THIS WARRANT AND THE WARRANT SHARES (AS DEFINED BELOW) ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION....
Exhibit
10.47.1
THIS
WARRANT AND THE WARRANT SHARES (AS DEFINED BELOW) ISSUABLE UPON EXERCISE
HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS WARRANT AND THE WARRANT SHARES 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 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.
WARRANT
TO
PURCHASE COMMON STOCK
OF
SMART
ONLINE, INC.
(void
after February 21, 2012)
No.
W-44
THIS
CERTIFIES THAT, for value received, Canaccord ▇▇▇▇▇ Inc., its permitted
transferees or permitted assigns (the “Holder”), from and after the date hereof,
and subject to the terms and conditions herein set forth, is entitled to
purchase from Smart Online, Inc., a Delaware corporation (the “Company”), at any
time before 5:00 p.m. New York City time on February 27, 2010 (the “Termination
Date”), Thirty Five Thousand (35,000) shares (as adjusted from time to time
pursuant to Section 2 hereof, the “Warrant Shares”) of the Company’s common
stock, $0.001 par value per share (the “Common Stock”), at a price per share
equal to the Warrant Price (as defined below) upon exercise of this Warrant
pursuant to Section 5 hereof. The number of Warrant Shares is subject to
adjustment under Section 2.
1. Definitions.
As used
in this Warrant, the following terms have the definitions ascribed to them
below:
(a) “Issuance
Date” means February 27, 2007.
(b) “Person”
means any individual, corporation, partnership, limited liability company,
trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental authority or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
(c) “Registration
Rights Agreement” means the registration rights agreement between the Holder and
the Company dated the date hereof.
(d) “Warrant
Price” means $2.55 subject to adjustment under Section 2.
2. Adjustments
and Notices.
The
Warrant Price and/or the Warrant Shares shall be subject to adjustment from
time
to time in accordance with this Section 2. The Warrant Price and/or the Warrant
Shares shall be adjusted to reflect all of the following events that occur
on or
after the Issuance Date.
(a) Subdivision,
Stock Dividends or Combinations.
In case
the Company shall at any time subdivide the outstanding shares of the Common
Stock (through a stock split or otherwise), the Warrant Price in effect
immediately prior to such subdivision shall be proportionately decreased,
and
the number of Warrant Shares for which this Warrant may be exercised immediately
prior to such subdivision shall be proportionately increased. In case the
Company shall at any time combine the outstanding shares of the Common Stock
(through a reverse stock split or otherwise), the Warrant Price in effect
immediately prior to such combination shall be proportionately increased,
and
the number of Warrant Shares for which this Warrant may be exercised immediately
prior to such combination shall be proportionately decreased. In each of
the
foregoing cases, the adjustment shall be effective automatically upon, and
simultaneously with, the effectiveness of the subdivision or combination
giving
rise to the adjustment. If the Company at any time pays a dividend, or makes
any
other distribution, to holders of Common Stock payable in shares of Common
Stock, or fixes a record date for the determination of holders of Common
Stock
entitled to receive a dividend or other distribution payable in shares of
Common
Stock, then the number of Warrant Shares in effect immediately prior to such
action shall be proportionately increased so that the Holder hereof may receive
upon exercise of the Warrant the aggregate number of shares of Common Stock
which he or it would have owned immediately following such action if the
Warrant
had been exercised immediately prior to such action. The adjustment shall
become
effective immediately as of the date the Company shall take a record of the
holders of its Common Stock for the purpose of receiving such dividend or
distribution (or if no such record is taken, as of the effectiveness of such
dividend or distribution).
(b) Reclassification,
Exchange, Substitution, In-Kind Distribution.
Upon
any capital reorganization, reclassification, exchange, substitution or other
event (other than an event described in Section 2(a) above) that results
in a
change of the number and/or class of the securities issuable upon exercise
or
conversion of this Warrant or upon the payment of a dividend in securities
or
property other than shares of the Common Stock, the Holder shall be entitled
to
receive, upon exercise of this Warrant, the number and kind of securities
and
property that Holder would have received if this Warrant had been exercised
immediately before the record date for such reclassification, exchange,
substitution, or other event or immediately prior to the record date for
such
dividend. The adjustment shall become effective immediately as of the date
the
Company shall take a record of the holders
2
of
its
Common Stock for the purpose of receiving such dividend or distribution (or
if
no such record is taken, as of the effectiveness of such dividend or
distribution), and the Company or its successor shall promptly issue to Holder
a
new warrant for such new securities or other property. The new warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2 including,
without
limitation, adjustments to the Warrant Price and to the number of securities
or
property issuable upon exercise or conversion of the new warrant. The provisions
of this Section 2(b) shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events and successive dividends.
(c) Reorganization,
Merger etc.
In case
of any merger or consolidation of the Company into or with another corporation
where the Company is not the surviving corporation, or a merger or consolidation
which results in the termination of the Company’s registration under the
Exchange Act, or sale, transfer or lease (but not including a transfer or
lease
by pledge or mortgage to a bona fide lender as collateral in connection with
the
incurrence of indebtedness by the Company) of all or substantially all of
the
assets of the Company, the Company, or such successor or purchasing corporation,
as the case may be, shall, as a condition to closing any such reorganization,
merger or sale, duly execute and deliver to the Holder hereof a new warrant
so
that the Holder shall have the right to receive, at a total purchase price
not
to exceed that payable upon the exercise or conversion of the unexercised
portion of this Warrant, and in lieu of the Warrant Shares theretofore issuable
upon exercise or conversion of this Warrant, the kind and amount of any class
or
classes of shares of stock or other ownership interests of the Company or
other
corporation or entity, other securities, money and property that would have
been
receivable upon such reorganization, consolidation, merger or sale by the
Holder
with respect to the Warrant Shares if this Warrant had been exercised
immediately before the consummation of such transaction. Such new warrant
shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 2. The provisions of this
subparagraph (c) shall similarly apply to successive transactions of the
type
described in this subparagraph (c).
(d) Certificate
of Adjustment.
In each
case of an adjustment or readjustment of the Warrant Price or an adjustment
of
the kind or number of securities issuable upon exercise of the Warrant, or
both,
the Company, at its own expense, shall cause its principal financial officer
to
compute such adjustment or readjustment in accordance with the provisions
hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to the Holder
at
the address provided in or pursuant to Section 13 hereof not later than 20
days
following the event prompting such adjustment or readjustment. Such certificate
shall set forth such adjustment or readjustment, showing in reasonable detail
the facts upon which such adjustment or readjustment is based (including
a
description of the basis on which the Board of Directors of the Company made
any
determination hereunder). No adjustment of the Warrant Price shall be required
to be made unless it would result in an increase or decrease of at least
one
cent ($0.01), but any adjustments not made because of this sentence shall
be
carried forward and taken into account in any subsequent adjustment otherwise
required hereunder.
3
(e) No
Impairment.
The
Company shall not, by amendment of its Certificate of Incorporation, by-laws
or
other organizational documents, 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 subject to Section 10 at all times in good faith assist in carrying
out
all of the provisions of this Section 2 and in taking all such action as
may be
necessary or appropriate to protect the Holder’s rights under this Section 2
against impairment.
(f) Fractional
Shares.
No
fractional shares shall be issuable upon exercise or conversion of the Warrant
and the number of shares to be issued shall be rounded down to the nearest
whole
share. If a fractional share interest arises upon any exercise or conversion
of
the Warrant, the Company shall eliminate such fractional share interest by
paying the Holder an amount computed by multiplying the fractional interest
by
the fair market value of a full share.
3. No
Stockholder Rights.
This
Warrant, by itself, as distinguished from any shares purchased hereunder,
shall
not (i) entitle the Holder to any of the rights of a stockholder of the Company
or (ii) impose any liabilities on the Holder to purchase any securities or
as a
stockholder of the Company, whether such liabilities are asserted by the
Company
or by creditors of the Company.
4. Reservation
of Stock.
The
Company covenants and agrees that it will reserve at all times from its
authorized and unissued stock a sufficient number of shares to provide for
the
issuance of the Warrant Shares upon the exercise of this Warrant. The Company
further covenants and agrees that this Warrant is, and any Warrants issued
in
substitution for or replacement of this Warrant and all Warrant Shares, will
upon issuance be duly authorized and validly issued and, in the case of Warrant
Shares, upon issuance will be fully paid and non-assessable and free from
all
preemptive rights of any stockholder, and from all taxes, liens and charges
with
respect to the issue thereof (other than transfer taxes) and, if the Common
Stock of the Company is then listed on any national securities exchanges
(as
defined in the Exchange Act) shall be, subject to the restrictions set forth
in
Section 11, duly listed or quoted thereon, as the case may be. In the event
that
the number of authorized but unissued shares of such Common Stock shall not
be
sufficient to effect the exercise of this entire Warrant into Warrant Shares,
then in addition to such other remedies as shall be available to the Holder
of
this Warrant, the Company shall promptly take such corporate action as may
be
necessary to increase its authorized but unissued shares of such Common Stock
to
such number of shares as shall be sufficient for such purpose. The duly
authorized issuance of this Warrant shall constitute full authority to the
Company’s officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for the Warrant Shares issuable
upon the exercise of this Warrant.
4
5. Exercise
of Warrant.
(a) This
Warrant may be exercised by the Holder hereof, in whole or in part, at any
time
from and after the Issuance Date and prior to the termination of this Warrant,
at the election of the Holder hereof with the notice of exercise substantially
in the form attached hereto as Attachment
1
duly
completed, executed and delivered at the principal office of the Company
or
Transfer Agent (the addresses of each of which are set forth in Section 13
hereof) and the payment to the Company, by certified or bank check, or by
wire
transfer to an account designated by the Company of an amount equal to the
then
applicable Warrant Price multiplied by the number of Warrant Shares then
being
purchased. This Warrant shall be deemed to have been exercised immediately
prior
to the close of business on the date of its surrender and payment for exercise
as provided above, and the person entitled to receive the Warrant Shares
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 after such date, the Company shall issue and deliver to the person
or persons entitled to receive the same a certificate or certificates for
the
number of full Warrant Shares issuable upon such exercise.
(b) In
lieu
of exercising this Warrant for cash, the Holder may elect to receive shares
equal to the value of this Warrant (or the portion thereof being exercised)
by
surrender of this Warrant at the principal office of the Company or the Transfer
Agent together with notice of such election substantially in the form attached
hereto as Attachment
1
duly
completed and executed (a “Net Exercise”). The Company shall issue to a Holder
who Net Exercises a number of Warrant Shares computed using the following
formula:
Y
(A -
B)
X
= A
Where
|
X
=
|
The
number of Warrant Shares to be issued to the
Holder.
|
|
Y
=
|
The
number of Warrant Shares purchasable under this Warrant or, if
only a
portion of the Warrant is being exercised, the portion of the Warrant
being cancelled (at the date of such
calculation).
|
|
A
=
|
The
fair market value of one (1) Warrant Share (at the date of such
calculation).
|
B
= The
Warrant Price (as adjusted to the date of such calculation).
For
purposes of this Section 5, the fair market value of a Warrant Share shall
mean:
| (i) |
If
traded on a securities exchange, the fair market value of the Common
Stock
shall be deemed to be the five-day-trailing average closing price
of the
Common Stock on such exchange or market on the trading days immediately
prior to the date of exercise by the
Holder;
|
5
| (ii) |
If
traded over-the-counter, the fair market value of the Common Stock
shall
be deemed to be the five-day-trailing average closing bid price of
the
Common Stock on the trading days immediately prior to the date of
exercise; and
|
|
(iii)
|
If
there is no public market for the Common Stock, the fair market
value
shall be the price per Warrant Share that the Company could obtain
from a
willing buyer for Warrant Shares sold by the Company from authorized
but
unissued Warrant Shares, as such prices shall be determined in
good faith
by the Company’s Board of
Directors.
|
In
the
event that this Warrant is exercised pursuant to this Section 5 in
connection with the consummation of the Company’s sale of its Common Stock or
other securities pursuant to a registration statement under the Act (other
than
a registration statement relating either to sale of securities to employees
of
the Company pursuant to its stock option, stock purchase or similar plan
or a
Rule 145 transaction) (a “Public Offering”), the fair market value per Warrant
Share shall be the per share offering price to the public of the Public
Offering.
(c) The
Holder shall not be entitled to exercise this Warrant for a number of Warrant
Shares in excess of that number of Warrant Shares which, upon giving effect
to
such exercise, would cause the aggregate number of shares of Common Stock
beneficially owned by the Holder to exceed 9.9% of the outstanding shares
of the
Common Stock following such exercise. For purposes of the foregoing proviso,
the
aggregate number of shares of Common Stock beneficially owned by the Holder
shall include the number of shares of Common Stock issuable upon exercise
of
this Warrant with respect to which determination of such proviso is being
made,
but shall exclude the shares of Common Stock which would be issuable upon
(i)
exercise of the remaining, unexercised Warrants beneficially owned by the
Holder
and (ii) exercise or conversion of the unexercised or unconverted portion
of any
other securities of the Company beneficially owned by the Holder subject
to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
Section 5(c), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. The Holder may waive the foregoing limitation
by written notice to the Company upon not less than 61 days prior written
notice
(with such waiver taking effect only upon the expiration of such 61 day notice
period). For purposes of this Section 5(c), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-Q or Form 10-K, as the case may be, filed with the SEC on the date
thereof, (y) a more recent public announcement by the Company or (z) any
other
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Stock outstanding. Upon the written request of the Holder, the
Company
shall within three trading days confirm in writing or by electronic mail
to the
Holder the number of shares of Common Stock then outstanding.
6
6. Transfer
of Warrant.
This
Warrant may be transferred or assigned by the Holder hereof as a whole or
in
part, provided that the transferor provides, at the Company’s request, an
opinion of counsel reasonably satisfactory to the Company that such transfer
does not require registration under the Securities Act.
7. Representations
of the Holder.
(a) The
Holder represents and warrants to, and covenants with, the Company that:
(i) the
Holder is an “accredited investor” as defined in Regulation D under the
Securities Act, is knowledgeable, sophisticated and experienced in making,
and
is qualified to make decisions with respect to, investments in securities
presenting an investment decision similar to that involved in the issuance
of
the Warrant, and has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision regarding the
issuance of the Warrant; (ii) the Holder understands that the Warrant and
the
underlying Shares are “restricted securities” and have not been registered under
the Securities Act and is acquiring the number of Warrant Shares and Warrant
in
the ordinary course of its business and for its own account for investment
only,
has no present intention of distributing the Warrant or Warrant Shares and
has
no arrangement or understanding with any other persons regarding the
distribution of the Warrant or Warrant Shares (this representation and warranty
not limiting the Holder’s right to sell the Warrant Shares pursuant to a
Registration Statement filed under the Registration Rights Agreement or
otherwise, or other than with respect to any claim arising out of a breach
of
this representation and warranty, the Holder’s right to indemnification under
Section 3 of the Registration Rights Agreement); (iii) the Holder will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) the Warrant or Warrant Shares except in compliance with the Securities
Act,
applicable state securities laws and the respective rules and regulations
promulgated thereunder; (iv) the Holder has answered the Holder Questionnaire
provided to it for use in preparation of the Registration Statement and the
answers thereto are true and correct as of the date hereof and will be true
and
correct as of the date of the Warrant; (v) the Holder will notify the Company
promptly of any change in any of such information until such time as the
Holder
has sold all of its Warrant Shares or until the Company is no longer required
to
keep the Registration Statement effective; and (vi) the Holder has relied
upon
the representations and warranties of the Company contained herein and the
information contained in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2005 (and any amendments thereto filed at least two (2)
Business Days prior to the Closing Date), the Company’s Quarterly Reports on
Form 10-Q for the quarters ended September 30, 2006, June 30, 2006 and March
31,
2006 (and any amendments thereto filed at least two (2) Business Days prior
to
the date hereof), the Company’s Proxy Statement for its 2006 Annual Meeting of
Shareholders, and any of the Company’s Current Reports on Form 8-K filed since
November 14, 2006 (and any amendments thereto filed at least two (2) Business
Days prior to the Closing Date) (all collectively, the “SEC
Reports”).
The
Holder understands that the issuance of the Warrant and the Warrant Shares
to
the Holder has not been and will not be registered under the Securities Act,
or
registered or qualified under any state securities law, in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other
things,
7
the
representations made by the Holder in this Agreement. No person (including
without limitation the Placement Agent) has been authorized by the Company
to
provide any representation that is inconsistent with or in addition to those
contained herein or in the SEC Reports, and the Holder acknowledges that
it has
not received or relied on any such representations.
(b) The
Holder agrees that it will not make any sale, transfer or other disposition
of
the Warrant Shares (a “Disposition”) other than Dispositions that are made
pursuant to the Registration Statement in compliance with any applicable
prospectus delivery requirements or that are exempt from registration under
the
Securities Act. Holder has not taken and will not take any action designed
to or
that might reasonably be expected to cause or result in manipulation of the
price of the Common Stock to facilitate the subscription to, or the sale
or
resale of the Warrant Shares.
(c) The
Holder represents and warrants to the Company that (i) the Holder has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) this Agreement constitutes a valid and binding obligation of the
Holder
enforceable against the Holder in accordance with its terms, except to the
extent (i) rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, (ii) such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) During
the thirty (30) days prior to the date hereof, no Holder nor any Affiliate
of
any Holder, foreign or domestic, has, directly or indirectly, effected or
agreed
to effect any “short sale” (as defined in Rule 200 under Regulation SHO),
whether or not against the box, established any “put equivalent position” (as
defined in Rule 16a-1(h) under the Exchange Act) with respect to the Company’s
common stock, borrowed or pre-borrowed any shares of the Company’s Common Stock,
or granted any other right (including, without limitation, any put or call
option) with respect to the Company’s Common Stock or with respect to any
security that includes, relates to or derived any significant part of its
value
from the Company’s Common Stock or otherwise sought to hedge its position in the
Shares and Warrants (each, a “Prohibited Transaction”).
(e) The
Holder understands that nothing in the SEC Reports, this Agreement, or any
other
materials presented to the Holder in connection with the purchase and sale
of
the Securities constitutes legal, tax or investment advice. The Holder has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of
Securities.
(f) The
parties acknowledge and agree that as of the date hereof, the Company has
not
disclosed any material non-public information to the Holder.
8
(g) The
Holder further acknowledges that in making its decision to enter into this
Agreement and purchase the Securities, it has relied on its own examination
of
the Company and the terms of, and consequences of holding, the Securities.
Holder has not received any general solicitation or advertising regarding
the
Warrant issuance and Holder has not been furnished with any oral or written
representation or information in connection with the Warrant
issuance.
(h) Holder
has thoroughly reviewed and the SEC Reports and the Memorandum (the “Disclosure
Documents”) prior to making this investment. Holder has been granted a
reasonable time prior to the date hereof during which we have had the
opportunity to obtain such additional information as Holder deems necessary
to
permit Holder to make an informed decision with respect to the purchase of
the
Common Stock. After examination of the SEC Reports and other information
available, Holder is fully aware of the business prospects, financial condition,
risks associated with investment and the operating history relating to the
Company, and therefore in subscribing for the purchase of the Securities,
Holder
is not relying upon any information other than information contained in the
Disclosure Documents. The Holder acknowledges that it has independently
evaluated the merits of the transactions contemplated by this Agreement,
that it
has independently determined to enter into the transactions contemplated
hereby,
that it is not relying on any advice from or evaluation by any other holder
or
investor, and that it is not acting in concert with any other holder or investor
regarding the issuance of the Warrant.
(i) The
certificate or certificates for the Warrant and the Warrant Shares (and any
securities issued in respect of or exchange for the Warrant or the Warrant
Shares) shall be subject to a legend or legends restricting transfer under
the
Securities Act and referring to restrictions on transfer herein, such legend
to
be substantially as follows:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE BEEN ISSUED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES
ACT
OF 1933 (THE “1933 ACT”), AND APPROPRIATE EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE SECURITIES MAY NOT
BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE
APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE
ENTITLED TO REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH
RESPECT TO COMPLIANCE OF THE PROPOSED SALE OR TRANSFER WITH THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT OR EXEMPTION THEREFROM.
9
The
Holder expressly agrees that any sale by the Holder of the Warrant Shares
pursuant to the Registration Statement shall be sold in a manner described
under
the caption “Plan of Distribution” in such Registration Statement and the Holder
will deliver a copy of the Prospectus contained in the Registration Statement
to
the purchaser or purchasers, directly or through the Holder’s broker, in
connection with such sale, in each case in compliance with the requirements
of
the Securities Act and Exchange Act applicable to such sale. The Holder further
agrees that the Warrant Shares shall only be sold while the Registration
Statement is effective, unless another exemption from registration is available.
On the basis of compliance by the Holder with the foregoing covenants, upon
(a)
effectiveness of the Registration Statement, (b) following any sale of such
Warrant Shares pursuant to Rule 144 (assuming the transferor is not an affiliate
of the Company, (c) if such Warrant Shares become eligible for sale under
Rule
144(k) (to the extent that the Holder provides a certification or legal opinion
to the Company to that effect), or (d) if such legend is not required under
applicable requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the SEC), the Company shall
as soon
as practicable (but not later than five business days after surrender of
the
legended certificates to the Company) cause certificates evidencing the Warrant
Shares previously issued to be replaced with certificates which do not bear
the
restrictive legends specified above in this Section 7(i), and all Shares
subsequently issued shall not bear the restrictive legend specified above
in
this Section 7(i); provided that the Holder shall notify the Company promptly
upon completion of the sale of all of its Warrant Shares. The Holder
acknowledges that the removal of the restrictive legends from certificates
representing Shares as provided in this Section 7(i) is predicated upon the
Company’s reliance on the Holder’s compliance with its covenants in this Warrant
and the Registration Rights Agreement.
8. Registration
Rights Agreement.
This
Warrant is issued pursuant to and in connection with the Holder’s representation
of the Company as placement agent in a private placement. The Warrant Shares
shall be entitled to the rights conferred thereon under the Registration
Rights
Agreement.
9. Termination.
This
Warrant shall terminate at 5:00 p.m. New York City time on the Termination
Date.
10.
Warrant
Exchangeable for Different Denominations and Reissuable Upon Partial
Exercise.
This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company or transfer agent, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of
such new Warrants shall represent such portion of such rights as is designated
by the Registered Holder at the time of such surrender. At the request of
the
Holder (pursuant to a transfer of Warrants or otherwise), this Warrant may
be
exchanged for one or more Warrants to purchase Common Stock. In the event
of a
partial exercise of this Warrant by the Holder, this Warrant shall be cancelled
and the Company shall issue a new Warrant to the Holder representing purchase
rights with respect to an amount of Warrant Shares equal to (x) the number
of
Warrant Shares represented hereby on the date of such partial exercise minus
(y)
the number of Warrant Shares exercised on the date of such partial exercise.
The
date the Company initially issues this Warrant shall be deemed to be the
date of
issuance hereof regardless of the number of times new certificates representing
the unexpired and unexercised rights formerly represented by this Warrant
shall
be issued. Each warrant representing a portion of the rights hereunder
constitutes a Warrant as defined herein.
10
11.
Ownership
of Warrants.
(a) The
Company may treat the person in whose name any Warrant is registered on the
register kept at the principal office of the Company as the owner and Holder
thereof for all purposes, notwithstanding any notice to the contrary, but
in all
events recognizing any transfers made in accordance with the terms of this
Warrant.
(b) THE
HOLDER OF THIS WARRANT IS ENTITLED TO CERTAIN REGISTRATION RIGHTS WITH RESPECT
TO THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF. SAID REGISTRATION RIGHTS
ARE SET FORTH IN THE REGISTRATION RIGHTS AGREEMENT BY AND BETWEEN THE INITIAL
HOLDER AND THE COMPANY.
12.
Warrant
Register.
The
Company shall maintain at its principal executive offices books for the
registration and the registration of transfer of the Warrant. The Company
may
deem and treat the Holder so registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing thereon made
by
anyone) for all purposes and shall not be affected by any notice to the
contrary, other than a notice in conformity with Section 13 hereof signed
by the
previous registered Holder indicating that the warrant has been transferred
or
assigned pursuant to Section 6 hereof. The initial registered Holder is
Canaccord ▇▇▇▇▇, Inc.
13.
Notices.
Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party);
or (iii) one trading day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive
the
same. The addresses and facsimile numbers for such communications shall
be:
If
to the
Company, to:
Smart
Online, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇, Corporate Counsel
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
Smith,
Anderson, Blount, Dorsett, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
11
If
to the
Holder, to:
Canaccord
▇▇▇▇▇
▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
or
such
other address provided to the Company pursuant to Section 12 hereof
If
to the
Transfer Agent, to:
Continental
Stock Transfer & Trust Company
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇)
▇▇▇-▇▇▇▇
or
at
such other address and/or facsimile number and/or to the attention of such
other
person as the recipient party has specified by written notice given to each
other party three (3) trading days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt
by
facsimile or receipt from a nationally recognized overnight delivery service
in
accordance with clause (i), (ii) or (iii) above, respectively.
14.
Miscellaneous.
This
Warrant shall be governed by the laws of the State of Delaware, as such laws
are
applied to contracts to be entered into and performed entirely in Delaware
by
Delaware residents. The headings in this Warrant are for purposes of convenience
and reference only, and shall not be deemed to constitute a part hereof.
Initially capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement. Neither this Warrant nor
any
term hereof may be changed or waived orally, but only by an instrument in
writing signed by the Company and the
Holder. Upon receipt of evidence reasonably satisfactory to the Company of
the
ownership of and the loss, theft, destruction or mutilation of any Warrant
and,
in the case of any such loss, theft or destruction, upon receipt of indemnity
or
security reasonably satisfactory to the Company or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Company
will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the
12
right
to
purchase the same aggregate number of Warrant Shares. This Warrant may be
amended with, and only with, the written consent of the Company and the Holder.
Any waiver of any term, covenant, agreement or condition contained in this
Warrant shall not be deemed a waiver of any other term, covenant, agreement
or
condition, and any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default thereof or
of any
default of any other term, covenant, agreement or condition. All
representations, warranties and covenants contained herein shall survive
the
execution and delivery of this Warrant and the issuance of any Warrant Shares
upon the exercise hereof. In the event that any court or any governmental
authority or agency declares all or any part of any Section of this Warrant
to
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any other Section of this Warrant, and in the event that only
a
portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section. All provisions of this Warrant shall be binding upon and inure to
the
benefit of the parties and their respective heirs, legatees, executors,
administrators, legal representatives, successors, and permitted transferees
and
assigns. No person other than the holder of this Warrant and the Company
shall
have any legal or equitable right, remedy or claim under or in respect of,
this
Warrant.
13
15
Attorneys’
Fees.
If any
suit or action is instituted or attorneys employed to enforce this Warrant
or
any part hereof, the Company agrees to pay all reasonable costs and expenses
associated with such action, including reasonable attorneys’ fees and court
costs.
ISSUED: February
27, 2007
SMART
ONLINE, INC.
By:
/s/
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
Title:
CFO
14
Attachment
1
NOTICE
OF
EXERCISE
TO:
SMART
ONLINE, INC.
| 1. |
The
undersigned hereby:
|
| q |
elects
to purchase
shares of Common Stock of the Company pursuant to the terms of
the
attached Warrant, and tenders herewith payment of the purchase
price of
such shares in full, or
|
| q |
elects
to exercise its net issuance rights pursuant to Section 5(b) of the
attached Warrant with respect to
shares of Common Stock.
|
| 2. |
Please
issue a certificate or certificates representing said Warrant Shares
in
the name of the undersigned or in such other name as is specified
below:
|
______________________________________
(Name
in
which certificate(s) are to be issued)
______________________________________
(Address)
|
______________________________
(Name
of Warrant Holder)
By:___________________________
Title:_________________________
Date
signed:___________________
|