REGISTRATION RIGHTS AGREEMENT
Exhibit
10.48
THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of October ___, 2006,
by and among Smart Online, Inc., a Delaware corporation with its headquarters
located at 0000 Xxxxxxxx Xxxxxxx, Xxxxxx, Xxxxx Xxxxxxxx 00000 (the “Company”),
and the undersigned (together with its Affiliates and any permitted assignees
or
transferees of all of its respective rights hereunder, the
“Investor”).
WHEREAS:
A. In
connection with the ________________ Agreement by and among Xxxxxxx Xxxxx
(“Xxxxx”) and the undersigned dated as of the date hereof (the “Stock
Purchase Agreement”),
Nouri has agreed, upon the terms and subject to the conditions contained
therein, to sell to the undersigned shares of the Company’s common stock (the
“Common Stock”), upon the terms and subject to the limitations and conditions
set forth in the Stock Purchase Agreement; and
B. To
induce
the undersigned to enter into the Stock Purchase Agreement with Nouri and
in
consideration of the enforcement rights in favor of the Company contained
in the
Stock Purchase Agreement, the Company has agreed to provide the undersigned
certain registration rights under the Securities Act of 1933, as amended,
and
the rules and regulations thereunder, or any similar successor statute
(collectively, the “1933 Act”), and applicable state securities
laws;
NOW,
THEREFORE, in consideration of the promises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Company and the Investor hereby agree
as
follows:
1. DEFINITIONS.
(a) As
used
in this Agreement, the following terms shall have the following
meanings:
(i)
“Affiliate”
of a Person means a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
the
first mentioned Person.
(ii)
“Blue
Sky
Expenses” means all fees and expenses incurred pursuant to Section 3(c) of this
Agreement.
(iii)
“Investor”
means any person who acquires shares of Common Stock of the Company, or any
security of the Company pursuant to which the holder has a right to receive
shares of Common Stock of the Company upon exercise or conversion of such
security, who agrees to become bound by the provisions of this Agreement
or a
counterpart of this Agreement, and permitted transfers and assignees of such
Investor in accordance with Section 9 hereof.
(iv)
“Stock
Purchase Shares” means shares of Common Stock transferred by Nouri to the
Investor pursuant to the Stock Purchase Agreement.
(v)
“Person”
means any individual, corporation, partnership, joint venture, limited liability
company, business trust, joint stock company, trust or unincorporated
organization or any government or any agency or political subdivision
thereof.
(vii)
“Registrable
Securities” mean (a) the Stock Purchase Shares and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the Stock Purchase
Shares, provided, however, that Registrable Securities shall not include
any
shares of Common Stock which have previously been registered or which have
been
sold to the public either pursuant to a Registration Statement or Rule 144,
or
which have been sold in a private transaction in which the transferor’s rights
under this Agreement are not assigned.
(viii)
“Registration
Expenses” mean all expenses incurred by the Company in effecting any
registration pursuant to this Agreement, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, and expenses of any regular or special audits incident
to or required by any such registration, but shall not include Selling Expenses,
Blue Sky Expenses, fees and disbursements of counsel for the Investor and
the
compensation of regular employees of the Company.
(ix)
“Registration
Period” means the earlier of (i) 120 days after the effective date of the
Registration Statement; (ii) the date on which all of the Registrable Securities
have been sold by the Investor; and (iii) the date on which the Registrable
Securities of the Investor (in the opinion of counsel to the Company) may
be
immediately sold to the public without registration or restriction (including
without limitation as to volume by Investor) under the 1933 Act.
(x)
“Registration
Statement” means a registration statement of the Company under the 1933
Act.
(xi)
“SEC”
means the United States Securities and Exchange Commission.
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(xii)
“Selling
Expenses” shall mean all underwriting discounts, selling commissions and stock
transfer taxes applicable to the sale of Registrable Securities and fees
and
disbursements of counsel for any Investor (other than the fees and disbursements
of counsel included in Registration Expenses).
(b) Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Stock Purchase Agreement.
2. REGISTRATION.
(a) The
Company shall notify the Investor in writing at least fifteen (15) days prior
to
the filing of any Registration Statement under the Securities Act for purposes
of a public offering of securities of the Company (whether in connection
with a
public offering of securities by the Company, a public offering of securities
by
shareholders of the Company, or both, but excluding a registration relating
solely to employee benefit plans, or a registration relating to a corporate
reorganization or other transaction on Form S-4, or a registration on any
registration form that does not permit secondary sales) and will afford such
Investor an opportunity to include in such Registration Statement all or
part of
such Registrable Securities held by the Investor as set forth herein. If
the
Investor desires to include in any such Registration Statement all or any
part
of the Registrable Securities held by such Investor, the Investor shall,
within
fifteen (15) days after the above-described notice from the Company, so notify
the Company in writing. Such notice shall state the intended method of
disposition of the Registrable Securities by such Investor as set forth herein.
If the Investor decides not to include all of its Registrable Securities
in any
Registration Statement thereafter filed by the Company, the Investor shall
nevertheless continue to have the right to include any Registrable Securities
in
any subsequent Registration Statement or Registration Statements as may be
filed
by the Company with respect to offerings of its securities, all upon the
terms
and conditions set forth herein.
(b) Underwriting.
If the
Registration Statement under which the Company gives notice under this Section
2
is for an underwritten offering, the Company shall so advise the Investor.
In
such event, the right of the Investor to be included in a registration pursuant
to this Section 2 shall be conditioned upon the Investor’s participation in such
underwriting and the inclusion of the Investor’s Registrable Securities in the
underwriting to the extent provided herein. If the Investor proposes to
distribute their Registrable Securities through such underwriting, the Investor
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
(c) Notwithstanding
any other provision of this Agreement, if the underwriter determines in good
faith that marketing factors require a limitation of the number of shares
to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated first to the Company; second, to any shares subject to
registration rights agreements in effect prior to this Agreement and remaining
in effect at the time of such underwritten offering; third, to the investors
who
are entitled to participate and who have elected to participate in the offering
pursuant to the terms of this Agreement, on a pro rata basis based upon the
total number of shares held by each such participating investor that are
subject
to piggyback registration rights pursuant hereto; and fourth, to any other
shareholder of the Company on a pro rata basis.
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(d) If
any
Investor disapproves of the terms of any such underwriting, such Investor
may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the Registration Statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Investor which is a partnership or corporation, the
partners, stockholders, subsidiaries, parents and Affiliates of such Investor,
or the estates and family members of any such partners and retired partners
and
any trusts for the benefit of any of the foregoing Persons shall be deemed
to be
a single “Investor”, and any pro rata reduction with respect to such “Investor”
shall be based upon the aggregate amount of shares carrying registration
rights
owned by all entities and individuals included in such “Investor,” as defined in
this sentence.
(e) Right
to Terminate Registration.
The
Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 2 prior to the effectiveness of such registration
whether or not the Investor has elected to include securities in such
registration. The Registration Expenses of such withdrawn registration shall
be
borne by the Company.
3. OBLIGATIONS
OF THE COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
(a) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements
and
the prospectus used in connection with the Registration Statement as may
be
necessary to keep the Registration Statement effective at all times during
the
Registration Period, and, during such period, comply with the provisions
of the
1933 Act with respect to the disposition of all Registrable Securities of
the
Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the Investor as set forth in the Registration
Statement.
(b) If
requested, the Company shall furnish to one legal counsel for all investors
whose Registrable Securities are included in a Registration Statement (i)
promptly (but in no event more than two (2) business days) after the same
is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of each Registration Statement and any amendment thereto,
each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration Statement referred to in Section 2(a),
each
letter written by or on behalf of the Company to the SEC or the staff of
the
SEC, and each item of correspondence from the SEC or the staff of the SEC,
in
each case relating to such Registration Statement (other than any portion
of any
thereof which contains information for which the Company has sought confidential
treatment), and (ii) promptly (but in no event more than two (2) business
days)
after the Registration Statement is declared effective by the SEC, such number
of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as the Investor
may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Investor. The Company will immediately notify one
legal
counsel representing all investors where Registrable
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Securities
are included in a Registration Statement by facsimile of the effectiveness
of
each Registration Statement or any post-effective amendment. The Company
will
promptly respond to any and all comments received from the SEC (which comments
shall promptly be made available to one legal counsel representing all investors
whose Registration Securities are included in a Registration Statement upon
request), with a view towards causing the Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as reasonably
practicable, and (ii) promptly file an acceleration request as soon as
reasonably practicable (but in no event more than two (2) business days)
following the resolution or clearance of all SEC comments. If applicable,
following notification by the SEC that any such Registration Statement or
any
amendment thereto will not be subject to review, the Company shall promptly
file
with the SEC a final prospectus as soon as reasonably practicable (but in
no
event more than two (2) business days) following receipt by the Company from
the
SEC of an order declaring the Registration Statement effective.
(c) The
Company shall use commercially reasonable efforts to (i) register, qualify
or
obtain an exemption for the Registrable Securities covered by the Registration
Statement under such other securities or “blue sky” laws of such jurisdictions
in the United States as the investors who hold a majority of the Registrable
Securities being offered by the Registration Statement may reasonably request,
(ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations, qualifications
and/or exemptions as may be necessary to maintain the effectiveness thereof
during the Registration Period, (iii) take such other actions as may be
reasonably necessary to maintain such registrations and qualifications in
effect
during the Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify or exempt the Registrable Securities for
sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (i) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for
this Section 3(c), (ii) subject itself to general taxation in any such
jurisdiction, (iii) file a general consent to service of process in any such
jurisdiction, (iv) provide any undertakings that cause the Company undue
expense
or burden, or (v) make any change in its certificate of incorporation or
bylaws.
(d) As
promptly as practicable after becoming aware of such event, the Company shall
notify the Investor of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material
fact or
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and use commercially reasonable
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such
number
of copies of such supplement or amendment to the Investor as such Investor
may
reasonably request; provided that, for not more than sixty (60) consecutive
trading days (or a total of not more than ninety (90) trading days in any
twelve
(12) month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an “Allowed
Delay”); provided, further, that the Company shall promptly (i) notify the
Investor in writing of the existence of material non-public information giving
rise to an Allowed Delay and (ii) advise the Investor in writing to cease
all
sales under such Registration Statement until the end of the Allowed Delay.
Upon
expiration of the Allowed Delay, the Company shall again be bound by the
first
sentence of this Section 3(d) with respect to the information giving rise
thereto.
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(e) The
Company shall use commercially reasonable efforts to prevent the issuance
of any
stop order or other suspension of effectiveness of any Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order within
a
reasonable time and to notify the Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution
thereof.
(f) The
Company shall permit a single firm of legal counsel designated by investors
who
own a majority of the registrable securities offered under the Registration
Statement to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC.
The
role of such legal counsel to the investors shall be to confirm that the
sections of such Registration Statement covering information with respect
to the
investors, the investors’ beneficial ownership of securities of the Company and
the investors’ intended method of disposition of Registrable Securities shall
conform to the information provided to the Company by each of the investors,
subject to review and approval by the Company and its legal counsel. Such
legal
counsel for the investors shall not have the right to require changes to
the
description of the Company, its business or other matters not related to
selling
shareholders.
(g) The
Company shall make generally available to its shareholders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the 0000 Xxx) covering a twelve-month period beginning not
later
than the first day of the Company’s fiscal quarter next following the effective
date of the Registration Statement.
(h) Until
the
Registration Statement ceases to be effective, the Company shall make available
for inspection following reasonable prior written notice by (i) any underwriter
participating in any disposition pursuant to a Registration Statement, (ii)
one
firm of attorneys or other agents retained by the investors who own a majority
of the registrable securities, and (iii) one firm of attorneys retained by
all
such underwriters (collectively, the “Inspectors”) all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company’s officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such
due
diligence; provided, however, that each Inspector shall hold in confidence
and
shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential,
and
of which determination the Inspectors are so notified, unless (a) the release
of
such Records is ordered pursuant to a subpoena or other order from a court
or
government body of competent jurisdiction, or (b) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to allow such inspection more than once per calendar year. Following such
due
diligence review, an Investor may require the Company to withdraw the
Registrable Securities of such Investor from the Registration Statement,
if the
Company does not make changes to the Registration Statement requested by
such
Investor.
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(i) The
Company shall not be required to disclose any confidential information in
such
Records to any Inspector or to any Investor pursuant to this Agreement until
and
unless such Inspector and Investor shall have entered into confidentiality
agreements (in
form and
substance satisfactory to the Company) with the Company with respect thereto.
The Investor agrees that it shall, upon learning that disclosure of such
Records
or other information is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any investor) shall be deemed to limit the Investor’s ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
(j) The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the
Registration Statement.
4. OBLIGATIONS
OF THE INVESTOR.
In
connection with the registration of the Registrable Securities, the Investor
shall have the following obligations:
(a) It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held
by it
and the intended method of disposition of the Registrable Securities held
by it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least five (5) business days prior
to
the first anticipated filing date of the Registration Statement, the Company
shall notify the Investor of the information the Company requires from the
Investor.
(c) In
the
event the Company or investors holding a majority of the Registrable securities
being registered determine to engage the services of an underwriter, the
Investor agrees to enter into and perform such Investor’s obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of
the
Registrable Securities, unless such Investor has notified the Company in
writing
of such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.
(d) The
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(d) or 3(e), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(d) or 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
(e) No
Investor may not participate in any underwritten registration hereunder unless
such Investor if requested by the Company (i) agrees to sell such Investor’s
Registrable Securities on the basis provided in any underwriting arrangements
in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of
all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below. Notwithstanding the
foregoing, there is no obligation on the part of the Company or any underwriter
to include Registrable Securities of Investor in the securities to be purchased
or sold by the underwriter.
5. EXPENSES
OF REGISTRATION.
(a) Registration
Expenses.
The
Investors shall bear its proportionate share of the Registration Expenses.
For
purposes of this Section 5, an Investor’s proportionate share shall be
determined by dividing the number of registrable securities for which the
Investor requested registration by the total number of securities being
registered pursuant to the Registration Statement.
(b) Selling
Expenses.
The
Investor shall bear all of the Selling Expenses incurred with respect to
the
Registrable Securities for which the Investor requested registration.
(c) Blue
Sky Expenses.
The
Investors shall reimburse the Company for all Blue Sky Expenses incurred
by the
Company in connection with a request by the investors pursuant to Section
3(c)
of this Agreement to register, qualify or obtain an exemption from registration
of the Registrable Securities under the blue sky laws of any jurisdiction
in the
United States.
(d) Investors’
Counsel.
The
Company shall not be obligated to pay any costs of counsel for incurred by
the
Investor.
To
the
extent that the Company incurs any Registration Expenses, Selling Expenses,
or
Blue Sky Expenses on behalf of any Investor or Investors, such Investor or
Investors shall reimburse the Company promptly for such expenses as they
are
incurred and are due and payable.
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6. INDEMNIFICATION.
In
the
event any Registrable Securities are included in a Registration Statement
under
this Agreement:
(a) To
the
extent permitted by law, the Company will indemnify, hold harmless and defend
(i) the Investor who holds such Registrable Securities, (ii) the directors,
officers, partners, employees, agents and each person who controls the Investor
within the meaning of the 1933 Act or the Securities Exchange Act of 1934,
as
amended (the “1934 Act”), if any, (iii) any underwriter (as defined in the 0000
Xxx) for the Investors, and (iv) the directors, officers, partners, employees
and each person who controls any such underwriter within the meaning of the
1933
Act or the 1934 Act, if any (each, an “Indemnified Person”), against any joint
or several losses, claims, damages, liabilities or expenses (collectively,
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, “Claims”) to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement of a material
fact in a Registration Statement or the omission to state therein a material
fact required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
the Company files any amendment thereof or supplement thereto with the SEC)
or
the omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading; or (iii) any violation by the Company of the 1933
Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer
or
sale of the Registrable Securities (the matters in the foregoing clauses
(i)
through (iii) being, collectively, “Violations”). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Indemnified Person, promptly as such expenses
are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i)
shall
not apply to a Claim arising out of or based upon a Violation which occurs
in
reliance upon and in conformity with information furnished in writing to
the
Company by any Indemnified Person or underwriter for such Indemnified Person,
or
any of their legal counsel, expressly for use in connection with the preparation
of such Registration Statement or any such amendment thereof or supplement
thereto; (ii) shall not apply to amounts paid in settlement of any Claim
if such
settlement is effected without the prior written consent of the Company,
which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified
Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus,
as
then amended or supplemented. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 9.
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(b) In
connection with any Registration Statement in which the Investor is
participating, the Investor agrees severally and not jointly to indemnify,
hold
harmless and defend, to the same extent and in the same manner set forth
in
Section 6(a), the Company, each of its directors, each of its officers who
signs
the Registration Statement, each person, if any, who controls the Company
within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or
any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and
together with an Indemnified Person, an “Indemnified Party”), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act
or
otherwise, insofar as such Claim arises out of or is based upon any Violation
by
such Investor, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor, or its legal counsel, expressly
for
use in connection with such Registration Statement; and subject to Section
6(c)
such Investor will reimburse any legal or other expenses (promptly as such
expenses are incurred and are due and payable) reasonably incurred by them
in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply
to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall
be
liable under this Agreement (including this Section 6(b) and Section 7) for
only
that amount as does not exceed the net proceeds to such Investor as a result
of
the sale of Registrable Securities pursuant to such Registration Statement.
Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of
the Registrable Securities by the Investor pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the
untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to
the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its
own
counsel with the fees and expenses to be paid by the indemnifying party,
if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party
and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such legal counsel shall be
selected by the investors holding a majority of the registrable securities
included in the
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Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the investors), if the investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written
notice
to the indemnifying party within a reasonable time of the commencement of
any
such action shall not relieve such indemnifying party of any liability to
the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability
to
defend such action. The indemnification required by this Section 6 shall
be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with
respect
to any amounts for which it would otherwise be liable under Section 6 to
the
fullest extent permitted by law; provided, however, that (i) no contribution
shall be made under circumstances where the maker would not have been liable
for
indemnification under the fault standards set forth in Section 6, (ii) no
seller
of Registrable Securities guilty of fraudulent misrepresentation (within
the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification
or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such
seller
from the sale of such Registrable Securities.
8. REPORTS
UNDER THE 1934 ACT.
With
a
view to making available to the Investor the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the Investor to sell securities of the Company to the
public
without registration (“Rule 144”), the Company agrees to use its best efforts
to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and
(c) furnish
to the Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied
with
the reporting requirements of Rule 144, the 1933 Act and the 1934 Act and
(ii)
such other information as may be reasonably requested to permit the Investor
to
sell such securities pursuant to Rule 144 without registration.
10
9. ASSIGNMENT
OF REGISTRATION RIGHTS.
The
Investor may not assign its rights under this Agreement to any Person other
than
an Affiliate except with the prior written consent of the Company, which
consent
may be withheld in the Company’s sole discretion. Any assignment permitted under
this Agreement shall be conditioned upon the following: (i) the Investor
shall
agree in writing with the transferee or assignee to assign such rights, and
a
copy of such agreement shall be furnished to the Company within a reasonable
time after such assignment; (ii) the Company shall be, within a reasonable
time
after such transfer or assignment, furnished with written notice of (a) the
name
and address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned; (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee shall be restricted under the 1933
Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence
prior
to or contemporaneous with such transfer or assignment, the transferee or
assignee shall agree in writing with the Company to be bound by all of the
provisions contained herein; (v) such assignment or transfer shall have been
made in accordance with the applicable requirements of the Stock Purchase
Agreement, and (vi) such transferee shall not be a “U.S. person” as that term
defined in Regulation S promulgated under the 1933 Act.
10. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company and the investors
who
hold a majority of the registrable securities, except that any Person who
acquires Registrable Securities may become a party to this Agreement by the
Company and such Person signing a counterpart of this Agreement. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon
the
Investor and the Company. In the event the Company becomes a subsidiary of
any
company whose Common Stock is publicly traded (“Holding Company”), and the
Investor receives shares of Common Stock of such Holding Company, all
obligations of the Company under this Agreement shall terminate upon such
Holding Company assuming this Agreement, which may be done without the consent
or approval of the Investor.
11. MISCELLANEOUS.
(a) A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
of
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect
to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any
notices required or permitted to be given under the terms hereof shall be
sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
11
If
to the
Company:
Xxxxxxx
Xxxxx
Smart
Online, Inc.
Xxxx
Xxxxxx Xxx 00000
Xxxxxxxx
Xxxxxxxx Xxxx, XX 00000-0000
Telephone:
(000) 000-0000
E-mail:
xxxxxx@xx.xxxxxxxxxxx.xxx
If
to the
Investor:
to
the
address set forth in the Stock Purchase Agreement, or on the address set
forth
immediately below such Investor’s name on the agreement entered into pursuant to
Section 9 of this Agreement.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate
as a
waiver thereof.
(d) THIS
AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE
LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO AGREEMENTS MADE AND TO
BE
PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS.
(e) In
the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(f) This
Agreement constitutes the entire agreement among the parties hereto with
respect
to the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and
therein. This Agreement supersedes all prior agreements and understandings
among
the parties hereto with respect to the subject matter hereof and
thereof.
(h) The
headings in this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
12
(i) This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party. This Agreement, once executed by a party, may
be
delivered to the other party hereto by facsimile transmission of a copy of
this
Agreement bearing the signature of the party so delivering this
Agreement.
(j) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Investors pursuant to this Agreement shall be made by the investors holding
a majority of the registrable securities relating to the Registration Statement,
determined as if all options, warrants and convertible securities then
outstanding have been issued and/or converted into registrable
securities.
(l) The
Company and the Investor acknowledge that a breach by it of its obligations
hereunder will cause irreparable harm by vitiating the intent and purpose
of the
transactions contemplated hereby. Accordingly, each party acknowledges that
the
remedy at law for breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach of any
of
the provisions under this Agreement, that the other parties shall be entitled,
in addition to all other available remedies in law or in equity, and in addition
to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically
the terms and provisions hereof, without the necessity of showing economic
loss
and without any bond or other security being required.
(m) The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(n) The
Investor may not bring any legal or other action or proceeding for breach
of
this Agreement or arising out of any matter related to this Agreement, unless
the investors who own a majority of the registrable securities relating to
the
Registration Statement consent to the bringing of such action. Any claim
may be
settled by the Company and the investors who own a majority of such registrable
securities.
[The
Remainder of this Page is Blank.]
13
IN
WITNESS WHEREOF, the Company and the undersigned Investor have caused this
Agreement to be duly executed as of the date on the first page of this
Agreement.
SMART
ONLINE, INC.
By:
______________________________
Name:
___________________________
Title:
____________________________
_________________________________:
_________________________________
Address:_____________________________
____________________________________
Telephone:___________________________
Facsimile:____________________________
Email:_______________________________
Initial
Number of Registrable Securities: _______
14
