FORM OF DRIBBLE OUT AGREEMENT
Exhibit
10.28
FORM
OF
AGREEMENT
dated as of ________________, 2005 between Smart Online, Inc., Delaware
corporation (the “Company”), and _______________ (“Subscriber”).
WHEREAS,
Subscriber has purchased shares of Common Stock (the “Purchased Shares”) from
the Company and the Company desires Subscriber to agree to limit its sales
of
the Purchased Shares in return for granting Subscriber the right to have the
Purchased Shares registered. The Purchased Shares are hereinafter individually
and collectively referred to as the “Securities”).
NOW,
THEREFORE, the parties hereby agree as follows:
(1) Registration
of Shares.
The
Company agrees to enter into the Registration Rights Agreement with
Subscriber.
(2) “Dribble-Out”
Agreement.
(a) In
consideration for the Registration Rights Agreement, Subscriber hereby agrees
that, except as permitted under subsection (c) of this Section, during the
Dribble Out Period, as defined herein, Subscriber will not:
(i) Sell
any
of the Securities or other securities of the Company or Holding Company received
on account of ownership of the Securities (the “Dribble-Out
Securities”).
(ii) Transfer,
assign or otherwise dispose of any of the Dribble-Out Securities.
(iii) Pledge,
hypothecate or otherwise create a lien on any of the Lock-Up
Securities.
(iv) Loan
to
any person or entity any shares or other securities of the Company or Holding
Company.
(v) Sell
short any shares or other securities of the Company or Holding
Company.
(vi) Acquire
a
put option or grant a call option with respect to any shares or other securities
of the Company 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, Holding Company shall mean any company whose stock
is
publicly traded (i) with which the Company merges or consolidates or (ii) of
which
(b) For
purposes of this Section, Holding Company shall mean any company whose stock
is
publicly traded (i) with which the Company merges or consolidates or (ii)
of
which the
Company or its successor becomes a subsidiary. For purposes of this Section,
the
Dribble Out Period shall mean the period beginning on the date of this Agreement
and ending six (6) months after the effective date of the first registration
statement of the Company that registers for resale the Dribble-Out Securities
(the “Effective Date”). Notwithstanding the foregoing, after the Effective Date
Subscriber may sell (if permitted under a registration statement), during
any
rolling thirty-day period during the Dribble Out Period, up to 25% of the
Dribble-Out Securities owned by Subscriber on the Effective Date. The Board
of
Directors of the Company or Holding Company may terminate the Dribble Out
Period
or allow Subscriber to take a prohibited action prior to termination of the
Dribble Out Period with respect to some or all of the Dribble-Out Securities
owned by the Subscriber, if the Board provides all other Subscribers of the
Company or Holding Company who have the same Dribble Out Period with the
same
termination or waiver at the same time and to the same extent as for
Subscriber.
(c) Notwithstanding
the foregoing, provided the transferee first signs an agreement on substantially
the terms set forth herein and reasonably acceptable to the Company or Holding
Company, Subscriber may transfer securities of the Company or Holding Company
without payment or other consideration: (i) if Subscriber is an individual,
to
any family member, (ii) if Subscriber is a corporation, to any direct or
indirect parent or subsidiary or any shareholder of Subscriber, (iii) if
Subscriber is a partnership, to any partner of Subscriber, (iv) if Subscriber
is
a limited liability company, to any member of Subscriber, and (v) if Subscriber
is a trust, to any beneficiary of such trust.
(d) Subscriber
further agrees that before and after termination of the Dribble Out Period,
Subscriber will comply with all securities laws, rules and regulations when
purchasing or reselling securities of the Company or Holding Company, including,
without limitation, those prohibiting sales and purchases of securities while
in
possession of material nonpublic information.
(e) The
Dribble-Out Securities of Subscriber shall have a legend in form and substance
acceptable to the Company and Holding Company referring to the restrictions
of
this Agreement and the Company or Holding Company may instruct the transfer
agent of the Company or 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) The
provisions of this Section shall continue in effect after the Dribble-Out
Securities are registered pursuant to the Registration Rights
Agreement.
(g) Stop
Transfer Instructions.
Subscriber agrees that the Company may issue instructions to its transfer agent
that prohibit transfer in violation of this Agreement.
(h) Legends.
The
Company may place a legend on the Dribble Out Securities referring to the
restrictions contained in this Agreement.
(3) The
representations, warranties, understandings, acknowledgments and agreements
in
this Agreement are true and accurate as of the date hereof, shall be true and
accurate as of the date of the acceptance hereof by the Company and shall
survive thereafter.
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(4) This
Agreement shall be enforced, governed and construed in all respects in
accordance with the laws of the State of Delaware, as such laws are applied
by
Delaware courts to agreements entered into and to be performed in Delaware,
and
shall be binding upon Subscriber, the Subscriber’s heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company and its successors and assigns.
(5) Subscriber
agrees not to transfer or assign this Agreement, or any of Subscriber’s interest
herein, without the express written consent of the Company.
(6) This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes any and all prior or contemporaneous
representations, warranties, agreements and understandings in connection
therewith. This Agreement may be amended only by a writing executed by all
parties hereto. This Agreement may be executed in one or more
counterparts.
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remainder of this page is intentionally left blank.)
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
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SMART
ONLINE, INC.
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By:
______________________
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By:
__________________________
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Xxxxxxx
Xxxxx, President
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Name:
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Address:
______________________
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______________________
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