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EXHIBIT 1.5
LOCK-UP LETTER AGREEMENT
May __, 0000
XXXXXX SECURITIES, INC.
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Gentlemen:
I am the owner of ________ shares of Common Stock par value of $.01 per
share (the "Common Stock") of Karts International Incorporation, a Nevada
corporation (the "Company").
The Company intends to conduct an initial public offering of its Common
Stock ("IPO") which shall be underwritten by, among others, Argent Securities,
Inc. ("Argent") as expressed in a letter of intent between the Company and
Argent (the "Letter of Intent") dated January 29, 1997. The undersigned
recognizes the benefits which the Company will derive from the IPO. For and in
consideration of Argent entering into the Letter of Intent and its willingness
to conduct the IPO contemplated thereby on mutually acceptable terms, I hereby
agree to the following lock-up arrangement restricting the sale of its Company
Common Stock.
A. THE LOCK-UP
1. During the period commencing on the date hereof and ending on the
date which is 60 months from the closing of the IPO (such period herein
referred to as the "Lock-Up Period"), I will not sell, pledge, hypothecate,
grant an option for sale or otherwise dispose of, or transfer or grant any
rights with respect thereto in any manner (either privately or publicly
pursuant to Rule 144 of the General Rules and Regulations under the Securities
Act of 1933, as amended, or otherwise) any of the shares of Common Stock
(directly or indirectly owned or controlled by me on the date hereof) (the
"Securities"), without Argent's prior written consent; provided, however, that
Securities may be sold or otherwise transferred in a private transaction during
the Lock-Up Period so long as the acquiror of the Securities, by written
agreement with Argent entered into at the time of acquisition and delivered to
Argent prior to the consummation of such acquisition, agrees to be bound by the
terms of this Paragraph A.1. for the balance of the Lock-Up Period, and by the
terms of Paragraph A.2. below; and, provided further, that the Securities, or
any portion thereof, may be transferred (I) by any such transferee to a trust
for the benefit of, or as gifts to, either individually or collectively in any
number, such transferee, or his or her spouse and children, (a "Permitted
Transferee") and in such event the trustee of such trust or donor shall execute
this Lock-Up Letter Agreement and agree to be bound thereby; or (ii) by court
order or pursuant to the laws of descent and distribution.
2. In the event I desire to sell any of the Securities at any time
during the term of the Lock-Up Period or within 12 months after termination of
the Lock-Up Period as described below, publicly under Rule 144 or otherwise, I
will sell such securities through Argent, so long as the price and terms of
execution offered by Argent are at least as favorable as may be obtained from
other brokerage firms.
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3. Notwithstanding the provision of Paragraph 4 below, on
__________, 1999, 2000, and 2001, _______ Shares shall be released from the
restrictions set forth in Paragraph A(i) and may be sold in accordance with the
provisions of Paragraph A(2) above, provided, however, that the price of the
Shares must be equal to or in excess of the price of the Shares sold in the
IPO, except for any sale made before the second anniversary of the Closing Date
where the price of the Shares must be equal to or in excess of $_____ per
Share.
4. The Securities shall be released from the restrictions set forth
in paragraph A(1) in the increments indicated below upon the Company's
achievement of three targets for applicable years as set forth in the following
table and the footnotes thereunder (the "Chart").
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EARNINGS PER SHARE OF EARNINGS PER SHARE OF
FYE SHARES (a) SHARES (b) STOCK
1/31 ---------------------------------------------------- PRICE
Current Cumulative Current Cumulative OF ANNUAL
------- ---------- ------- ---------- SHARES(c) REVENUE
==========================================================================================
1997 0 0 $ $ $ --
------------------------------------------------------------------------------------------
1998 0 0 $ $ $ $
------------------------------------------------------------------------------------------
1999 $ $ $ $
------------------------------------------------------------------------------------------
2000 $ $ $ $
------------------------------------------------------------------------------------------
2001 $ $ $ $
------------------------------------------------------------------------------------------
2002 $ $ $ $
==========================================================================================
(a) For the year in which the Company attains (i) the earnings per share
(EPS) on a cumulative basis, (ii) the target stock price for Shares or
(iii) Annual Revenue on a cumulative basis after ______, any Shares not
previously released shall be released in addition to the Shares released
for the applicable year. In addition, for any fiscal year in which the
Company attains earnings per share, target stock price or cumulated
Annual Revenue targets applicable to a subsequent fiscal year, any
shares eligible for release in such subsequent fiscal year shall also be
released. Regardless of whether the EPS target, Target Stock Price or
Annual Revenue is achieved, all of the shares shall be released on
_________.
(b) Earnings per share is defined as net income per share of the Company as
reported in its audited financial statements for the applicable fiscal
year.
(c) The stock price of shares shall be defined as the average of the closing
bid sales price of the Common Stock of the last 20 trading days prior to
the end of the fiscal year.
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5. Notwithstanding anything herein to the contrary, all of the
Securities shall be released from the restrictions set forth in paragraph A(1),
to the extent not previously released, on ________________.
B. PROVISIONS APPLICABLE TO SHARES
The Company and the undersigned hereby acknowledge and represent that:
(a) A copy of this Lock-up Agreement will be available from
the Company or its transfer agent upon request and without charge and a copy of
this Lock-Up Agreement may be filed with the Securities Commissions of various
states, including, without limitation, any state securities commission
requiring its availability.
(b) A typed legend will be placed on the reverse side of each
stock certificate representing the Common Stock covered by the Lock-up
Agreement which states that the sale or transfer of the shares evidenced by the
certificate is subject to certain restrictions pursuant to an agreement between
the shareholder (whether beneficial or of record) and Argent, which agreement
is on file with the Company and the Company's stock transfer agent from whom a
copy is available, upon request and without charge.
(c) The terms and conditions of this Lock-up Agreement can
only be modified (including premature termination thereof), upon the written
consent of Argent and the prior approval of any state securities commission
which requires such consent.
(d) Stop transfer instructions will be placed with the
transfer agent against all shares of the Company's Common Stock subject to the
restrictions contained in paragraph A(1) of this Lock-up Agreement.
Notwithstanding the foregoing, shares subject to this Lock-Up Agreement may be
transferred by the transfer agent when shares are accompanied by an opinion of
company counsel certifying that such transfer is a permitted transfer.
(e) This Lock-Up Letter Agreement shall terminate and be of no
force and effect if it, or any of Argent's rights and obligations hereunder,
are assigned to any third party by Argent.
(f) With regard to V. Xxxx Xxxxxxxx, the Chairman of the Board
and Chief Executive Officer of the Company, the afore-referenced lock-up
provisions, to which Xx. Xxxxxxxx would be subject, will be terminated after
the termination of Xx. Xxxxxxxx'x Employment Agreement, unless such Agreement
is otherwise extended.
If this agreement is acceptable to Argent, please sign the form of
acceptance below and deliver one of the counterparts hereof to me. This will
become a binding agreement between us upon execution by each of the parties
hereto.
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Very truly yours,
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V. Xxxx Xxxxxxxx
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(Number of Shares Beneficially Owned)
AGREED to and ACCEPTED
this ____ day of May, 1997.
ARGENT SECURITIES, INC.
By
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Authorized Signature
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