EXECUTION COPY
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (the "Lock-up Agreement") is entered into
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effective as of January 31, 2003, by and between ▇▇▇▇▇▇▇▇ ▇. Batch (the
"Shareholder"), a shareholder of Zanett, Inc., a Delaware corporation (the
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"Company"), and the Company;
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WHEREAS, Shareholder beneficially owns (within the meaning of Rule 13d-
3 under the Securities Exchange Act of 1934, as amended)
( ) shares of common
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stock, par value $0.001 per share of the Company (the "Common Stock");
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WHEREAS, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Shareholder has agreed to enter into this
Lock-up Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Lock-up on Transfer of Shares
(a) The Shareholder agrees not, directly or indirectly, to
sell, offer to sell, contract to sell, assign, pledge, hypothecate, encumber
or otherwise transfer, or enter into any contract, option or other
arrangement or understanding with respect to the sale, assignment, pledge or
other disposition of (collectively, "Transfer") any rights with respect to
(i) any Common Stock currently owned by Shareholder and (ii) any Common Stock
owned by Shareholder as a result of additional issuances for a period
commencing on the date hereof and continuing through January 31, 2008 (the
"Lock-up Period") except as expressly provided herein. The foregoing
restriction has been expressly agreed to preclude Shareholder from engaging
in any hedging or other transaction during the Lock-up Period that is
designed to or reasonably expected to lead to or result in a Transfer of the
Common Stock. Such prohibited hedging or other transaction would include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale, or grant of any right (including, without limitation, any put
or call option) with respect to the Common Stock or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from the Common
Stock.
(b) The Shareholder also agrees and consents to the entry of
stop transfer instructions with the Company's Transfer Agent and Registrar
against the Transfer of Common Stock held by Shareholder except in compliance
with the terms and conditions of this Lock-up Agreement.
(c) The restrictions contained in this Lock-up Agreement shall
apply to Shareholder with respect to any and all Transfers of any of the
Company's Common Stock with the exception of that Common Stock acquired by
the Shareholder on the open market. Any and all other Transfers are
prohibited by this Agreement.
2. Early Termination of Lock-Up Period; Price Gateways.
(a) In the event that both ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ (collectively, the "Investment Banker") solely determine that the
release of shares of Common Stock from the restrictions contained in this
Lock-Up Agreement would not have an adverse short-term or long-term effect on
the market price for the Common Stock, then the Investment Banker may, but is
not obligated to, release shares of Common Stock from the restrictions
contained in this Lock-Up Agreement in such amount and on such terms as the
Investment Banker determines in its sole discretion. This Early Termination
clause is at the sole discretion of the Investment Banker, and requires no
consultation of, nor approval by, the Board of Directors of the Company, nor
any approval by the other Shareholders of the Company. This Early
Termination clause is applicable in whole or in part, with respect to the
amount of shares owned by a single Shareholder, and its applicability towards
one Shareholder does not constitute any obligation what-so-ever towards any
or all other Shareholders which may have signed the same, or similar, Lock-Up
Agreements.
(b) In the event any Common Stock of Shareholder is subject to
any involuntary transfer, whether by reason of death, bankruptcy or divorce
proceedings or otherwise, the transferee of such Common Stock shall take such
Common Stock subject to this Lock-Up Agreement. Any purported transfer of
any Common Stock of Shareholder that is not in accordance with this Lock-Up
Agreement shall be null and void, and shall not operate to transfer any
right, title or interest in such Common Stock to the purported transferee.
The Company agrees that the Company shall not cause or permit the transfer of
any Common Stock of Shareholder to be made on its books unless the transfer
is permitted by this Lock-Up Agreement and has been made in accordance with
its terms.
(c) The restrictions contained in this Lock-up Agreement shall
not apply to any Transfer by Shareholder (i) with respect to transfers of any
Common Stock acquired on the open market or (ii) for which the Investment
Banker has provided written consent as detailed in Section 2(a) above
3. Price Gateways.
Notwithstanding anything contained herein to the contrary, at
such time as the closing price of the Common Stock (NASDAQ: ▇▇▇▇) on the
NASDAQ SmallCap Market, or such other market as the Common Stock is then
publicly traded, equals or exceeds each price target (the "Gateway Price")
set forth on Schedule A hereto, the corresponding percentage of Common Stock
(the "Release Percentage") set forth on Schedule A multiplied by the total
number of shares of Common Stock (the "Total Number") subject to this
Agreement shall be released from the restrictions in this Lock-up Agreement
for so long as the price of the Common Stock remains equal to, or exceeds
such Gateway Price. The shares underlying unexercised Options shall not be
included in the calculation of the Total Number. Any sale of Common Stock so
released shall require duplicate confirmation (by Shareholder's broker and
the Company) to the effect that it was consummated at or above the relevant
Gateway Price.
4. Representations, Warranties and Covenants of the
Shareholder.
Shareholder represents and warrants to, and agrees with, the
Company that:
(a) this Lock-up Agreement has been duly executed and delivered
by Shareholder and constitutes a valid and binding obligation of Shareholder
enforceable in accordance with its terms;
(b) neither the execution and delivery of this Lock-up
Agreement nor the consummation of the transactions contemplated hereby will
result in any breach or violation of, be in conflict with or constitute a
default under any agreement or instrument to which Shareholder is a party or
by which Shareholder may be affected or is bound;
(c) Shareholder is not subject to or obligated under any
provisions of any law, regulation, order, judgment or decree which would be
breached or violated by the execution, delivery and performance of this Lock-
up Agreement by Shareholder and the consummation of the transactions
contemplated hereby; and
(d) Shareholder is now, and will be at all times up to the
termination of this Lock-up Agreement, the record and beneficial owner of the
Common Stock which at such time is subject to Transfer restrictions pursuant
to the terms hereof, free and clear of any pledge, lien, security interest,
mortgage, charge, claim, equity, option, proxy, voting restriction, right of
first refusal, limitation on disposition, adverse claim of ownership or use
or encumbrance of any kind, other than pursuant to this Lock-up Agreement.
5. Miscellaneous
(a) Specific Performance. Shareholder acknowledges that
damages would be an inadequate remedy for any breach of the provisions of
this Lock-up Agreement and agrees that the obligations of Shareholder
hereunder shall be specifically enforceable and Shareholder shall not take
any action to impede the Company from seeking to enforce such right of
specific performance. Shareholder agrees that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of his
obligations in this Lock-up Agreement and hereby agrees to waive in any
action for specific performance of any such obligation, the defense that a
remedy at law would be adequate.
(b) Notices. All notices, demands and other communications to
be given or delivered under or by reason of the provisions of this Lock-up
Agreement shall be in writing and shall be given and shall be deemed to have
been given when personally delivered or three days after being mailed, if
mailed by first class mail, return receipt requested, or one day after being
sent by reputable overnight delivery service, or when receipt is
acknowledged, if sent by facsimile, telecopy or other electronic transmission
device. Notices, demands and communications to Shareholder and the Company
will, unless another address is specified in writing, be sent to the address
indicated below, except that notices of change of address shall only be
effective upon receipt:
If to Shareholder:
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Paragon Dynamics, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. Batch
If to the Company:
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Zanett, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Legal Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Assignment. This Lock-up Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, except
that neither this Lock-up Agreement nor any of the rights, interests or
obligations hereunder may be assigned by either party hereto without the
prior written consent of the Investment Banker.
(d) Governing Law. The internal law, without regard for
conflicts of law principles, of the State of New York will govern all
questions concerning the construction, validity and interpretation of this
Lock-up Agreement and the performance of the obligations imposed by this
Lock-up Agreement.
(e) Counterparts. This Lock-up Agreement may be executed in
one or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall
constitute one and the same instrument.
(f) Severability. Whenever possible, each provision of this
Lock-up Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Lock-up Agreement is
held to be prohibited by or invalid under applicable law, such provision will
be ineffective only to the extent of such provision or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Lock-up Agreement.
(g) Amendment; Waiver. This Lock-up Agreement may not be
amended or waived except, (i) in a writing executed by the party against
which such amendment or waiver is sought to be enforced, and (ii) without the
expressed written consent of the Investment Banker. No course of dealing
between or among any persons having any interest in this Lock-up Agreement
will be deemed effective to modify or amend any part of this Lock-up
Agreement or any rights or obligations of any person under or by reason of
this Lock-up Agreement.
(h) Complete Agreement. This Lock-up Agreement contains the
complete agreement between the parties hereto and supersedes any prior
understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in
any way.
IN WITNESS WHEREOF, the parties hereby have executed this Lock-up
Agreement as of the date first written above.
ZANETT, INC. SHAREHOLDER
By:
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Name: Pierre-▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇. Batch
Title: Chief Legal Officer
SCHEDULE A
Gateway Price 1 Release Percentage
$ 6.75 10%
$ 9.60 20%
$12.75 30%
$17.75 40%
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1 Subject to adjustment as a result of stock dividends, splits,
recapitalizations and similar events.