LOCK-UP/LEAK-OUT AGREEMENT
THIS
LOCK-UP/LEAK-OUT AGREEMENT (the "Agreement") is made and entered into this
20th
day of November 2008, between those individuals set forth on Schedule A attached
hereto (each a "Shareholder" and, collectively, the "Shareholders") and Red
Oak
Concepts, Inc., a Nevada corporation (the "Company").
All
capitalized terms not defined herein shall have the meanings ascribed to them
in
that certain Share Exchange Agreement dated the date hereof between the Company,
on the one hand, and the holders of all of the outstanding shares of the capital
stock of The Vinyl Fence Company, Inc., a California corporation ("TVFC"),
on
the other, pursuant to which the Company is acquiring all of the outstanding
shares of TVFC capital stock from said holders in exchange for shares of the
Company's common stock, par value $.0001 per share ("Common
Stock").
RECITALS
WHEREAS,
the
Stockholders collectively owned all of the issued and outstanding shares of
Common Stock prior to giving effect to the consummation of the transactions
contemplated by the Share Exchange Agreement (the "Shares");
WHEREAS,
as a
material inducement to the holders of the TVFC capital stock to enter into
the
Share Exchange Agreement and as a condition precedent to the closing thereof,
the Company and the Shareholders have agreed to enter into this Agreement and
to
restrict the sale, assignment, transfer, conveyance, hypothecation or alienation
of the Shares, all on the terms set forth below.
NOW,
THEREFORE,
in
consideration of the foregoing premises and the mutual covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Notwithstanding
anything contained in this Agreement, each of the Shareholders may transfer
such
Shareholder’s shares of Common Stock to such Shareholder’s affiliates, spouse
and lineal descendants (individually, a “Transferee”) for estate planning
purposes, at such value as determined by such Shareholder to be appropriate,
provided that the Transferee (or the legal representative of the Transferee)
executes an agreement to be bound by all of the terms and conditions of this
Agreement in connection with the resale of any Shares, in form and substance
reasonably satisfactory to and to be executed by the Company. Transfers pursuant
to this Section 1 shall not be subject to the requirements of Section 2. Upon
completion of a transfer under this Section 1, the Transferee shall be a
“Shareholder” under this Agreement for all purposes.
2. Except
as
otherwise expressly provided herein, and except as the Shareholders may be
otherwise restricted from selling Shares under applicable United States Federal
or state securities laws, rules and regulations, the Shareholders may only
sell
Shares subject to the following conditions:
2.1. For
the
six months after the effective date of the registration statement filed with
the
Securities and Exchange Commission ("SEC") that registers the Shares under
the
Securities Act of 1933, as amended, the Shareholders may not sell, pledge,
hypothecate, transfer, assign or in any other manner dispose of the
Shares.
2.2. Upon
the
expiration of the six-month period described in subsection 2.1, above, for
a
period of thirty six months thereafter, each Shareholder shall be allowed to
sell 1/36th
of such
Shareholder’s Shares during each month thereafter. Upon the expiration of said
thirty-six month period, the Shareholders shall be entitled to sell or otherwise
dispose of their Shares in any manner they see fit.
2.3. All
Shares shall be sold on a non-cumulative basis, meaning that if a Shareholder
did not sell all of the Shares such Shareholder was entitled to sell during
a
particular month, such Shareholder may not cumulate the unsold portion of that
month's allotment to the next month's allotment, and so forth. Each Shareholder
agrees that all sales will be made at no less than the best “asked” prices, and
no sales will be made at the “bid” prices for the Shares.
2.4. Except
as
otherwise provided herein, all Shares shall be sold in “broker’s transactions”
and each Shareholder will comply with the “manner of sale” requirements as those
terms are defined in Rule 144 of the Securities and Exchange Commission during
the Lock-Up/Leak-Out Period.
2.5. An
appropriate legend describing this Agreement shall be imprinted on each stock
certificate representing the Shares, and the transfer records of the Company’s
transfer agent shall reflect such appropriate restrictions.
2.6. Each
Shareholder agrees that such Shareholder will not engage in any short selling
of
the Common Stock during the term of this Agreement.
3. Notwithstanding
anything to the contrary set forth herein, the Company may, in its sole
discretion, at any time and from time to time, waive any of the conditions
or
restrictions contained herein to increase the liquidity of the Common Stock
or
if such waiver would otherwise be in the best interests of the development
of
the trading market for the Common Stock. Such waiver shall be applicable equally
to all of the Shareholders, and upon issuance of such waiver all Shareholders
shall be promptly notified of the waiver given and the time frame during which
such waiver shall be effective. Any waiver shall be specific to the period
described in the notice.
4. In
the
event of: (a) a completed tender offer to purchase all or substantially all
of
the Company’s issued and outstanding securities or (b) a merger, consolidation
or other reorganization of the Company with or into an unaffiliated entity
that
results in a subsequent change in control of the Company, then this Agreement
shall terminate as of the closing of such event and the Shares restricted
pursuant hereto shall be released from such restrictions.
5. Except
as
otherwise provided in this Agreement or any other agreements between the
parties, each Shareholder shall be entitled to exercise such Shareholder’s
respective beneficial rights of ownership of such Shareholder’s Shares,
including the right to vote such Shareholder’s Shares for any and all
purposes.
6. The
number of Shares that may be sold during any month by a Shareholder shall be
appropriately adjusted should the Company declare a dividend or distribution,
undergo a forward split or a reverse split or otherwise reclassify its class
of
Common Stock.
7. If
a
Shareholder fails to fully adhere to the terms and conditions of this Agreement,
then such Shareholder shall be liable to the Company for any damages suffered
by
reason of any such breach of the terms and conditions hereof. Each Shareholder
agrees that in the event of a breach of any of the terms and conditions of
this
Agreement by such Shareholder, that in addition to all other remedies that
may
be available in law or in equity to the Company, a preliminary and permanent
injunction, without bond or surety, and an order of a court requiring such
Shareholder to cease and desist from violating the terms and conditions of
this
Agreement and specifically requiring such Shareholder to perform such
Shareholder’s obligations hereunder is fair and reasonable by reason of the
inability of the parties to this Agreement to presently determine the type,
extent or amount of damages that the Company may suffer as a result of any
breach or continuation thereof by such Shareholder. If the Company prevails
in
an action to enforce this Agreement, it shall be entitled to receive from a
violating Shareholder reimbursement for all fees and expenses incurred in
connection therewith, including reasonable fees of counsel.
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8. All
notices, instructions or other communications required or permitted to be given
pursuant to this Agreement shall be given in writing and delivered by facsimile,
certified mail, return receipt requested or overnight courier by a nationally
recognized courier service:
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If to the Company:
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The Vinyl Fence Company, Inc.
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0000 Xxxxx Xxxxxx Xxxxxx
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Xxxxx Xxx Xxxxxxxxxx 00000
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Attn.: Xx. Xxxxxx Xxxxx
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Facsimile No.: 000-000-0000
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If to a Shareholder:
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at addresses set forth for each Shareholder on Schedule A
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All
notices shall be deemed to be given on the same day if delivered by facsimile,
on the following business day if sent by overnight delivery or on the third
business day following the date of mailing.
9. The
resale restrictions on the Shares set forth in this Agreement shall be in
addition to all other restrictions on transfer imposed by applicable United
States and state securities laws, rules and regulations.
10. This
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof, and may not be amended except by a written
instrument executed by the parties hereto.
11. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California applicable to contracts entered into and to be performed
wholly within said State; and the Company and each Shareholder agrees that
any
action based upon this Agreement may be brought in the United States and state
courts of Orange County, California only, and each Shareholder submits to the
jurisdiction of such courts for all purposes hereunder.
12. In
the
event of default hereunder, the non-defaulting parties shall be entitled to
recover all fees and expenses incurred in connection with the enforcement of
this Agreement, including reasonable fees of counsel.
13. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing
(or
on whose behalf such signature is executed) with the same force and effect
as if
such facsimile or “.pdf” signature page were an original thereof.
IN
WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement
as of the day and year first above written.
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By:
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Xxxxxx
Xxxxx, President
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SCHEDULE
A
SHAREHOLDERS
4
