SUBSCRIPTION AGREEMENT
(WITH WARRANTS)
Smart Online, Inc.
0000 Xxxxxxxx Xxxxxxx
0xx Xxxxx
Xxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Gentlemen:
(1) Pursuant to prior understandings and discussions, the
undersigned ("Subscriber") hereby agrees to purchase from Smart Online, a
Delaware corporation (the "Company"), for a purchase price of Three Dollars and
Fifty Cents ($3.50) per share (i) the number of shares of Common Stock, par
value $0.001 per share ("Common Stock") set forth on the signature page of this
Agreement and a minimum investment of $100,000 and (ii) a Warrant ("Warrants")
to purchase the number of shares on Common Stock ("Warrant Shares") set forth on
the signature page of this Agreement. (The Common Stock, Warrant Shares and
warrant are sometimes hereinafter referred to collectively as the "Securities.")
Subscriber hereby acknowledges (i) that this subscription shall not be deemed to
have been accepted by the Company until the Company indicates its acceptance by
returning to Subscriber an executed copy of this subscription, and (ii) that
acceptance by the Company of this subscription is conditioned upon the
information and representations of Subscriber hereunder being complete, true and
correct as of the date of this subscription and as of the date of closing of
sale of the Securities to Subscriber. As a condition to Subscriber's purchase of
the Securities pursuant to this Agreement, Subscriber and the Company will
execute and deliver to one another a copy of the Registration Rights Agreement
in substantially the form attached hereto as APPENDIX A (the "Registration
Rights Agreement") and the Company shall issue a Warrant in substantially the
form of APPENDIX B hereto.
(2) Until actual delivery of the purchase price to the Company and
acceptance by the Company of the purchase price and this Subscription Agreement,
the Company shall have no obligation to Subscriber. The Company may revoke a
prior acceptance of this Subscription Agreement at any time prior to delivery to
and acceptance by the Company of the purchase price for the Securities.
(3) Subscriber hereby represents and warrants to the Company as
follows:
(a) AUTHORIZATION. Subscriber has full power and authority
to enter into this Agreement. This Agreement constitutes Subscriber'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.
(b) EXPERIENCE. Subscriber is experienced in evaluating and
investing in private placement transactions of securities of technology
companies such as the Company, has
such knowledge and experience in financial and business matters that Subscriber
is capable of evaluating the merits and risks of Subscriber's investment in the
Securities, is able to bear the economic risk of the investment and is prepared
to hold the shares for an indefinite period of time.
(c) INVESTMENT. Subscriber is acquiring the Securities for
investment for Subscriber's own account and not with a view to, or for resale in
connection with, any distribution thereof, and Subscriber has no present
intention of selling or distributing the Securities. Subscriber 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 person with
respect to any of the Securities other than as set forth in this Agreement.
Subscriber understands that the Securities to be purchased by Subscriber have
not been registered under the Securities Act of 1933, as amended (the "Act") by
reason of a specific exemption from the registration provisions of the Act which
depends upon, among other things, the bona fide nature of the investment intent
as expressed herein.
(d) RELIANCE UPON SUBSCRIBER REPRESENTATIONS. Subscriber
understands that the Securities are not registered under the Act on the grounds
that the sale provided for in this Agreement and the issuance of Securities
hereunder is being made in reliance upon an exemption from the registration
requirements of the Act pursuant to Section 4(2) thereof as a transaction by an
issuer of Securities not involving a public offering or pursuant to Section 4(6)
thereof as a transaction by an issuer of securities solely to accredited
investors, and is similarly exempt under applicable state securities laws, and
that the Company's reliance on such exemption is predicated on Subscriber's
representations as set forth in this Agreement.
(e) RESTRICTED SECURITIES. Subscriber acknowledges that the
Securities have not been registered under the Act or any applicable state
securities law and that the Securities may not be sold, assigned, pledged,
hypothecated or transferred, unless there exists an effective registration
statement therefor under the 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. Subscriber understands
that in the absence of an effective registration statement covering the
Securities or an exemption therefrom under the Act and all applicable state
securities laws, the Securities must be held indefinitely. In particular,
Subscriber is aware that the Securities may not be sold pursuant to Rule 144
promulgated under the Act, unless all conditions of Rule 144 are met. Among the
conditions for the use of Rule 144 may be the availability of current and
adequate information to the public about the Company. Such information is not
now available and, except as set forth in the Registration Rights Agreement, the
Company has no obligation to make such information available. Notwithstanding
the foregoing, no opinion of counsel shall be required by the Company in
connection with the transfer of the Securities to an entity that is a direct or
indirect wholly-owned subsidiary of Subscriber.
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(f) LEGENDS.
(i) Each certificate or warrant agreement
representing the Securities shall, in addition to any legends required
elsewhere, bear the following legend as appropriate for stock certificates and
warrant agreements:
THE SHARES REPRESENTED BY THIS CERTIFICATE AND WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF 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.
(ii) Each certificate or warrant agreement
representing Securities or Conversion Securities shall also bear any legend
required by any applicable state securities law or by any other agreement to
which the holder thereof is a party or by which the holder thereof is bound.
(iii) Each certificate or warrant agreement
representing the Securities shall also bear a legend referring to the Lock-Up
Agreement set forth in Section (5) below.
(g) NO PUBLIC MARKET. Subscriber understands that no public
market now exists for any of the securities issued by the Company.
(h) ACCESS TO INFORMATION. Subscriber has received all
information that Subscriber considers necessary or appropriate for deciding
whether to purchase Securities. Subscriber has had an opportunity to ask
questions and receive answers from the Company's management regarding the terms
and conditions of the offering of the Securities and the business, properties,
prospects and financial condition 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 unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to Subscriber or
to which Subscriber had access.
(i) ACCREDITED INVESTOR. Subscriber recognizes it is
important under the Act and state securities law that the Company determine if
potential investors are "accredited investors," as defined in APPENDIX C
attached hereto. Subscriber represents that Subscriber is an "accredited
investor" by reason of having assets in excess of $5,000,000 USD, not formed for
the specific purpose of investing in the company, whose purchase is directed by
a sophisticated person having knowledge and experience in financial and business
matters or any other "accredited investors"
3
definitions as defined in APPENDIX C. Subscriber further represents that
Subscriber is a resident of the State of North Carolina.
(4) 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.
(5) LOCKUP AGREEMENT.
(a) Subscriber hereby agrees that, except as permitted under
subsection (b) of this Section (5), during the Restricted 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 "Lock-Up Securities").
(ii) Transfer, assign or otherwise dispose of any of
the Lock-up 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 (5), 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 (5), the Restricted Period shall mean
the period beginning on the date of this Agreement and ending 18 months after
the effective date of the first registration statement of the Company that
registers for resale the Lock-Up Securities (the "Effective Date").
Notwithstanding the foregoing, after the Effective Date Subscriber may sell,
during any rolling thirty-day period during the Restricted Period, up to 33% of
the Lock-Up Securities owned by Subscriber on the Effective Date. The Board of
Directors of the Company or Holding Company may terminate the Restricted Period
or allow Subscriber to take a prohibited action prior to termination of the
Restricted Period with respect to some or all of the Lock-Up Securities owned by
the Subscriber, if the Board provides all other Subscribers of the Company or
Holding Company who have the same Restricted Period with the same termination or
waiver at the same time and to the same extent as for Subscriber.
4
(c) Notwithstanding the foregoing, provided the transferee
first signs a Lockup Agreement on substantially the terms set forth in this
Section 5 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 Restricted 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 Lock-Up 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 (5) shall continue in
effect after the Lock-Up Securities are registered pursuant to the Registration
Rights Agreement.
(6) 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.
(7) Subscriber agrees not to transfer or assign this Agreement, or
any of Subscriber's interest herein, without the express written consent of the
Company.
(8) 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.
(The remainder of this page is intentionally left blank.)
5
IN WITNESS WHEREOF, Subscriber has executed this Subscription Agreement
this ____ day of April, 2004.
SUBSCRIPTION
Number of Shares of Common Stock
Total payment
Number of Warrant Shares
0000 Xxxxxxxxx Xxx
(Address) -----------------------------------
(Name of Subscriber)
Xxxxxxx, XX 00000
-----------------------------------
(Signature)
------------------------------
------------------------------
ACCEPTANCE
The foregoing Subscription Agreement is accepted on this the ____ day of
____________, 2004.
SMART ONLINE, INC.
By: ___________________________
Xxxxxxx Xxxxx, President
6
APPENDIX A
FORM OF REGISTRATION RIGHTS AGREEMENT
APPENDIX B
FORM OF WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF
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.
SMART ONLINE, INC.
FORM OF COMMON STOCK WARRANT
Warrant No. W-________ ___________ __, 2004
This Warrant is issued to _____________________, and its permissible
transferees, successors and assigns (the "HOLDER"), by Smart Online, Inc., a
Delaware corporation (the "COMPANY"), for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged.
1. PURCHASE OF SECURITIES. Subject to the terms and conditions
hereinafter set forth, the Holder shall be entitled, at any time during the
Exercise Period (as set forth in Section 3 below), to purchase from the Company
__________________________ (__________) shares (the "SHARES") of the Company's
common stock (the "COMMON STOCK") (subject to adjustment as provided in Section
7 of this Warrant).
2. WARRANT PRICE. The exercise price per Share is $3.50 (subject to
adjustment pursuant to Section 7 of this Warrant and subject to the cashless
exercise provision of Section 4 of this Warrant) (the "WARRANT PRICE").
3. EXERCISE PERIOD. This Warrant may be exercised in whole or in
part at any one or more times during the period (the "EXERCISE PERIOD") that
begins with issuance of this Warrant and ends on ____________, 2006.
2
4. METHOD OF EXERCISE. While this Warrant remains outstanding and
exercisable, the Holder may exercise, in whole or in part, the purchase rights
evidenced hereby. Such exercise shall be effected by:
(a) the surrender of this Warrant, together with a duly
executed copy of the Notice of Exercise attached hereto as APPENDIX A to the
Secretary of the Company at its principal offices; and
(b) payment of the Warrant Price at the Holder's election
either (i) in cash or by check or wire transfer in an amount equal to the
Warrant Price, or (ii) by forgiving any debt owed by Company to Holder in an
amount equal to the Warrant Price; or (iii) by delivery of shares of the
Company's Common Stock having a fair market value equal to the Warrant Price, or
(iv) by surrender of Warrants (a "NET ISSUANCE") as determined below. If the
Holder elects the Net Issuance method, the Company will issue Common Stock in
accordance with the following formula:
X = Y(A-B)
A
Where: X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock requested to be
exercised under this Warrant.
A = the fair market value of one (1) share of Common Stock.
B = the Warrant Price.
For purposes of the above calculation, current fair market value of Common Stock
shall be determined in accordance with the following.
(i) if the exercise is in connection with a public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per Warrant Share
shall be the initial "Price to Public" specified in the final prospectus with
respect to the offering;
(ii) if this Warrant is exercised after, and not in
connection with a public offering, and:
3
(a) if the Common Stock is traded on a
securities exchange, the fair market value shall be deemed to be the average of
the closing prices of such Common Stock over a 5 day period ending 3 days before
the day the current fair market value of Warrant Shares is being determined; or
(b) if the Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the average of the
closing bid and asked prices of such Common Stock quoted on the NASDAQ system
(or similar system, including the Over the Counter Bulletin Board) over the 5
day period ending 3 days before the day the current fair market value of the
Warrant Shares is being determined; and
(c) if at any time the Common Stock is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Common Stock shall be
the price per share which the Company could obtain determined by agreement of
the Company and the Holder, or in the absence thereof, by an investment banker
acceptable to the Company and the Holder, and the Company shall pay any fees of
the investment banker.
5. CERTIFICATES FOR SHARES. Upon the exercise of the purchase
rights evidenced by this Warrant pursuant to Section 4 hereof, the Holder shall
immediately be deemed a Holder of the Shares so purchased, and one or more
certificates for the number of Shares so purchased shall be issued in the name
of the Holder as soon as practicable following the receipt of the completed
Notice of Exercise and payment of the purchase price for such Shares, and in any
event within thirty (30) days thereafter. The Company may pay cash in lieu of
issuing any fractional shares upon the exercise of the Holder's purchase rights
under this Warrant.
6. RESERVATION OF SHARES. The Company covenants that, during the
Exercise Period, the Company will reserve from its authorized and un-issued
shares a sufficient amount to provide for the issuance of the Shares. The
Company further covenants that such Shares, when issued pursuant to the exercise
of this Warrant, will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
7. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number of
and kind of securities purchasable upon exercise of this Warrant, and the
Warrant Price therefore, shall be subject to adjustment from time to time as
follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time prior to the expiration of this Warrant subdivide its
outstanding Common Stock, by split-up or otherwise, or combine its outstanding
Common Stock, or issue additional shares of its capital stock as a dividend with
respect to any shares of Common Stock, the number of Shares issuable upon the
exercise of this Warrant shall forthwith be proportionately increased in the
4
case of a subdivision or stock dividend, or proportionately decreased in the
case of a combination. Appropriate adjustments shall also be made to the Warrant
Price, but the aggregate purchase price payable for the total amount of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the
Shares issuable upon exercise of this Warrant shall be changed into a different
form or class of securities of the Company, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares provided for above), the Holder shall, on exercise of this Warrant, be
entitled to purchase, in lieu of the Shares that the Holder would have become
entitled to purchase but for such change, an amount of such other securities
equivalent to the amount that the Holder would have received had this Warrant
been exercised immediately before that change, all subject to further adjustment
as provided in this Section 7.
(c) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF
ASSETS. If at any time there shall be a capital reorganization of the Company's
outstanding equity securities (other than a combination, reclassification,
exchange, or subdivision of shares provided for elsewhere in this Warrant) or
merger or consolidation of the Company with or into another corporation (other
than a Liquidation Event), as a part of such capital reorganization, merger or
consolidation, lawful provision shall be made so that the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price then in
effect, the number and class of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Shares issuable upon exercise of this
Warrant would have been entitled in such capital reorganization, merger or
consolidation if this Warrant had been exercised immediately prior thereto. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the capital reorganization, merger or consolidation such that the
provisions of this Warrant (including adjustment of the Warrant Price then in
effect and number of shares purchasable upon exercise of this Warrant) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant. The provisions of this paragraph shall similarly apply to successive
capital reorganizations, mergers or consolidations.
(d) NOTICE OF ADJUSTMENTS. The Company shall give notice of
each adjustment or readjustment of the amount of Shares or other securities
issuable upon exercise of this Warrant and the Warrant Price to the registered
Holder at such Holder's address as shown on the Company's books within thirty
(30) days after the occurrence of the event resulting in such adjustment.
(e) NO CHANGE NECESSARY. The form of this Warrant need not
be changed because of any adjustment in the amount of Shares issuable upon its
exercise. A Warrant issued after any adjustment upon any partial exercise or in
replacement may continue to express the same amount of Shares (appropriately
reduced in the case of partial exercise) as are stated in this
5
Warrant as initially issued, and that number of shares shall be considered to
have been so changed at the close of business on the date of adjustment.
(f) NO IMPAIRMENT. The Company shall not, by amendment of
its Amended and Restated Articles of Incorporation or through a reorganization,
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 under this
Warrant by the Company, but shall at all times in good faith assist in carrying
out all of the provisions of this Section 7 and in taking all such action as may
be necessary or appropriate to protect Holder's rights under this Section 7
against impairment. If the Company takes any action affecting the Shares other
than as described above that adversely affects Holder's rights under this
Warrant, the Warrant Price shall be adjusted downward and the number of Shares
issuable upon exercise of this Warrant shall be adjusted upward in such a manner
that the aggregate Warrant Price of this Warrant is unchanged.
8. NOTICE OF CERTAIN EVENTS. If the Company proposes at any time to
effect any Liquidation Event, then, in connection with each such event, the
Company shall give Holder at least twenty (20) days prior written notice of the
date when the same will take place (and specifying the date on which the holders
of Common Stock will be entitled to exchange their stock for securities or other
property deliverable upon the occurrence of Liquidation Event).
9. EXERCISE, TRANSFER AND EXCHANGE RESTRICTIONS. The transfer,
surrender or exchange of this Warrant or any of the Shares issued upon the
exercise hereof is subject to any restrictions on transfer imposed by state and
federal securities laws, including compliance with Regulation S under the
Securities Act. Any Warrant or certificate representing Shares shall bear a
legend substantially as follows:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended or any state securities
laws, and may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under such
Act and applicable state securities laws or an opinion of counsel
satisfactory to the Company is obtained to the effect that such
registration is not required.
10. LOSS, THEFT, MUTILATION, ETC. Upon receipt 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 delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. NOTICES. All notices required under this Warrant shall be deemed
to have been given or made (i) upon personal delivery, with acknowledgement
received (ii) upon confirmation receipt that the communication was successfully
sent to the applicable number if sent by
6
facsimile (with a copy of such notice sent no later than the next business day
by reputable overnight courier service, with acknowledgement of receipt), (iii)
upon receipt, when sent by reputable overnight courier service, with
acknowledgement of receipt or (iv) three (3) business days after posting when
sent by registered or certified United States mail, postage prepaid, return
receipt requested. Notices to the Company shall be sent to the principal office
of the Company (or at such other place as the Company shall notify the Holder
hereof in writing). Notices to the Holder shall be sent to the address of the
Holder at 0000 Xxxxxxxxx Xxx, Xxxxxxx, XX 00000 (or at such other place as the
Holder shall notify the Company hereof in writing).
12. WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing, signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
13. SUCCESSOR AND ASSIGNS. This Warrant shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided that the Company shall have no right to assign its rights, or
to delegate its obligations, hereunder without the prior written consent of
Holder.
13. REGISTRATION RIGHTS. The Holder of this Warrant shall have the
same registration rights as are granted to any investor in a Warrant Triggering
financing. Holder may transfer registration rights to any transferee of all or
part of the Warrant.
14. WARRANT TRANSFERABLE. This Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Holder if a written
opinion of counsel to Holder reasonably satisfactory to the Company has been
delivered to the Company stating that such transfer will not violate the
registration requirements of the Securities Act or any applicable state
securities laws, provided that no such opinions shall be required in the event
of transfer to any officer, director, shareholder or member of Holder or any
affiliated person or company of Holder or any of the foregoing persons.
15. GOVERNING LAW. This Warrant shall be governed in all respects by
the laws of the State of North Carolina without regard to its principles of
conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer.
SMART ONLINE, INC.
By: ________________________________
Name: __________________________
Title: _________________________
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APPENDIX A
FORM OF NOTICE OF EXERCISE
(Used at Time of Exercise)
-----------------------------
-----------------------------
-----------------------------
Attention: Corporate Secretary
1. The undersigned, pursuant to the provisions of the attached
Warrant, hereby elects to exercise such Warrant with respect to ___________
shares of Common Stock (the "Exercise Number"). Capitalized terms used but not
otherwise defined herein have the meanings ascribed thereto in the attached
Warrant.
2. The undersigned herewith tenders payment of US$____________ for
such shares or that number of shares of Company Common Stock as set forth in
Section 2 of the Warrant.
3. Please issue a certificate or certificates representing the
shares issuable in respect hereof under the terms of the attached Warrant, as
follows:
-----------------------------------
(Name of Holder/Transferee)
and deliver such certificate or certificates to the following address:
-----------------------------------
-----------------------------------
-----------------------------------
(Address of Holder/Transferee)
4. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
5. If the Exercise Number is less than all of the shares of Common
Stock purchasable pursuant to the Warrant, please issue a new warrant
representing the remaining balance of such Shares, as follows:
-----------------------------------
(Name of Holder/Transferee)
and deliver such warrant to the following address:
-----------------------------------
-----------------------------------
-----------------------------------
(Address of Holder/Transferee)
8
In witness whereof, the undersigned Holder has caused this Notice of
Exercise to be executed as of this _____ day of ____________, 200___.
-----------------------------------
(Name of Holder)
By: _______________________________
Name:
Title:
9
APPENDIX C
An Accredited Investor is defined as follows:
(1) a natural person whose individual net worth, or joint net worth, with
that person's spouse, at the time of purchase exceeds $1,000,000;
(2) a 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 (the
year in which the purchase is made);
(3) any trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of investing in the Company, whose purchase is directed
by a sophisticated person having such knowledge and experience in
financial and business matters that she is capable of evaluating the
risks and merits of investing in the Company;
(4) a director or executive officer of the Company;
(5) an 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;
(6) a bank as defined in the Securities Act of 1933 (the "Act"), or a
savings and loan association or other institution as defined in the Act
whether acting in its individual or fiduciary capacity; a broker or
dealer registered under the Securities Exchange Act of 1934; an
insurance company as defined in the Act; an investment company
registered under the Investment Company act of 1940 or a business
development company as defined in the Act; a Small Business Investment
Company licensed under the Small Business Investment Act of 1958; an
employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, which is either a bank, savings and loan
association, an 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;
(7) a "private business development company" as defined in the Investment
Advisers Act of 1940; or
(8) an entity in which all of the equity owners are accredited investors.
