Contract
Exhibit
10.44
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS WARRANT AND SUCH UNDERLYING SECURITIES HAVE BEEN ACQUIRED
FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN
THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN EXEMPTION FROM REGISTRATION
AVAILABLE SO THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH FOREIGN
JURISDICTION LAWS HAVE BEEN SATISFIED.
SMART
ONLINE, INC.
STOCK
PURCHASE WARRANT AND AGREEMENT
WHEREAS,
on
November 13, 2006 Atlas Capital, S.A., (the “Holder”)
issued
an irrevocable standby letter of credit (the “Letter
of Credit”)
to
secure a revolving credit arrangement (the “Line
of Credit”)
for
Smart Online, Inc. (the “Company”)
with
Wachovia Bank, NA ("Wachovia")
in the
amount of $1.3 million.
WHEREAS,
the
Company desires to increase the amount of the Line of Credit by $1.2 million
and
Wachovia requires a corresponding $1.2 million increase in the Holder’s Letter
of Credit (the “Letter
of Credit Increase”).
WHEREAS,
as
consideration for the Holder’s agreement to the Letter of Credit Increase, the
parties have agreed to enter into this Stock Purchase Warrant and Agreement
(the
“Agreement”),
which
represents the issuance of a stock purchase warrant (the “Warrant”)
to the
Holder convertible into common stock of the Company at a price of $2.70 (the
“Exercise
Price”).
WHEREAS,
the
Corporation has received comments from its outside legal counsel regarding
the
Agreement and the Warrant.
NOW,
THEREFORE, in
consideration of the premises, covenants and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and legal
sufficiency of which they hereby acknowledge, and intending to be legally bound,
the parties agree as follows:
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1. Issuance
of Warrant; Term; Price.
1.1 Number
and Type.
During
the Term, this Warrant shall be exercisable by the Holder into up to the number
of shares of common stock of the Company determined by dividing the Letter
of
Credit Increase by the Exercise Price (the “Warrant
Stock”).
1.2. Term.
This
Warrant shall be exercisable at the Holder’s option: (a) at any time the Company
is in default under the Line of Credit or (b) within thirty (30) business days
of the termination of the Line of Credit. If (a) this Warrant is not exercised
within thirty (30) business days of the termination of the Line of Credit,
or
(b) if the Holder has not provided the Company with a new or revised letter
of
credit reflecting the Letter of Credit Increase by January 22, 2007, all rights
and obligations of the parties under this Agreement and this Warrant shall
terminate.
2. Stock
Splits and Reverse Stock Splits.
If at
any time on or after the date hereof the Company shall subdivide its outstanding
shares of common stock into a greater number of shares, the Exercise Price
in
effect immediately prior to such subdivision shall thereby be proportionately
reduced and the number of shares of common stock receivable upon exercise of
this Warrant shall thereby be proportionately increased; and, conversely, if
at
any time on or after the date hereof the outstanding number of shares of common
stock shall be combined into a smaller number of shares, the Exercise Price
in
effect immediately prior to such combination shall thereby be proportionately
increased and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.
3. No
Impairment.
The
Company will not, by amendment and/or restatement of its certificate of
incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any
other voluntary action, avoid or seek to avoid the observance or performance
of
any of the terms to be observed or performed hereunder by the Company and in
the
taking of all such action (including, without limitation, amending its
certificate of incorporation) as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
4. No
Fractional Shares.
No
fractional shares of Warrant Stock will be issued in connection with any
exercise hereunder. In lieu of any fractional shares that would otherwise be
issuable, the Company shall pay cash equal to the product of such fraction
multiplied by the fair market value of one share of Warrant Stock on the date
of
exercise, as determined in good faith by the Company's Board of
Directors.
5. Reservation
of Stock.
The
Company covenants that during the Term, the Company will reserve from its
authorized and unissued common stock a sufficient number of shares to provide
for the issuance of shares of common stock upon the exercise of this Warrant.
The Company agrees that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for common stock
upon the exercise of this Warrant. All common stock issuable hereunder shall,
upon payment therefore in accordance herewith, be duly authorized, validly,
issued, fully paid and nonassessable.
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6. Exercise
of Warrant.
This
Warrant may be exercised by the Holder by the surrender of this Warrant at
the
principal office of the Company, accompanied by payment in full of the purchase
price of the Warrant Stock purchased thereby and the completed subscription
form
attached hereto. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of exercise as provided above, and
the person or entity entitled to receive the shares or other securities issuable
upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date. As promptly as
practicable, the Company shall issue and deliver to the person or entity
entitled to receive the same a certificate or certificates for the number of
full shares of Warrant Stock issuable upon such exercise, together with cash
in
lieu of any fraction of a share as provided above. The shares of Warrant Stock
issuable upon exercise hereof shall, upon their issuance, be fully paid and
nonassessable. In the event of partial exercise hereof, the Company shall,
without charge to the Holder, promptly issue a replacement Warrant for the
unexercised portion hereof.
7. Representations
of the Company.
The
Company hereby represents and warrants to the Holder as follows:
7.1 The
Company has the full legal right, power, capacity and authority to enter into
this Agreement and the transactions contemplated hereby and to perform its
obligations pursuant to the terms of this Agreement. This Agreement constitutes
that Company’s valid and legally binding obligation, enforceable in accordance
with its terms except as limited by (i) applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and (ii) general
principals of equity, the application of which may deny the Buyer the right
to
specific performance, injunctive relief and other equitable
remedies.
7.2 The
Company has not engaged in any general solicitation or advertising as defined
under Regulation D of the Securities Act of 1933, as amended (the “Securities
Act”)
in
connection with the transfer of the Warrant as contemplated by this Agreement.
8. Representations
of the Holder.
The
Holder hereby represents and warrants to the Company as follows:
8.1. The
Holder has the full legal right, power, capacity and authority to enter into
this Agreement and the transactions contemplated hereby and to perform its
obligations pursuant to the terms of this Agreement. This Agreement constitutes
the Holder’s valid and legally binding obligation, enforceable in accordance
with its terms except as limited by (i) applicable bankruptcy, insolvency,
receivership, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and (ii) general
principals of equity, the application of which may deny the Company the right
to
specific performance, injunctive relief and other equitable
remedies.
8.2 The
Holder has carefully reviewed all current public information regarding the
Company, including financial information and risk factors, and fully understands
the risk associated with investment in the Company.
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8.3 The
Holder is experienced in evaluating and investing in private placement
transactions of securities of technology companies such as the Company,
acknowledges that it is able to fend for itself, can bear the economic risk
of
its investment, has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Warrant and the Warrant Stock, and is prepared to hold the Warrant and
the Warrant Stock for an indefinite period of time. The Holder also represents
it has not been organized for the purpose of acquiring the Warrant or the
Warrant Stock. The Holder recognizes that its acceptance of the Warrant and
Warrant Stock as consideration for the extension of the Standby Letter of Credit
involves substantial risks, and has taken full cognizance of and understands
such risks. The Holder also acknowledges and is aware that the Warrant and
the
Warrant Stock are a speculative investment involving a high risk of loss by
it
of its entire investment.
8.4 The
Holder is an “accredited investor” as defined in Rule 501(a) under the
Securities Act, a copy of which definition is attached hereto as Exhibit
A.
8.5 The
Holder is acquiring the Warrant and the Warrant Stock for its own account,
for investment and not with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities Act. The Holder
has no present intention of selling or distributing the
Warrant or the Warrant Stock.
The
Holder does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to such person or to any
third party with respect to the Warrant or the Warrant Stock other than as
set
forth in this Agreement. The Holder understands that the Warrant and, when
applicable, the Warrant Stock, being transferred to it under this Agreement
has
not been registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, which depend upon,
among
other things, the bona fide nature of the investment intent as expressed
herein.
8.6 The
Holder understands that the Warrant and, when applicable, the Warrant Stock
are
not registered under the Securities Act on the grounds that the sale provided
for in this Agreement and the issuance of the Warrant and, when applicable,
the
Warrant Stock hereunder is being made in reliance upon an exemption from the
registration requirements of the Securities Act pursuant to Section 4 thereof
and that the Company’s reliance on such exemption is predicated on the Holder’s
representations as set forth in this Agreement.
8.7 The
Holder acknowledges that the Warrant, and, when applicable, the Warrant Stock,
has not been registered under the Securities Act and may not be sold, assigned,
pledged, hypothecated or transferred, unless there exists an effective
registration statement therefore under the Securities Act and all applicable
state securities laws or the Company has received an opinion of counsel,
reasonably acceptable to counsel for the Company, or other reasonable
assurances, that such sale, assignment, pledge, hypothecation or transfer is
exempt from registration. The Holder understands that in the absence of an
effective registration statement covering the Warrant or the Warrant Stock
or an
exemption from the Securities Act and all applicable state securities laws,
the
Warrant and the Warrant Stock must be held indefinitely. In particular, the
Holder is aware that neither the Warrant nor the Warrant Stock may be sold
pursuant to Rule 144 promulgated under the Securities Act, unless all conditions
of Rule 144 are met. Among the conditions for use of Rule 144 may be the
availability of current and adequate information to the public about the
Company. Notwithstanding the foregoing, no opinion of counsel shall be required
by the Company in connection with the transfer of the Warrant or the Warrant
Stock to an entity that is a direct or indirect wholly-owned subsidiary of
the
Holder.
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8.8 Each
certificate representing the Warrant Stock if and when issued shall, in addition
to any legends required elsewhere, bear the following legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAW AND MAY
NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR TRANSFERRED UNLESS THERE EXISTS
AN EFFECTIVE REGISTRATION STATEMENT THEREFORE UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ALL APPLICABLE STATE SECURITIES LAWS OR THE ISSUER HEREOF HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL OF THE
ISSUER, THAT SUCH SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR TRANSFER IS EXEMPT
FROM REGISTRATION.
Each
certificate representing the Warrant Stock shall also bear any legend required
by any applicable state securities law or by any other agreement to which the
Holder of the certificate is a party or by which the Holder of the certificate
thereof is bound.
8.9 The
Holder has received all information that it considers necessary or appropriate
for deciding whether to accept the issuance of the Warrant and, when applicable,
the issuance of the Warrant Stock. The Holder has had an opportunity to ask
questions and receive answers from the Company’s management regarding the
Warrant and, when applicable, the Warrant Stock and the business, properties,
prospects and financial conditions of the Company and to obtain additional
information from the Company (to the extent that the Company possessed such
information or could acquire it without reasonable effort or expense) necessary
to verify the accuracy of any information furnished to the Holder or to which
the Holder had access.
9. Mutual
Indemnification. Each party hereto covenants and agrees to indemnify, defend,
protect and hold harmless the other party and each of their officers, directors,
employees, stockholders, assigns, successors and affiliates from, against and
in
respect of all liabilities, losses, claims, damages, punitive damages, causes
of
action, lawsuits, administrative proceedings (including informal proceedings),
investigations, audits, demands, assessments, adjustments, judgments, settlement
payments, deficiencies, penalties, fines, interest (including interest from
the
date of such damages) and costs and expenses (including without limitation
reasonable attorneys’ fees and disbursements of every kind, nature and
description) suffered, sustained, incurred or paid by the other party or each
of
their officers, directors, employees, stockholders, assigns, successors or
affiliates in connection with, resulting from or arising out of, directly or
indirectly (a) any breach of any representation or warranty of the indemnifying
party set forth in this Agreement or (b) any nonfulfillment of any covenant
or
agreement by the indemnifying party under this Agreement.
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10. Notice
of Proposed Transfers.
Prior
to any proposed transfer of this Warrant or the Warrant Stock received on the
exercise of this Warrant (the "Securities"),
unless there is in effect a registration statement under the Securities Act
of
1933, as amended (the "Securities
Act"),
covering the proposed transfer, the Holder shall give written notice to the
Company of the Holder’s intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall, if the Company so reasonably requests, be
accompanied by either (i) written opinion of legal counsel to the effect that
the proposed transfer of the Securities may be effected without registration
under the Securities Act, or (ii) a "no action" letter from the Securities
Exchange Commission (the "Commission")
to the
effect that the transfer of such Warrant Stock without registration will not
result in a recommendation by the staff of the Commission that action be taken
with respect thereto, whereupon the holder of the Warrant Stock shall be
entitled to transfer the Warrant Stock in accordance with the terms of the
notice delivered by the holder to the Company; provided,
however,
no such
registration statement or opinion of counsel shall be necessary for a transfer
by a holder to any affiliate of such holder, or a transfer by a holder which
is
a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original holder hereunder. Each
certificate evidencing the Warrant Stock transferred as above provided shall
bear the appropriate restrictive legend set forth above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for the Company such legend is not required in order to establish compliance
with any provisions of the Securities Act.
11. Replacement
of Warrants.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Warrant, and in the case of
any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of this Warrant the Company will execute and deliver,
in lieu thereof, a new warrant of like tenor.
12. Miscellaneous.
This
Warrant shall be governed by the laws of the State of Delaware. The headings
in
this Warrant are for purposes of convenience of reference only, and shall not
be
deemed to constitute a part hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provisions. All notices and other communications from the Company to
the
Holder shall be delivered personally or mailed by first class mail, postage
prepaid, to the address furnished to the Company in writing by the Holder who
shall have furnished an address to the Company in writing, and if mailed shall
be deemed given three days after deposit in the U.S. Mail.
13. Amendment.
Any
term of this Warrant may be amended with the written consent of the Company
and
Holder. Any amendment effected in accordance with this Section
13
shall be
binding upon Holder and the Company.
[Signatures
on Following Page]
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[Signature
Page to Stock Purchase Warrant and Agreement]
IN
WITNESS WHEREOF, the Holder has executed this Agreement this 15th
day of
January, 2007.
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ATLAS
CAPITAL, S.A.
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By: /s/
[unintelligible] /s/ Avy Xxxxxxx
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Name:
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Title:
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ACCEPTANCE
The
foregoing Agreement is accepted by the Company this 15th
day of
January, 2007.
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SMART
ONLINE, INC.
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By:
/s/
Xxxxxxx
Xxxxx
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Name:
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Title:
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8
EXHIBIT
A
DEFINITION
OF ACCREDITED INVESTOR
From
Rule 501(a) of the Securities Act of 1933, as amended (the
“Act”)
Accredited
investor
shall
mean any person who comes within any of the following categories, or who the
issuer reasonably believes comes within any of the following categories, at
the
time of the sale of the securities to that person:
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Any
bank as defined in section
3(a)(2)
of
the Act, or any savings and loan association or other institution
as
defined in section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; any broker or dealer registered pursuant to
section
15
of
the Securities Exchange Act of 1934; any insurance company as defined
in
section
2(a)(13)
of
the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in section
2(a)(48)
of
that Act; any Small Business Investment Company licensed by the U.S.
Small
Business Administration under section 301(c) or (d) of the Small
Business
Investment Act of 1958; any plan established and maintained by a
state,
its political subdivisions, or any agency or instrumentality of a
state or
its political subdivisions, for the benefit of its employees, if
such plan
has total assets in excess of $5,000,000; any employee benefit plan
within
the meaning of the Employee Retirement Income Security Act of 1974
if the
investment decision is made by a plan fiduciary, as defined in section
3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons
that
are accredited investors;
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Any
private business development company as defined in section
202(a)(22)
of
the Investment Advisers Act of
1940;
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Any
organization described in section
501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership,
not
formed for the specific purpose of acquiring the securities offered,
with
total assets in excess of
$5,000,000;
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Any
director, executive officer, or general partner of the issuer of
the
securities being offered or sold, or any director, executive officer,
or
general partner of a general partner of that
issuer;
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Any
natural person whose individual net worth, or joint net worth with
that
person's spouse, at the time of his purchase exceeds
$1,000,000;
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6.
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Any
natural person who had an individual income in excess of $200,000
in each
of the two most recent years or joint income with that person's spouse
in
excess of $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current
year;
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Any
trust, with total assets in excess of $5,000,000, not formed for
the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person as described in Rule
506(b)(2)(ii);
and
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Any
entity in which all of the equity owners are accredited
investors.
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10
NOTICE
OF EXERCISE
The
undersigned hereby subscribes for _____ shares of the common stock of Smart
Online, Inc. (the “Company”)
pursuant to the terms of the Stock Purchase Warrant and Agreement between the
Company and the undersigned dated January ___, 2007 (the “Agreement”).
The
undersigned certifies to the Company that its representations, warranties and
covenants contained in the Agreement remain true and correct in all respects.
The certificate(s) for such shares shall be issued in the name of the
undersigned or as otherwise indicated below:
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____________________________
Signature
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Address:
___________________
___________________
___________________
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