REIMBURSEMENT AGREEMENT
Exhibit
10.48
THIS
REIMBURSEMENT AGREEMENT, dated as of November 10, 2006, is made and entered
into
by and between Smart Online, Inc., a Delaware corporation (the “Company”)
and
Atlas Capital SA, a Swiss business organization (“Atlas”).
W
I T N E
S S E T H:
WHEREAS,
pursuant to a Loan Agreement dated as of even date herewith (as the same may
be
amended pursuant to its terms from time to time, the “Loan
Agreement”)
between the Company and Wachovia Bank, NA (the “Bank”),
the
Bank will make a revolving line of credit in a maximum principal amount of
$1,300,000 available to the Company (the “Revolving
Line”);
and
WHEREAS,
to induce the Bank to enter into the Loan Agreement and make the Revolving
Line
available to the Company, and to provide security under the Loan Agreement
for
the payment of the Revolving Line, the Company has requested that Atlas direct
HSBC Private Bank (Suisse) SA, a Swiss business organization (the “Letter
of Credit Provider”),
to
issue an irrevocable, direct-pay letter of credit to the Bank substantially
in
the form of Exhibit
A
attached
hereto (as the same may be amended from time to time, the “Letter
of Credit”);
and
WHEREAS,
Atlas is willing to direct the Letter of Credit Provider to issue the Letter
of
Credit, subject to the following terms and conditions.
NOW,
THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Defined
Terms.
The
following terms when used herein shall have the following respective meanings
(unless the context requires otherwise, words in the singular include the plural
and words in the plural include the singular):
“Accredited
Investor”
means
an “accredited investor” as defined in Rule 501(a) under the Securities
Act, a copy of which definition is attached hereto as Exhibit
B.
“Agreement”
means
this Reimbursement Agreement, as the same may be amended, modified, supplemented
or restated from time to time.
“Atlas”
has
the
meaning ascribed thereto in the first paragraph hereof.
“Bank”
has
the
meaning ascribed thereto in the first Recital.
“Business
Day”
means
any day on which The New York Stock Exchange is not closed.
“Company”
has
the
meaning ascribed thereto in the first paragraph hereof.
“Default
Rate”
means
a
per annum interest rate of six percent (6%).
“Letter
of Credit”
has
the
meaning ascribed thereto in the second Recital.
“Letter
of Credit Provider”
has
the
meaning ascribed thereto in the second Recital.
“Loan
Agreement”
has
the
meaning ascribed thereto in the first Recital.
“Person”
means
an individual, a corporation, a partnership, a limited liability company, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Revolving
Line”
has
the
meaning ascribed thereto in the first Recital.
“Schedule
of Exceptions”
has
the
meaning ascribed thereto in Article III.
“Securities
Act”
has
the
meaning ascribed thereto in Section 3.4.
“Shares”
has
the
meaning ascribed thereto in Section 3.1.
ARTICLE
II
LETTER
OF
CREDIT
Section
2.1 Agreement
to Issue Letter of Credit.
(a) Atlas
shall direct the Letter of Credit Provider to issue the Letter of Credit on
the
date of this Agreement. The Letter of Credit shall be issued in an amount equal
to $1,300,000.
The term
of the Letter of Credit shall end one year from the date of the issuance of
the
Letter of Credit.
(b) So
long
as there is no continuing default on the date of the expiration of the Letter
of
Credit described in Section 2.1(a), Atlas shall direct the Letter of Credit
Provider to issue a replacement Letter of Credit for an equal amount for a
term
of one year from the date of the issuance thereof.
Section
2.2 Reimbursement
of Drawings under Letter of Credit.
(a) The
Company hereby agrees to pay to Atlas within thirty (30) Business Days following
the Business Day any amount is drawn and paid under any Letter of Credit a
sum
equal to the amount so drawn together with interest at half of the Default
Rate.
2
(b) If
the
Company fails to pay to Atlas any amount when due under subsection (a) above,
interest shall accrue on any and all such amounts at the Default Rate (in the
case of interest on interest, to the maximum extent permitted by law),
commencing the day after such amounts first became due until payment in full,
and the Company hereby agrees to pay such accrued interest to Atlas upon
demand.
All
interest hereunder shall be computed on the basis of the actual number of days
elapsed over a 360-day year and shall include the first day but exclude the
last
day of the relevant period.
(c) The
Company may pay any principal or interest amount due under this Section 2.2
in
U.S. Dollars or in common stock of the Company. In the event the Company elects
to pay in common stock of the Company, such stock shall be deemed to be valued
at $2.50 per share.
Section
2.3 Letter
of Credit Fee.
The
Company hereby agrees to pay to Atlas on the date of issuance of any Letter
of
Credit a commitment fee in an amount equal to the product of one tenth of one
percent and the amount of the Letter of Credit.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Subject
to the exceptions and qualifications set forth on the Schedule of Exceptions
attached hereto and incorporated by reference herein (the “Schedule
of Exceptions”),
the
Company hereby represents and warrants to Atlas as follows:
Section
3.1 Organization
and Good Standing; Power and Authority; Qualifications.
The
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and (ii) has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as presently conducted and as proposed to be conducted. The Company
has
all requisite legal and corporate power to execute and deliver this Agreement
and to issue the shares of capital stock that may be issuable hereunder
(collectively, the “Shares”),
and
to carry out and perform its other obligations under the terms of the Agreement.
The Company is qualified to transact business as a foreign corporation in,
and
is in good standing under the laws of, all of the jurisdictions wherein the
character of the property owned or leased or the nature of the activities
conducted by it makes such qualification necessary, except jurisdictions in
which the failure to be so qualified would not have a material adverse effect
on
the condition (financial or otherwise), results of operations, business, assets
or prospects of the Company.
Section
3.2 Authorization.
All
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance and delivery of the Shares has been
taken or will be taken, and the Agreement, when executed and delivered by the
Company, shall constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors’ rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies. The Shares will not be subject to any preemptive rights
or
rights of first refusal that have not been properly waived or complied
with.
3
Section
3.3 Capitalization.
The
Shares which may be issued pursuant to Section 2.2(c) above shall be duly
authorized, fully paid and are nonassessable and have been issued in compliance
with all applicable federal, foreign, and state securities laws at the time
of
the issuance.
Section
3.4 Consents.
Except
as set forth on the Schedule of Exceptions, no permit, consent, approval, order
or authorization of, or registration, qualification, designation, declaration
or
filing with, any Person on the part of the Company is required in connection
with the Company’s valid execution, delivery or performance of this Agreement,
the consummation of the transactions contemplated by this Agreement or the
offer, sale or issuance of the Shares except for filings pursuant to applicable
state securities laws and Regulation D of the Securities Act of 1933, as amended
(the “Securities
Act”),
which
will be timely filed within the applicable periods therefor.
Section
3.5 Financial
Statements.
The
Company’s financial statements, including the Shares thereto, contained in the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby, except
as
otherwise noted therein, and fairly present the consolidated financial condition
and results of operations of the Company and its consolidated subsidiaries,
on
the bases therein stated, as of the respective dates thereof, and for the
respective periods covered thereby and include, in the case of unaudited
financial statements, all material adjustments and accruals consistent with
those included in the audited financial statements.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF ATLAS
Atlas
represents and warrants to the Company as of the date hereof as
follows:
Section
4.1 Authorization.
Atlas 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
Atlas’s valid and legally binding obligation, enforceable in accordance with its
terms, except as limited by (i) applicable bankruptcy, insolvency, receivership,
reorganization, moratorium, fraudulent conveyance and other laws of general
application affecting enforcement of creditors’ rights generally, and (ii)
general principles of equity, the application of which may deny Atlas the right
to specific performance, injunctive relief or other equitable
remedies.
Section
4.2 Public
Information. Atlas has carefully reviewed all current public information
regarding the Company, including financial information and risk factors, and
fully understands the risks associated with investment in the
Company.
4
Section
4.3 Sophistication;
Not Formed for the Specific Purpose of Acquisition; Acknowledgement of
Risks. Atlas 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 this Agreement
and an investment in the Shares, and is prepared to hold the Shares for an
indefinite period of time. Atlas also represents it has not been organized
for
the purpose of acquiring the Shares. Atlas recognizes that its purchase of
the
Shares involves substantial risks, and has taken full cognizance of and
understands such risks. Atlas also acknowledges and is aware that the Shares
are
a speculative investment involving a high risk of loss by it of its entire
investment.
Section
4.4 Accredited
Investor. Atlas is an Accredited Investor.
Section
4.5 Purchase
Entirely for Own Account. Atlas is acquiring the Shares 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. Atlas has no
present intention of selling, transferring or distributing the Shares. Atlas
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 Shares other than as set forth in this Agreement.
Atlas understands that the Shares being transferred to it under this Agreement
have 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.
Section
4.6 No
Registration under the Securities Act. Atlas understands that the Shares are
not registered under the Securities Act on the grounds that the sale provided
for in this Agreement and the issuance of the Shares 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 Atlas’s representations as set forth in this
Agreement.
Section
4.7 Restricted
Securities. Atlas acknowledges that the Shares have not been registered
under the Securities Act and that the Shares may not be sold, assigned, pledged,
hypothecated or transferred, unless there exists an effective registration
statement therefor 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.
Atlas
understands that in the absence of an effective registration statement covering
the Shares, an exemption from the Securities Act and all applicable state
securities laws, the Shares must be held indefinitely. In particular, Atlas
is
aware that the Shares may not 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
Shares to an entity that is a direct or indirect wholly-owned subsidiary of
Atlas.
Section
4.8 Legends.
Atlas understands that the Shares and any securities issued in respect of or
exchange for the Shares, shall, in addition to any legends required elsewhere,
bear the following legends:
5
(a)
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 THEREFOR 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.
(b) 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.
Section
4.9 Disclosure
of Information.
Atlas
has received all information that it considers necessary or appropriate for
deciding whether to enter this Agreement and purchase the Shares. Atlas has
had
an opportunity to ask questions and receive answers from the Company’s
management regarding the Shares 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 Atlas or to which Atlas had
access.
ARTICLE
V
MISCELLANEOUS
Section
5.1 Notices.
All
demands, notices, approvals, consents, requests and other communications
hereunder shall be in writing and shall be deemed to have been given when the
writing is delivered, if given or delivered by hand, overnight delivery service
or facsimile transmitter (with confirmed receipt), or three (3) Business Days
after being mailed, if mailed by first class, registered or certified mail,
postage prepaid, to the address or telecopy number set forth below:
|
If
to the Company:
|
Smart
Online, Inc.
|
|
0000
Xxxxxxxx Xxxxxxx, 0xx Xxxxx
|
|
|
Xxxxxx,
Xxxxx Xxxxxxxx 00000
|
|
|
Attention:
Xxxxxx Xxxxxxx Xxxxx
|
|
|
Fax
No.: (000) 000-0000
|
6
|
with
a copy to counsel:
|
Smith,
Anderson, Blount, Dorsett,
|
|
Xxxxxxxx
& Xxxxxxxx, L.L.P.
|
|
|
P.
O. Xxx 0000
|
|
|
Xxxxxxx,
Xxxxx Xxxxxxxx 00000-0000
|
|
|
Attention:
Xxxxxxxx Xxxxxxxxx, Esq.
|
|
|
Fax
No.: (000) 000-0000
|
|
|
If
to the Atlas:
|
Atlas
Capital SA
|
|
000
Xxx Xx Xxxxx
|
|
|
Xxxxxx,
Xxxxxxxxxxx CH-1204
|
|
|
Attention:
Avy Xxxxxxx
|
|
|
Fax
No.: x000 00 0000 00000
|
The
Company or Atlas may, by notice given hereunder, designate any further or
different addresses or telecopy numbers to which subsequent demands, notices,
approvals, consents, requests or other communications shall be sent or Persons
to whose attention the same shall be directed.
Section
5.2 Controlling
Law.
This
Agreement has been executed, delivered and accepted at, and shall be deemed
to
have been made in, the State of Delaware and shall be interpreted in accordance
with the internal laws (as opposed to conflicts of laws provisions) of the
State
of Delaware, without regard to principles of conflicts of laws.
Section
5.3 Assignment.
Without
the prior written consent of the other party, neither party may sell, assign
or
transfer this Agreement or any portion hereof, including without limitation,
either party’s rights, title, interests, remedies, powers and duties hereunder
or thereunder.
Section
5.4 Amendment.
This
Agreement can be amended or modified only by an instrument in writing signed
by
the Company and Atlas.
Section
5.5 Severability.
In the
event that any provision of this Agreement shall be determined to be invalid
or
unenforceable by any court of competent jurisdiction, such determination shall
not invalidate or render unenforceable any other provision hereof.
Section
5.6 Entire
Agreement.
This
Agreement constitutes the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings of such parties,
verbal or written, relating to the subject matter hereof. This Agreement
represents the final agreement between the parties and may not be contradicted
by prior, contemporaneous or subsequent oral agreements of the parties. There
are no unwritten oral agreements between the parties.
Section
5.7 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be an
original and all of which together shall constitute but one and the same
instrument.
[Signature
Page Follows]
7
[Signature
Page to the Reimbursement Agreement]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
|
SMART
ONLINE, INC.
|
|
|
By:
|
/s/
Xxxxxxx Xxxxx
|
|
Xxxxxxx
Xxxxx
|
|
|
President
and Chief Executive Officer
|
|
|
ATLAS
CAPITAL SA
|
|
|
By:
|
/s/
Avy Xxxxxxx
|
|
Name:
|
|
|
Title:
|
|
8
