LOCK-UP AGREEMENT

 

This LOCK-UP AGREEMENT (this “Agreement”) is dated as of ________, 2012 by and
among Universal Entertainment Group Limited, a company incorporated under the
law of the British Virgin Islands, with its registered office at P.O. Box 3321,
Drake Chambers, Road Town, Tortola (“Digital HKco’s Shareholder”), and Wizzard
Software Corporation, a Colorado corporation (the “Company”).

 

WHEREAS, Digital HKco’s Shareholder owns 100% of the issued and outstanding
shares of capital stock (the “Digital HKco Shares”) of Digital Entertainment
International Ltd., a company incorporated under the law of the Hong Kong
Special Administrative Region (“Digital HKco”), free and clear of any Liens;

WHEREAS, the Company wishes to acquire, and Digital HKco’s Shareholder wishes to
sell, all of the Digital HKco Shares in accordance with and subject to the terms
and conditions of that certain Share Exchange Agreement dated as of April 5,
2012, by and among Digital HKco’s Shareholder; Digital HKco; Beijing Dingtai
Guanqun Culture Co., Ltd.; Beijing FAB Culture Co., Ltd.; and Beijing FAB
Digital Entertainment Products Co., Ltd. (the “Share Exchange Agreement”)
(capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Share Exchange Agreement);

WHEREAS, in partial consideration for the purchase of the Digital HKco Shares
under the Share Exchange Agreement, the Company shall issue to Digital HKco’s
Shareholder at Closing (as defined in Section 2.2 of the Share Exchange
Agreement) such number of shares of the Company’s common stock, par value one
mill ($0.001) per share, as constitutes forty-nine percent (49%) of the
Company’s issued and outstanding common stock on a fully diluted basis
immediately following the Closing after issuance of such shares (the “Initial
Company  Shares,” as defined in Section 2.3(a) of the Share Exchange Agreement);

WHEREAS, in partial consideration for the purchase of the Digital HKco Shares
under the Share Exchange Agreement, the Company shall also issue to Digital
HKco’s Shareholder at Closing a certain number of shares of the Company’s Series
B Convertible Preferred Stock, which shares shall give Digital HKco’s
Shareholder the right to convert into the Company’s common stock and increase
Digital HKco’s Shareholder’s equity position in the Company  to 78% on a fully
diluted basis as of the date of the Closing, upon attainment of certain
milestones  in the next 12 to 18 months in accordance with the Certificate of
Designation of Preferences, Rights and Limitations of Series B Convertible
Preferred Stock attached as Exhibit B to the Share Exchange Agreement (the
“Convertible Preferred Shares”, as defined in Section 2.3(b) of the Share
Exchange Agreement); and

 

WHEREAS, in order to enter into the Share Exchange Agreement, the Company and
Digital HKco’s Shareholder have agreed to define fifty percent (50%) of the
Initial Company Shares as the “Lock-up Shares”, and Digital HKco’s Shareholder
agrees not to sell any of the Lock-up Shares except in accordance with the terms
and conditions set forth herein (at the Closing, Digital HKco’s Shareholder will
provide a specific list of beneficiaries’ names and respective number of shares
which are subject to the Lock-up);

 

NOW, THEREFORE, in consideration of the covenants and conditions hereinafter
contained, the parties hereto agree as follows:

 

1. Restriction on Transfer; Term.

 

(a) Digital HKco’s Shareholder hereby agrees not to offer, sell, contract to
sell, assign, transfer, hypothecate, gift, pledge or grant a security interest
in, or otherwise dispose of, or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition of (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise, directly or indirectly) (each, a “Transfer”), any of the Lock-Up
Shares until a date that is twelve (12) months following the date of the Closing
of the Share Exchange Agreement (the “Lock-Up Period”).

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(b)   It is the intention of the parties hereto that this Lock-up Agreement
shall create a first lien on the Lock-up Shares for the term of the Lock-Up
Period to secure the indemnification obligations of Digital HKCo’s Shareholder
under Article XI of the Share Exchange Agreement, which lien on the Lock-up
Shares shall be enforceable in accordance with the New York Uniform Commercial
Code in the event of any Claim under such Article XI.  The provisions of Section
1(a) notwithstanding, such lien shall not be released during the pendency of any
such Claim asserted by a third party unrelated to the Company prior to the end
of the Lock-Up Period to the extent of the amount of such Claim, but shall
otherwise be released at the end of the Lock-Up Period.  The provisions of this
Section 1(b) shall not be exclusive of any other remedies that the Company may
have under the terms of the Share Exchange Agreement.

(c)  Notwithstanding the foregoing, Digital HKco’s Shareholder may transfer
Shares without the prior consent of the Company in connection with (a) transfers
of Lock-up Shares as a bona fide gift, by will or intestacy or to a family
member or trust for the benefit of a family member, (b) transfers of Lock-up
Shares to a charity or educational institution, (c) transfers of Lock-up Shares
to any shareholder, partner or member of, or owner of similar equity interests
in, Digital HKco’s Shareholder, and (d) transfers of Lock-up Shares to any
corporation, partnership, limited liability company or other business entity
controlled by or under common control with Digital HKco’s Shareholder, provided,
in each case, that such transfer is not for value and does not violate the
Securities Act of 1933, as amended, or applicable Chinese securities laws rules
and regulations and further provided  that prior to any transfer of Lock-up
Shares under this Section 1(c), the transferee of such Lock-up Shares shall
first have executed a Lock-up Agreement on the same terms and conditions as set
forth in this Agreement and shall have forwarded such executed Lock-up Agreement
to the Company no later than five (5) business days prior to such transfer.

2. Ownership.  During the Lock-Up Period, Digital HKco’s Shareholder shall
retain all rights of ownership in all Lock-Up Shares except as otherwise
provided in this Agreement, the Share Exchange Agreement, or the Voting
Agreement as defined therein.

 

3. Company and Transfer Agent; Legends.  

(a)  The Company is hereby authorized and required to disclose the existence of
this Agreement to its transfer agent. The Company and its transfer agent are
hereby authorized and required to decline to make any transfer of the Lock-up
Shares if such transfer would constitute a violation or breach of this Agreement
and/or the Share Exchange Agreement.  

(b)  The following legend describing this Agreement shall be imprinted on each
stock certificate representing Lock-up Shares, in addition to the usual and
customary restrictive legend relating to “restricted” shares, and the transfer
records of the Company’s transfer agent shall reflect such restrictions:

THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS OF A LOCK-UP AGREEMENT
AND A SHARE EXCHANGE AGREEMENT WITH THE ISSUER.  THESE SHARES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, GIFTED OR OTHERWISE DISPOSED OF OTHER THAN IN ACCORDANCE
WITH THE TERMS OF SUCH AGREEMENTS, AND ANY ATTEMPT TO DO SO SHALL BE VOID.
 THESE SHARES ARE ALSO THE SUBJECT OF A LIQUIDATED DAMAGES CLAUSE OF THE SHARE
EXCHANGE AGREEMENT, WHICH PROVIDES THAT, IN THE EVENT OF ANY UNCURED   MATERIAL
BREACH THEREOF, THE SHARES REPRESENTED HEREBY SHALL BE IMMEDIATELY AND
AUTOMATICALLY FORFEITED AND CANCELLED ON THE BOOKS AND RECORDS OF THE ISSUER,
WITHOUT THE REQUIREMENT FOR DELIVERY OF THIS INSTRUMENT AND WITHOUT THE
REQUIREMENT FOR THE ISSUER TO POST ANY BOND OR TAKE ANY FURTHER ACTION
WHATSOEVER.

 

(c)  At the end of the Lock-up Period, the Company shall promptly coordinate
with its transfer agent to replace the Lock-up stock certificates with new ones
eliminating the above Legends upon request of Digital HKCo’s Shareholder.

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4. Notices.  All notices, demands, consents, requests, instructions and other
communications to be given or delivered or permitted under or by reason of the
provisions of this Agreement or in connection with the transactions contemplated
hereby shall be in writing and shall be deemed to be delivered and received by
the intended recipient as follows: (i) if personally delivered, on the business
day of such delivery (as evidenced by the receipt of the personal delivery
service), (ii) if delivered by overnight courier (with all charges having been
prepaid), on the business day of such delivery (as evidenced by the receipt of
the overnight courier service of recognized standing), or (iii) if delivered by
facsimile transmission, on the business day of such delivery if sent by 6:00
p.m. in the time zone of the recipient, or if sent after that time, on the next
succeeding business day (as evidenced by the printed confirmation of delivery
generated by the sending party’s telecopier machine). If any notice, demand,
consent, request, instruction or other communication cannot be delivered because
of a changed address of which no notice was given (in accordance with this
Section 4), or the refusal to accept same, the notice, demand, consent, request,
instruction or other communication shall be deemed received on the second
business day the notice is sent (as evidenced by a sworn affidavit of the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses or facsimile numbers as
applicable.

 

If to the Company:

Wizzard Software Corporation

5001 Baum Blvd.

Suite 770

Pittsburgh, PA  15213

Attention: John Busshaus

Telephone No.: (412) 621-0902

Facsimile No.: (412) 621-2625

with copies (which copies shall not constitute notice to the Company) to:

Branden T. Burningham, Esq.

Burningham & Burningham

455 East 500 South

Suite 205

Salt Lake City, UT  84111

Tel. No.: (801) 363-7411

Fax No.: (801) 355-7126

If to Digital HKco’s Shareholder:

Address: 21 Fl., Wan-Shang Building    

Shijingshan District, Beijing, China

Attn:  Bob (Zhong Bing-Bin)       

Telephone: 100186-135-8190-0771

Fax: 01186-1066032873

or to such other address for either party as such party may specify by notice
given to the other party in accordance with this Section 4.

 

5. Amendment.  This Agreement may not be modified, changed, supplemented,
amended or terminated, nor may any obligations hereunder be waived, except by
written instrument signed by each of the parties hereto.

 

 

6. Entire Agreement.  This Agreement contains the entire understanding and
agreement of the parties relating to the subject matter hereof and supersedes
all prior and/or contemporaneous

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understandings and agreements of any kind and nature (whether written or oral)
among the parties with respect to such subject matter.

 

7. Governing Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.

 

8. Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OF THE PARTIES UNCONDITIONALLY AND IRREVOCABLY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
LOCATED IN NEW YORK COUNTY AND THE FEDERAL DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND
EACH OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY OBJECTION
TO VENUE IN NEW YORK COUNTY OR SUCH DISTRICT, AND AGREES THAT SERVICE OF ANY
SUMMONS, COMPLAINT, NOTICE OR OTHER PROCESS RELATING TO SUCH SUIT, ACTION OR
OTHER PROCEEDING MAY BE EFFECTED IN THE MANNER PROVIDED IN SECTION 4.

 

9. Severability.  The provisions of this Agreement are severable and, in the
event that any court of competent jurisdiction shall determine that any one or
more of the provisions or part of the provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement and such provision
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

 

10. Binding Effect; Assignment.  This Agreement and the rights and obligations
hereunder may not be assigned by Digital HKco’s Shareholder without the prior
written consent of the Company, except in connection with a transfer of Lock-up
Shares pursuant to Section 1(c). This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

 

11. Headings.  The section headings contained in this Agreement are inserted for
reference purposes only and shall not affect in any way the meaning,
construction or interpretation of this Agreement. Any reference to the
masculine, feminine, or neuter gender shall be a reference to such other gender
as is appropriate. References to the singular shall include the plural and vice
versa.

  

12. Counterparts.  This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same Agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other parties hereto, it being understood that all parties need not sign
the same counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

 

 

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[SIGNATURE PAGE TO LOCK-UP AGREEMENT]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above herein.

 

  

WIZZARD SOFTWARE CORPORATION

 

By:   /s/Christopher Spencer

         Name: Christopher Spencer

         Title:  President and Chief Executive Officer

 

 

  

DIGITAL HKCO’S SHAREHOLDER:

  

 

Universal Entertainment Group Limited

 

By:/s/

         Name:

         Title: