Registration Rights Agreement
Exhibit
10.46.2
This
Registration Rights Agreement (the “Agreement”)
is made as of the date set forth below between Smart Online, Inc., a Delaware
corporation (the “Company”),
and the purchasers of its Common Stock (as defined below) pursuant to a
Securities Purchase Agreement dated as of the date hereof (each in “Investor”
and, collectively, the “Investors”).
Capitalized terms used and not defined herein shall have the respective meanings
ascribed to them in the Securities Purchase Agreement.
RECITALS
WHEREAS,
the Company has sold to up to 2,352,941 shares (the “Shares”)
of its common stock, $0.001 par value per share, (the “Common
Stock”),
to certain investors in a private placement (the “Offering”);
and
WHEREAS,
the execution and delivery of this Agreement by the Company is a condition
to
the completion of the Offering.
NOW,
THEREFORE, the parties hereto agree as follows:
1. Registration
Procedures and Expenses.
The Company shall:
(a) subject
to receipt of necessary information from the Investors, prepare and file with
the Securities and Exchange Commission (“SEC”),
within thirty (30) calendar days after the Closing Date (the “Required
Filing Date”),
a Registration Statement on Form S-1 to enable the resale of the Shares by
the
Investors from time to time;
(b) use
its best efforts, subject to receipt of necessary information from the
Investors, to cause the Registration Statement to become effective as soon
as
practicable, but in no event later than sixty (60) days after the actual filing
date of the Registration Statement with the SEC (the “Actual
Filing Date”)
or ninety (90) days after the Actual Filing Date if the Registration Statement
is reviewed by the SEC (the “Required
Effective Date”).
If the Registration Statement (i) has not been filed by the Required Filing
Date
or (ii) has not been declared effective by the SEC on or before the Required
Effective Date, then the Company shall on the first business day after the
Required Filing Date if not filed or the Required Effective Date if not declared
effective, as the case may be, make
a payment to the Investor as compensation for such delay an amount equal to
one
percent (1%) of the Purchase Price paid for the Shares purchased by the
Investor,
and on each 30th
day anniversary thereafter make a payment to the Investor as compensation for
such delay an amount equal to one-half percent (0.5%) of the Purchase Price
paid
for the Shares purchased by the Investor (collectively, the “Late
Registration Payments”),
until the Registration Statement is filed or declared effective by the SEC.
Notwithstanding the foregoing, in no event shall the total of all Late
Registration Payments exceed in the aggregate ten percent (10%) of such Purchase
Price. Late Registration Payments, if any, will be prorated on a daily basis
and
will be paid to Investor by wire transfer or check within five (5) Business
Days
after the date that each payment is due;
(c) use
its commercially reasonable best efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus
as
may be necessary to keep the Registration Statement current and effective for
a
period ending on the earlier of (i) the date as all of the Investor’s Shares
shall have been sold, (ii) the date on which the Investor may sell Shares
pursuant to paragraph (k) of Rule 144 under the Securities Act or any successor
rule (“Rule
144”)
or (iii) such time as all Shares purchased by such Investor in this Offering
have been sold pursuant to a registration statement or Rule 144, and to notify
each Investor promptly upon the Registration Statement and each post-effective
amendment thereto, being declared effective by the SEC;
(d) furnish
to the Investor such number of copies (in paper or electronic version) of the
Registration Statement and
the Prospectus (including
supplemental prospectuses), as the Investor may reasonably request, in order
to
facilitate the public sale or other disposition of all or any of the Shares
by
the Investor;
(e) file
documents required of the Company for normal blue sky clearance in states
specified in writing by the Investor; provided, however, that the Company shall
not be required to qualify to do business or consent to service of process
in
any jurisdiction in which it is not now so qualified or has not so consented;
(f) bear
all expenses (other than underwriting discounts and commissions, if any) in
connection with the procedures in paragraph (a) through (e) of this Section
1
and the registration of the Shares pursuant to the Registration Statement;
(g) advise
the Investors, promptly after it shall receive notice or obtain knowledge of
the
issuance of any stop order by the SEC delaying or suspending the effectiveness
of the Registration Statement or of the initiation of any proceeding for that
purpose; and it will promptly use its commercially reasonable efforts to prevent
the issuance of any stop order or to obtain its withdrawal at the earliest
possible moment if such stop order should be issued; and
(h) with
a view to making available to the Investor the benefits of Rule 144 or other
rule that may permit the Investor to sell Shares without registration, the
Company agrees to use its commercially reasonable efforts to: (i) make and
keep
public information available, as those terms are understood and defined in
Rule
144, until the earlier of (A) such date as all of the Investor’s Shares may be
resold pursuant to Rule 144(k) or (B) such date as all of the Investor’s Shares
shall have been sold; (ii) file with the SEC in a timely manner all reports
and
other documents required of the Company under the Securities Act and under
the
Exchange Act; and (iii) furnish to the Investor upon request a written statement
that the Company has complied with the reporting requirements of the Securities
Act and the Exchange Act, a copy (in paper or electronic version) of the
Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form
10-Q, and (C) such other information as may be reasonably requested that permits
the selling of any such Shares without registration.
It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Section 1 that the Investor shall furnish to the Company
such information and representations regarding Investor, the Shares to be sold
by Investor, and the intended method of disposition of such securities as shall
be required to effect the registration of the Shares and/or sale under Rule
144.
The
Company understands that the Investor disclaims being an underwriter, but
acknowledges that a determination by the SEC that the Investor is deemed an
underwriter shall not relieve the Company of any obligations it has hereunder.
The Company and the Investor agree and acknowledge that each Investor
individually negotiated the terms of the transactions contemplated hereby and
are of
the view that the Investors are not acting as a “group” for purposes of Section
13(d) under the Exchange Act.
2. Transfer
of Shares After Registration; Suspension.
(a) The
Investor agrees that it will not effect any disposition or other transfer of
the
Shares or its right to purchase the Shares that would constitute a sale within
the meaning of the Securities Act other than transactions exempt from the
registration requirements of the Securities Act, as contemplated in the
Registration Statement and as described below, and that it will promptly notify
the Company of any material changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.
(b) Except
in the event that paragraph (c) below applies, the Company shall: (i) if deemed
necessary by the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and so that, as thereafter delivered
to purchasers of the Shares being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not misleading; (ii)
provide the Investor with either copies of any documents filed pursuant to
Section 2(b)(i) or access to such documents electronically; and (iii) upon
request, inform each Investor who so requests that the Company has complied
with
its obligations in Section 2(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify the Investor to that effect, will
use its best efforts to secure the effectiveness of such post-effective
amendment as promptly as possible and will promptly notify the Investor pursuant
to Section 2(b)(i) hereof when the amendment has become effective).
(c) Subject
to paragraph (d) below, in the event: (i) of any request by the SEC or any
other
federal or state governmental authority during the period of effectiveness
of
the Registration Statement for amendments or supplements to the Registration
Statement or related Prospectus or for additional information; (ii) of the
issuance by the SEC or any other federal or state governmental authority of
any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv)
of
any event or circumstance which necessitates the making of any material changes
in the Registration Statement or Prospectus, or any document incorporated or
deemed to be incorporated therein by reference, so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit
to state a material fact required to be stated therein or necessary to make
the
statements therein, in the light of the circumstances under which they were
made, not misleading; then the Company shall promptly deliver a certificate
in
writing or electronically to the Investor (the “Suspension
Notice”)
to the effect of the foregoing and, upon receipt of such Suspension Notice,
the
Investor will refrain from selling any Shares pursuant to the Registration
Statement (a “Suspension”)
until the Investors are advised in writing by the Company that the current
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. Notwithstanding the foregoing, the right of the Company
to implement a Suspension shall be limited to two such Suspensions in any
twelve-month period, each of which may not exceed 45 days. In the event of
any
Suspension, the Company will use its reasonable best efforts to cause the use
of
the Prospectus so suspended to be resumed as soon as reasonably practicable
after delivery of a Suspension Notice to the Investors. In addition to and
without limiting any other remedies (including, without limitation, at law
or at
equity) available to the Investor, the Investor shall be entitled to specific
performance in the event that the Company fails to comply with the provisions
of
this Section 2(c). The Investor covenants that from the date hereof it will
maintain in confidence the receipt and content of any Suspension Notice provided
in accordance with this paragraph (c) in accordance with and subject to Section
4.6 of Annex I to the Securities Purchase Agreement.
(d) If
a Suspension is not then in effect, the Investor may sell Shares under the
Registration Statement, provided that it complies with any applicable prospectus
delivery requirements. Upon receipt of a request therefor, the Company will
provide an adequate number of current Prospectuses to the Investor and to any
other parties requiring such Prospectuses.
(e) The
Company agrees that it shall, upon the Registration Statement being declared
effective, deliver to its transfer agent an opinion letter of counsel, opining
that the transfer agent shall issue certificates representing such Shares
without restrictive legend, provided that the Investor undertakes that the
Shares will be sold only pursuant to the Prospectus contained in an effective
Registration Statement. Upon receipt of such opinion, the Company shall cause
the transfer agent to confirm, for the benefit of the Investor, that no further
opinion of counsel is required at the time of transfer in order to issue such
Shares without restrictive legend.
The
Company shall cause
its transfer agent to issue
a certificate without any restrictive legend to a purchaser of any Shares from
the Investor at Investor’s expense and upon request of Investor, if (a) the sale
of such Shares is registered under the Registration Statement (including
registration pursuant to Rule 415 under the Securities Act); (b) the holder
has
provided the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect
that
a public sale or transfer of such Shares may be made without registration under
the Securities Act; or (c) such Shares are sold in compliance with Rule 144
under the Securities Act. In addition, the Company shall, at the Investors
expense and upon request of the Investor, remove the restrictive legend from
any
Shares held by the Investor following the expiration of the holding period
required by Rule 144(k) under the Securities Act (or any successor rule).
3. Indemnification.
For
the purpose of this Section 3:
(a) the
term “Selling
Shareholder”
shall mean the Investor and each person, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act;
(b) the
term “Registration
Statement”
shall mean the final Prospectus, supplement or amendment thereto (or deemed
to
be a part thereof) referred to in Section 1; and
(c) the
term “untrue
statement”
shall mean any material untrue statement, or any material omission of a
statement of a material fact required to be made therein or necessary to make
the statements therein, in the light of the circumstances under which they
were
made, not materially misleading.
(d) (i) The
Company agrees to indemnify and hold harmless each Selling Shareholder from
and
against any losses, or damages to which such Selling Shareholder may incur
(under the Securities Act or otherwise) insofar as such losses or damages arise
out of (i) any untrue statement of a material fact contained in the Registration
Statement, or (ii) any inaccuracy in the representations of the Company
contained in this Agreement. The Company will reimburse such Selling Shareholder
for any reasonable legal expense incurred or any out of pocket expenses
reasonably incurred in defending any such claim or action; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss or damage arises out of, or is based upon, an untrue statement made in
such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Shareholder
for use in preparation of the Registration Statement, or any inaccuracy in
representations made by such Selling Shareholder in the Investor Questionnaire
or the failure of such Selling Shareholder to comply with its covenants and
agreements contained in Sections in this Agreement or contained in the
Securities Purchase Agreement or any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the Selling
Shareholder prior to the pertinent sale or sales by the Selling Shareholder.
The
obligation to indemnify shall be limited to the net amount of the proceeds
received by the Company from the Investor as a result of the
Offering.
(ii)
The
Investor agrees to indemnify and hold harmless the Company (and each person,
if
any, who controls the Company within the meaning of Section 15 of the Securities
Act, each officer of the Company who signs the Registration Statement and each
director of the Company) from and against any losses or damage to which the
Company (or any such officer, director or controlling person) may become subject
(under the Securities Act or otherwise), insofar as such loss or damage (or
actions or proceedings in respect thereof) arise out of, or are based upon,
(i)
any failure to comply with the covenants and agreements contained in this
Agreement or of the Securities Purchase Agreement or (ii) any untrue statement
of a material fact contained in the Registration Statement if, and only if,
such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use
in
preparation of the Registration Statement. The Investor will reimburse the
Company (or such officer, director or controlling person), as the case may
be,
for any reasonable legal expense or other actual accountable out-of-pocket
expenses reasonably incurred in defending any such claim, action or proceeding.
The obligation to indemnify shall be limited to the net amount of the proceeds
received by the Investor from the sale of the Shares pursuant to the
Registration Statement.
(iii)
Promptly
after receipt by any indemnified person of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 3, such indemnified person shall
notify the indemnifying person in writing of such claim or of the commencement
of such action, but the omission to so notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party under
this Section 3 (except to the extent that such omission materially and adversely
affects the indemnifying party’s ability to defend such action) or from any
liability otherwise than under this Section 3. Subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written notice delivered
to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof (unless it has failed to assume the defense thereof and appoint
counsel reasonably satisfactory to the indemnified party), such indemnifying
person shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense
thereof; provided, however, that if there exists or shall exist a conflict
of
interest that would make it inappropriate, in the reasonable opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel
at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) for all indemnified parties.
In no event shall any indemnifying person be liable in respect of any amounts
paid in settlement of any action unless the indemnifying person shall have
approved the terms of such settlement; provided that such consent shall not
be
unreasonably withheld. No indemnifying person shall, without the prior written
consent of the indemnified person, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified person is or could
reasonably have been a party and indemnification could have been sought
hereunder by such indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability on claims
that are the subject matter of such proceeding.
(iv) If
the indemnification provided for in this Section 3 is unavailable to or
insufficient to hold harmless an indemnified party under paragraphs 3(d)(i)
or
3(d)(ii) above in respect of any loss or damage (or actions or proceedings
in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss or damage (or actions in respect thereof) in such proportion as
is
appropriate to reflect the relative fault of the Company on the one hand and
the
Investor on the other in connection with the statements or omissions or other
matters which resulted in such loss or damage (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault
shall
be determined by reference to, among other things, in the case of an untrue
statement, whether the untrue statement relates to information supplied by
the
Company on the one hand or the Investor on the other and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement. The Company and the Investor agree that it would not
be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Investors were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the loss or damage (or actions in respect thereof) referred to above in
this
subsection (d) shall be deemed to include any reasonable legal fees incurred
by
such indemnified party in connection with defending any such action or claim.
Notwithstanding the provisions of this subsection (d), the Investor shall not
be
required to contribute any amount in excess of the amount by which the gross
amount received by the Investor from the sale of the Shares to which such loss
relates exceeds the amount of any damages which the Investor has otherwise
been
required to pay by reason of such untrue statement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Investors’ obligations in this
subsection to contribute are several in proportion to their sales of Shares
to
which such loss relates and not joint.
(e) The
parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions
of
this Section 3, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 3 fairly allocate the risks
in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement as required by the Securities Act and the Exchange Act.
4. Termination
of Conditions and Obligations. The
conditions precedent imposed by Section 4 of the Securities Purchase Agreement
or this Agreement upon the transferability of the Shares shall cease and
terminate as to any particular number of the Shares when such Shares shall
have
been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition set forth
in
the Registration Statement covering such Shares or at such time as an opinion
of
counsel satisfactory to the Company shall have been rendered to the effect
that
such conditions are not necessary in order to comply with the Securities Act.
5. Information
Available. So
long as the Registration Statement is effective covering the resale of Shares
owned by the Investor, the Company will furnish (or, to the extent such
information is available electronically through the Company’s filings with the
SEC, the Company will make available) to the Investor:
(a) as
soon as practicable after it is available, one copy of (i) its Annual Report
to
Shareholders (which Annual Report shall contain financial statements audited
in
accordance with generally accepted accounting principles by a national firm
of
certified public accountants) and (ii) if not included in substance in the
Annual Report to Shareholders, its Annual Report on Form 10-K (the foregoing,
in
each case, excluding exhibits); and,
(b) upon
the reasonable request of the Investor, an adequate number of copies of the
Prospectuses to supply to any other party requiring such Prospectuses either
in
printed or electronic form.
6. Limits
on Additional Issuances.
Except for the issuance of stock options under the Company’s stock option plan,
the issuance of warrants to purchase the Company’s common stock, or the issuance
of common stock under
the Company’s employee stock purchase plan or upon
exercise of outstanding options and warrants and the offering contemplated
hereby, the Company will not, for a period of three (3) months following the
Closing Date, offer for sale or sell any securities unless, in the opinion
of
the Company’s counsel, such offer or sale does not jeopardize the availability
of exemptions from the registration and qualification requirements under
applicable securities laws with respect to the Offering. The foregoing shall
not
apply to securities issued in connection with any acquisition, including by
way
of merger, or purchase of stock or all or substantially all of the assets of
any
third party. The foregoing provisions shall not prevent the Company from filing
a “shelf” registration statement pursuant to Rule 415 under the Securities Act,
but the foregoing provisions shall apply to any sale of securities
thereunder.
7. Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing, shall be delivered (A) if within the United States, by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile, or (B) if from outside the United
States, by International Federal Express (or comparable service) or facsimile,
and shall be deemed given (i) if delivered by first-class registered or
certified mail domestic, upon the Business Day received, (ii) if delivered
by
nationally recognized overnight carrier, one (1) Business Day after timely
delivery to such carrier, (iii) if delivered by International Federal Express
(or comparable service), two (2) Business Days after timely delivery to such
carrier, (iv) if delivered by facsimile, upon electric confirmation of receipt
and shall be addressed as follows, or to such other address or addresses as
may
have been furnished in writing by a party to another party pursuant to this
paragraph:
(a)
if
to the Company, to:
Smart
Online, Inc
0000
Xxxxxxxx Xxxxxxx, 0xx
Xxxxx
Xxxxxx,
XX 00000
Attention: Xxxxx
Xxxxxx, Corporate Counsel
Telephone:
(000) 000-0000
with
a copy to:.
Smith,
Anderson, Blount, Dorsett,
Xxxxxxxx
& Xxxxxxxx, LLP
0000
Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxx,
Xxxxx Xxxxxxxx 00000-0000
Attention:
Xxxxxxxx X. Xxxxxxxxx
Telephone: (000)
000-0000
(b)
if
to the Investor, at its address on the signature page to the Stock Purchase
Agreement.
8. Amendments;
Waiver. This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor. Any waiver of a provision of
this Agreement must be in writing and executed by the party against whom
enforcement of such waiver is sought.
9. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
10.
Entire
Agreement; Severability. This
Agreement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. If any provision
contained in this Agreement is determined to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
11.
Governing
Law. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
12.
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other
parties.
[Remainder
of Page Intentionally Left Blank]
Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.
|
____________________________
By:
_________________________
Its:
_________________________
____________________
By:
Its:
Address: ___________________
___________________
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AGREED
AND ACCEPTED:
SMART
ONLINE, INC.
By:
____________________________
Name:
Title:
Dated
as of:
February
__, 2007
