Amendment No. 1 to LOCK BOX AGREEMENT
Exhibit
10.41
Amendment
No. 1 to
This
Amendment No. 1 to Lock Box Agreement dated as of November 8, 2006 (this
“Amendment”) is made by and among Smart Online, Inc., a Delaware corporation
(the “Buyer”), Smart Commerce, Inc., a Delaware corporation (the “Company”), and
certain former shareholders of iMart Incorporated, Inc. (the
“Sellers”)
WHEREAS,
the Buyer, iMart Incorporated, Inc., a Michigan corporation (“iMart”), and the
Sellers previously entered into a Stock Purchase Agreement, dated October
17,
2005 (the “SPA”), the provided for, inter
alia,
the
establishment of a
lock
box agreement and account
(the
“Lock Box Account”);
WHEREAS,
pursuant to the SPA, the parties entered into a Lock Box Agreement dated
as of
October 17, 2005 (the “Agreement”) establishing the Lock Box Account and certain
procedures regarding payments to be made from the Lock Box Account
WHEREAS,
following consummation of the SPA and the Agreement, iMart merged with and
into
the Company, and the Company is successor in interest to iMart under the
SPA and
the Agreement;
WHEREAS,
the Company desires to enter into a certain loan transaction with Fifth Third
Bank, a Michigan banking corporation (the “Bank”), pursuant to which the Company
will grant Bank a security interest in its assets and establish a lock box
agreement and account with the Bank (the “Fifth Third Account”);
and
WHEREAS,
the parties wish to amend the Agreement to (i) extend the term of the Agreement
and provide for advance payment of certain Installment Payments (as defined
in
the Agreement) and/or Noncompetition Payments (as defined in the Agreement),,
and (ii) terminate the Sellers’ security interest granted pursuant to the
Agreement and SPA.
NOW
THEREFORE, the parties agree to amend the Agreement as follows:
1. The
caption of the Agreement is hereby amended to delete the words “iMart
Incorporated, a Michigan corporation” and add the words “Smart Commerce, Inc., a
Delaware corporation” and each
reference in the Agreement to “the Company” or words of like import referring to
iMart
Incorporated, a Michigan corporation,
shall
mean and be a reference to Smart
Commerce, Inc., a Delaware corporation.
2. Section
1
of the Agreement is deleted in its entirety and replaced with the
following:
“1. Deposit
of Proceeds.
The
Company hereby agrees that all cash, checks, drafts and other instruments
for
the payment of money at any time received by the Company as proceeds from
the
operation of the Business (the “Proceeds”) shall be deposited into a lock box
account as described in Section 2, below.”
3. The
following sentence is hereby added to the end of Section 2 of the
Agreement:
“On
January 1, 2007, the Company shall initiate the process of having all Proceeds
deposited in an account (“the Fifth Third Account”) to be opened with Fifth
Third Bank, a Michigan banking corporation (the “Bank”). At such time as an
audit determines that all Proceeds are being deposited in the Fifth Third
Account, the Buyer and the Company will take all necessary steps to close
the
Lock Box Account.”
4. Sections
3(a), (c) and (d) of the Agreement are hereby deleted in their entirety and
replaced with the following:
“3. Disposition
of Proceeds.
(a) The
Sellers shall be paid the Installment Payments and Noncompetition Payments
according to the following schedule: (i) $1,329,518.00 upon the deposit of
$1,550,000 by Buyer into the Lock Box Account as payment for the Installment
Payments and Noncompetition Payments due on October 2, 2006 and partial
Installment Payment due January 5, 2007, (ii) $707,977.08 on January 1, 2007
as
payment for the remaining Installment Payments and Noncompetition Payments
due
January 5, 2007, and (iii) $292,500.00 on or before February 5, 2007 as payment
for all remaining Noncompetition Payments due in 2007. Such payments are
to be
made to the Sellers in the ordinary course of the Company’s
business.”
5. Section
5
of the Agreement is hereby deleted in its entirety and replaced with the
following:
“5. Term.
This
Agreement shall terminate upon the date all payments required under Section
3(a)
above have been made.”
6. The
security interest granted to Sellers under Section 3.2 of the SPA and under
former Section 1 of the Agreement shall be fully released and of no further
force and effect, and Sellers hereby understand and acknowledge that the
Sellers
have no interest in the Lock Box Account or the accounts or the monies in
the
Lock Box Account at anytime and all amounts deposited into the Lock Box Account
are subject to a perfected security interest in favor of the Bank. Nothing
contained in this Section 6, however, shall in any way be construed to limit
the
restrictions (for the benefit of Sellers) on the Company’s ability to withdraw
amounts from the Lock Box Account contained in the Agreement, as amended
hereby.
7. Sellers
shall execute and deliver to or for Buyer such additional documents and shall
provide additional information as the Bank and Buyer may reasonably require
to
carry out the terms of this Amendment, including Section 6 hereof, and
facilitate the certain loan transaction with the Bank.
8. All
parties acknowledge that the Lock Box Account shall remain in place as a
matter
of convenience only, and periodically at the sole discretion of the Bank,
all
amounts in the Lock Box Account in excess of any minimum balance required
by the
depository institution maintaining the Lock Box Account shall be transferred
to
and deposited in the Fifth Third Account.
9. In
the
event of a conflict between the terms of the Agreement, as amended, and the
SPA,
the terms of the Agreement, as amended, shall govern. All remaining terms
of the
Agreement and the SPA shall remain in full force and effect; provided,
however,
that
Section 3.2 of the SPA shall be of no further force and effect.
Each
of
the parties has caused this Amendment to be executed on its behalf by its
duly
authorized representative as of the date first set forth above.
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SMART
ONLINE, INC.
By:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:
▇. ▇. ▇▇▇▇▇
Title:
CEO/President
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SELLERS
By:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
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SMART
COMMERCE, INC.
By:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:
▇. ▇. ▇▇▇▇▇
Title:
President
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By:
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
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By:
/s/ Hak ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
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