Exhibit 10.27
FORM OF
LOCK-UP, PROXY AND RELEASE AGREEMENT FOR COMMON STOCK
This Agreement (the "AGREEMENT") is made and entered into as of January
1, 2004, by and between Smart Online, Inc., a Delaware corporation (the
"CORPORATION"), and the undersigned stockholder or option holder of the
Corporation ("STOCKHOLDER"). As used herein, the "Corporation" includes Smart
Online, Inc. and any successor to substantially all of its business, whether by
way of merger, asset sale or otherwise.
1. REORGANIZATION.
Stockholder hereby agrees that the proposed reorganization that would eliminate
the outstanding shares of Series A Preferred Stock will make Stockholder's
shares of Common Stock and/or options to purchase shares of Common Stock more
valuable by eliminating certain rights of holders of Series A Preferred Stock,
including liquidation preferences and redemption rights. Stockholder is entering
into this Agreement because the holders of Series A Preferred Stock require the
Corporation to enter into this Agreement with holders of Common Stock as part of
the reorganization process. Sections 3 and 4 of this Agreement shall become
effective immediately the Corporation ceasing to have any shares of Series A
Preferred Stock issued or outstanding (the "EFFECTIVE TIME").
2. APPOINTMENT OF PROXY.
(a) The undersigned Stockholder hereby irrevocably constitutes and
appoints Michael Nouri attorney and proxy with full power of substitution to act
and vote all the shares of the Corporation held by the undersigned in connection
with any meeting or written consent of the stockholders of the Corporation to
approve the matters described below, and at any adjournment or adjournments
thereof, provided such stockholders meeting is held, or written consent is
circulated, on or before April 30, 2004. The undersigned hereby directs this
proxy to be voted solely with respect to the following matters:
(i) For approval of the Amendment to the Certificate of
Incorporation in the form attached on Schedule A to this
Agreement (the "Amendment").
(ii) For approval of the conversion of all shares of Series A
Preferred Stock of the Corporation into Common Stock as provided
in the Amendment.
(b) This proxy is given to induce the Corporation to enter into this
Agreement, it being agreed by the undersigned Stockholder that entering into
this Agreement causes the appointment of the named proxy to be coupled with an
interest.
(c) In the event that, as the result of a stock split or stock
dividend or combination of shares or any other change, or exchange for other
securities, by reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, Stockholder should be entitled to new or
additional or different shares of stock or securities, such new or substitute
shares or securities shall be subject to this proxy.
3. LOCKUP AGREEMENT.
(a) Stockholder hereby agrees that, except as permitted under
subsection (b) of this Section 3, during the Restricted Period, as defined
herein, Stockholder will not:
(i) Sell any securities of the Corporation or Holding Company.
(ii) Transfer, assign or otherwise dispose of any securities of the
Corporation or Holding Company.
(iii) Pledge, hypothecate or otherwise create a lien on any securities
of the Corporation or the Holding Company.
(iv) Loan to any person or entity any securities of the Corporation
or Holding Company.
(v) Sell short any securities of the Corporation or Holding Company.
(vi) Acquire a put option or grant a call option with respect to any
securities of the Corporation or Holding Company.
(vii) Enter into any agreement concerning any of the foregoing
transactions, or otherwise facilitate any other person
conducting any of the foregoing transactions.
(b) For purposes of this Section 3, Holding Company shall mean any
company whose stock is publicly traded (i) with which the Corporation merges or
consolidates or (ii) of which the Corporation or its successor becomes a
subsidiary. For purposes of this Section 3, the Restricted Period shall mean the
period beginning on the Effective Time and ending on September 30, 2006.
Commencing October, 1, 2005, Stockholder may sell, during any calendar month
until the end of the Restricted Period, up to eight and one half percent (8.5%)
of the shares of the Corporation owned by Stockholder or any shares of Holding
Company issued in respect of such shares (or options) owned by Stockholder as of
September 30, 2005.
(c) Notwithstanding the foregoing, provided the transferee first
signs a Lockup Agreement on substantially the terms set forth in this Section 3
and reasonably acceptable to the Corporation or Holding Company, Stockholder may
transfer securities of the Corporation or Holding Company without payment or
other consideration: (i) if Stockholder is an individual, to any family member,
(ii) if Stockholder is a corporation, to any direct or indirect parent or
subsidiary or any shareholder of Stockholder, (iii) if Stockholder is a
partnership, to any partner of Stockholder, (iv) if Stockholder is a limited
liability company, to any member of Stockholder, and (v) if Stockholder is a
trust, to any beneficiary of such trust.
(d) Stockholder further agrees that before and after termination of
the Restricted Period, Stockholder will comply with all securities laws, rules
and regulations when purchasing or reselling securities of the Corporation or
Holding Company, including, without limitation, those prohibiting sales and
purchases of securities while in possession of material nonpublic information.
(e) The securities of Stockholder shall have a legend in form and
substance acceptable to the Corporation and Holding Company referring to the
restrictions of this Agreement and the Corporation or Holding Company may
instruct the transfer agent of the Corporation Holding Company to stop any
transfer of any securities in violation of this Agreement and may take any other
action required to avoid violation of this Agreement, including, without
limitation, obtaining an injunction.
(f) This Section 3 covers all securities of the Corporation and
Holding Company whether currently owned or acquired after the date of this
Agreement.
4. RELEASES.
(a) In consideration of the release provided in subsection (b)
below, Stockholder, for himself/herself/itself and for each of Stockholder's
directors, officers, employees, agents, attorneys, legal successors and assigns,
hereby absolutely, unconditionally and irrevocably releases and forever
discharges the Corporation and its directors, officers, employees, agents,
attorneys, legal successors and assigns, individually and jointly, from any and
all causes of actions, suits, promises, representations, contracts, obligations,
claims, counterclaims, defenses, demands, debts, accounts, reckonings,
obligations, costs, rights of set off, demands or liabilities whatsoever, in law
or equity, whether the same or whether the facts on which the same may be based
are now known or unknown, suspected or unsuspected, which he/she/it, has, may
have, has ever had, or hereafter can, shall or may have, for, upon or by reason
of any matter, cause or thing whatsoever occurring through the date of this
Agreement arising out of Stockholder's purchase or ownership of any securities
of the Corporation (collectively, "LIABILITIES").
(b) In consideration of the release provided in subsection (a)
above, the Corporation hereby absolutely, unconditionally and irrevocably
releases and forever discharges Stockholder and, as applicable, its directors,
officers, employees, agents, attorneys, legal successors and assigns,
individually and jointly, from any and all causes of actions, suits, promises,
representations, contracts, obligations, claims, counterclaims, defenses,
demands, debts, accounts, reckonings, obligations, costs, rights of set off,
demands or liabilities whatsoever, in law or equity, whether the same or whether
the facts on which the same may be based are now known or unknown, suspected or
unsuspected, which he/she/it, has, may have, has ever had, or hereafter can,
shall or may have, for, upon or by reason of any matter, cause or thing
whatsoever occurring through the date of this Agreement arising out of
Stockholder's purchase or ownership of any securities of the Corporation
(collectively, "LIABILITIES").
(c) It is the parties' intention in executing this Agreement and in
giving and receiving the consideration called for by this Agreement that this
Agreement shall be effective as a full and final accord and satisfaction and
release of all Liabilities released under subsections (a) or (b) (the "RELEASED
LIABILITIES"). Each party acknowledges that it is aware that it or its attorneys
or its accountants may hereafter discover Liabilities or facts in addition to or
different from those which it now knows or believes to exist with respect to the
Released Liabilities, but that it is its intention hereby to fully, finally, and
forever settle and release all disputes and differences with respect to the
Released Liabilities. In furtherance of this intention, the releases hereby
given shall be and remain in effect as a full and complete
release notwithstanding the discovery or existence of any such additional or
different Liability or fact.
(d) The above releases shall not be effective for any claims arising
from a breach of this Agreement, for any claims relating to fraud or for any
claims relating to any untrue statement of a material fact or any failure to
disclose a material fact necessary in order to make the statements made with
respect to the transactions contemplated by this Agreement, in light of the
circumstances under which they were made, not misleading. Nothing contained
herein shall be construed to supercede or amend the terms of any
confidentiality, noncompetitive or similar agreement between Stockholder and the
Corporation.
5. TERMINATION OF EXISTING AGREEMENTS. Stockholder and the Corporation
hereby agree to terminate the Stock Rights Agreement dated as of August 10,
1999, as amended to date, and the Amended and Restated Stockholders' Agreement,
dated as of August 6, 1999, as amended to date. Termination shall be effective
upon the Effective Time.
6. TERMINATION OF THIS AGREEMENT. This Agreement may be terminated by
either Stockholder or the Corporation, if the Effective Time does not occur on
or before April 30, 2004. Upon termination neither Stockholder nor the
Corporation shall have any liability to the other arising out of the Agreement.
Termination shall be effective upon receipt of written notice of termination
provided by Stockholders to the principal office of the Corporation or by the
Corporation to the address of Stockholder set forth below the signature of
Stockholder.
7. This Agreement shall be subject to the laws of the State of Delaware.
8. This Agreement may be executed in one or more counterparts.
9. The Corporation may assign this Agreement to any successor to
substantially all of its business.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first above written.
SMART ONLINE, INC.
By: ________________________________________
Michael Nouri, Chief Executive Officer
STOCKHOLDER:
____________________________________________
Print Name__________________________________
Address_____________________________________
______________ Number Shares of Common Stock of Stockholder Subject to
this Agreement.