FOURTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED NOTE PURCHASE AGREEMENT, SECOND AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTES AND THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
FOURTH AMENDMENT TO
CONVERTIBLE SECURED SUBORDINATED NOTE
PURCHASE AGREEMENT, SECOND
AMENDMENT TO CONVERTIBLE SECURED
SUBORDINATED PROMISSORY
NOTES AND THIRD AMENDMENT TO
REGISTRATION RIGHTS
AGREEMENT
THIS
FOURTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED NOTE PURCHASE AGREEMENT,
SECOND AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTES AND THIRD
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this “Amendment”),
effective as of March 5, 2010, is made and entered into by and among
Smart Online, Inc., a Delaware corporation (the “Company”), the
undersigned holders (the “Holders”, and each
individually, a “Holder”) of the
Convertible Secured Subordinated Promissory Notes (the “Notes”) issued by the
Company from time to time pursuant to that certain Convertible Secured
Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended
through the date hereof, the “Note Purchase
Agreement”), among the Company and the Holders. Capitalized
terms used but not defined herein have the meanings assigned to them in the Note
Purchase Agreement.
WITNESSETH:
WHEREAS,
The Company and the Investors desire to amend the Notes previously issued
pursuant to the Note Purchase Agreement to provide that the Maturity Date of
each Note be extended from November 14, 2010 to November 14, 2013, and to
provide that the definition of “Maturity Date” contained in any Additional Note
issued on or after the date hereof shall be conformed to the definition thereof
contained in the Notes, as hereby amended;
WHEREAS,
Section 9(a) of the Note Purchase Agreement provides that any provision of the
Note Purchase Agreement may be amended with the written consent of the Company
and Holders holding at least a Requisite Percentage;
WHEREAS,
Section 8 of each of the Notes provides that any provision of the Notes may be
amended with the written consent of the Company and Holders holding at least a
Requisite Percentage;
WHEREAS,
Section 3.6 of the Registration Rights Agreement, dated November 14, 2007 (as
amended through the date hereof, the “Registration Rights
Agreement”), by and among the Company and the Investors party thereto
provides that any provision of the Registration Rights Agreement may be amended
with the written consent of the Company and the Holders holding a Requisite
Percentage; and
WHEREAS,
Atlas Capital, S.A., a Swiss organization, constitutes the holder of a Requisite
Percentage necessary to amend the provisions of each of the Notes, the
Registration Rights Agreement and the Note Purchase Agreement.
NOW,
THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section
1. Amendment to Note Purchase
Agreement.
(a) All references in the
Note Purchase Agreement to “Note” or “Notes” shall mean the form of Convertible
Secured Subordinated Promissory Note attached hereto as Exhibit
1.
(b) Section 9(h) of the Note
Purchase Agreement shall be deleted and the following shall be inserted in lieu
thereof:
“(h) Notices. Except as set forth
in Section 1(c), all notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall in writing and faxed,
mailed or delivered to each party as follows: (i) if to an Investor, at such
Investor's address or facsimile number set forth in the Schedule of Investors
attached as Schedule I,
or at such other address as such Investor shall have furnished the Company in
writing, or (ii) if to the Company, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: Chief Executive Officer, (▇▇▇) ▇▇▇-▇▇▇▇ (facsimile), with a
copy to Cohen, Tauber, Spievack & ▇▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇
(facsimile) or at such other address or facsimile number as the Company shall
have furnished to the Investors in writing. All such notices and communications
will be deemed effectively given the earlier of (i) when received, (ii) when
delivered personally, (iii) one Business Day after being delivered by facsimile
(with receipt of appropriate confirmation), (iv) one Business Day after being
deposited with an overnight courier service of recognized standing or (v) two
days after being deposited in the U.S. mail, first class with postage
prepaid.”
Section
2. Amendment to
Notes.
(a) The
last sentence of the first paragraph of each Note shall be deleted and the
following shall be inserted in lieu thereof:
“All
unpaid principal, together with any then unpaid and accrued interest and other
amounts payable hereunder, shall be due and payable on the earlier of
(i) November 14, 2013, (ii) a Change of Control or (iii) when, upon or
after the occurrence of an Event of Default (as defined below), such amounts are
declared due and payable by Investor or made automatically due and payable in
accordance with the terms hereof (such date upon which all amounts
payable hereunder are due is referred to herein as the “Maturity Date”).”
-2-
(b) The
Maturity Date as defined in any Additional Note issued on the date hereof or
hereafter shall be the same as provided in the Notes, as hereby
amended.
Section
3. Amendment to Registration
Rights Agreement.
(a) Section
1.13 of the Registration Rights Agreement shall be deleted and the following
shall be inserted in lieu thereof:
“1.13 “Maturity Date” means November
14, 2013.”
(b) Section
3.5 of the Registration Rights Agreement shall be deleted and the following
shall be inserted in lieu thereof:
“3.5
Notices. All
notices and other communications given or made pursuant to this Agreement shall
be in writing and shall be deemed effectively given upon the earlier of actual
receipt or: (i) personal delivery to the party to be notified ; (ii) when sent,
if sent by electronic mail or facsimile during the recipient's normal business
hours, and if not sent during normal business hours, then on the recipient's
next business day; (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1)
business day after the business day of deposit with a nationally recognized
overnight courier, freight prepaid, specifying next-day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their addresses as set forth on Schedule A hereto, or to the
principal office of the Company and to the attention of the Chief Executive
Officer, in the case of the Company, or to such email address, facsimile number,
or address as subsequently modified by written notice given in accordance with
this Section 3.5. If notice is given to the Company, a copy shall also be sent
to ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
(facsimile).”
Section
4. Ratification.
Except as specifically amended above, each of the Notes, the Registration Rights
Agreement and the Note Purchase Agreement shall continue in full force and
effect in accordance with its terms, and is hereby in all respects ratified and
confirmed.
Section
5. Counterparts. This
Amendment may be executed in several counterparts and by facsimile or other
electronic transmission, each of which shall be an original and all of which
together shall constitute but one and the same.
-3-
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first above written.
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SMART
ONLINE, INC.
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By:
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Name:
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Title:
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By:
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/s/ Avy ▇▇▇▇▇▇▇
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Avy
▇▇▇▇▇▇▇
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Title:
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Member
of the Management
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CRYSTAL
MANAGEMENT LTD.
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇
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Title:
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▇▇▇▇▇▇▇
▇▇▇▇
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THE
BLUELINE FUND
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By:
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇
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Title:
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UBP,
UNION BANCAIRE PRIVEE
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By:
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Name:
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Title:
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[Signature
Page to Fourth Amendment to Convertible Secured Subordinated Note
Purchase
Agreement,
Second Amendment to Convertible Secured Subordinated Promissory Notes and
Third
Amendment
to Registration Rights Agreement]
-4-
EXHIBIT
1
THIS
NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND
UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE COMPANY, IN ITS SOLE
DISCRETION, SHALL HAVE THE RIGHT TO REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED IN CONNECTION WITH ANY PROPOSED TRANSFER NOR IS SUCH TRANSFER IN
VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL
BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
SMART
ONLINE, INC.
CONVERTIBLE
SECURED SUBORDINATED PROMISSORY NOTE
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$_________
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__________,
__ ____
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Durham,
NC
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FOR VALUE
RECEIVED, Smart Online, Inc., a Delaware corporation (the “Company”) promises
to pay to ________________ (“Investor”), or its registered
assigns, in lawful money of the United States of America the principal sum of
____________________ ($______), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of
this Note on the unpaid principal balance at a rate equal to 8.00% per annum,
computed on the basis of the actual number of days elapsed and a year of 360
days. All unpaid principal, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable on the
earlier of (i) November 14, 2013, (ii) a Change of Control or
(iii) when, upon or after the occurrence of an Event of Default (as defined
below), such amounts are declared due and payable by Investor or made
automatically due and payable in accordance with the terms
hereof (such date upon which all amounts payable hereunder are due is
referred to herein as the “Maturity Date”).
This Note
is one of the “Notes” issued pursuant to the Convertible Secured Subordinated
Note Purchase Agreement, dated November 14, 2007 (as amended, modified or
supplemented, the “Note
Purchase Agreement”), between the Company and the Investors (as defined
in the Note Purchase Agreement). Capitalized terms used herein and
not otherwise defined shall have the meanings assigned thereto in the Note
Purchase Agreement. This Note and the Investor are subject to certain
restrictions, and are entitled to certain rights and privileges, set forth in
the Note Purchase Agreement.
THE
OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT DATED AS OF
NOVEMBER 14, 2007 (AS AMENDED, RESTATED OR SUPPLEMENTED, THE “SECURITY AGREEMENT”) AND
EXECUTED BY COMPANY FOR THE BENEFIT OF THE INVESTORS. ADDITIONAL
RIGHTS OF INVESTOR ARE SET FORTH IN THE SECURITY AGREEMENT.
The
following is a statement of the rights of Investor and the conditions to which
this Note is subject, and to which Investor, by the acceptance of this Note,
agrees:
1. Definitions.
As used in this Note, the following capitalized terms have the following
meanings:
(a) “Business Day” shall mean any
day other than a Saturday or Sunday or other day on which the New York Stock
Exchange is permitted or required by law to close.
(b) the
“Company” includes the
corporation initially executing this Note and any Person which shall succeed to
or assume the obligations of the Company under this Note.
(c) “Conversion
Price” shall mean the lowest “Applicable Conversion Price”
determined for each Note issued under the Note Purchase
Agreement. The “Applicable Conversion Price”
for each Note issued under the Note Purchase Agreement shall be calculated by
multiplying 120% by the lowest of (i) the average of the high and low
prices of the Common Stock on the OTC Bulletin Board averaged over the five (5)
trading days prior to the Closing Date of the issuance of such Note, (ii) if the
Common Stock is not traded on the Over-The-Counter market, the closing
price of the Common Stock reported on the Nasdaq National Market or the
principal exchange on which the Common Stock is listed, averaged over the five
(5) trading days prior to the Closing Date of the issuance of such Note, or
(iii) the closing price of the Common Stock on the OTC Bulletin Board, the
Nasdaq National Market or the principal exchange on which the Common Stock is
listed, as applicable, on the trading day immediately preceding the date such
Note is converted (in each case as adjusted for stock splits, dividends or
combinations, recapitalizations or similar events).
(d) “Change of Control” shall mean
(i) any consolidation or merger or other transaction or series of
transactions involving the Company pursuant to which the Company’s stockholders
own less than fifty percent (50%) of the voting securities of the surviving
entity (other than an equity financing) or (ii) the sale of all or substantially
all of the assets of the Company.
(e) “Event of Default” has the
meaning given in Section 4
hereof.
(f) “Note Purchase Agreement” has
the meaning given in the introductory paragraph hereof.
-2-
(g) “Obligations” shall mean and
include all loans, advances, debts, liabilities and obligations, howsoever
arising, owed by the Company to Investor of every kind and description (whether
or not evidenced by any note or instrument and whether or not for the payment of
money), now existing or hereafter arising under or pursuant to the terms of this
Note, the Note Purchase Agreement and the Security Agreement, including, all
interest, fees, charges, expenses, attorneys’ fees and costs and accountants’
fees and costs chargeable to and payable by the Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of a
proceeding under Title 11 of the United States Code (11 U. S. C.
Section 101 et
seq.), as amended from time to time (including post-petition interest)
and whether or not allowed or allowable as a claim in any such
proceeding.
(h) “Person” shall mean and include
an individual, a partnership, a corporation (including a business trust), a
joint stock company, a limited liability company, an unincorporated association,
a joint venture or other entity or a governmental authority.
(i) “Requisite Percentage” shall
mean, at least a majority of the aggregate outstanding principal amount of
the Notes issued pursuant to the Note Purchase Agreement.
(j) “Securities Act” shall mean the
Securities Act of 1933, as amended.
(k) “Security Agreement” has the
meaning given in the introductory paragraphs to this Note.
(l) “Transaction Documents” shall
mean this Note, each of the other Notes issued under the Note Purchase
Agreement, the Note Purchase Agreement, the Registration Rights Agreement, dated
November 14, 2007, as amended, restated and supplemented, and the Security
Agreement.
2. Interest. Accrued
interest on this Note shall be payable in cash in quarterly installments
commencing on the third month anniversary of the date of issuance of this Note
with the final installment payable on the Maturity Date.
3. Prepayment.
This Note may not be prepaid without the consent of a Requisite
Percentage. Any prepayment must be made in connection with the
prepayment of all outstanding Notes.
4. Events of
Default. The occurrence of any of the following shall constitute an
“Event of Default” under
this Note and the other Transaction Documents:
(a) Failure to
Pay. The Company shall fail to pay (i) when due any
principal or interest payment on the due date hereunder or (ii) any other
payment required under the terms of this Note or any other Transaction Document
on the date due and, with respect to this subclause (ii) only, such payment
shall not have been made within five (5) days of the Company’s receipt of
written notice to the Company of such failure to pay;
-3-
(b) Non-Performance of Affirmative
Covenants. The Company shall default in the due observance or
performance of any material covenant set forth in the Note, the Note Purchase
Agreement or the Security Agreement, which default shall continue uncured for
fifteen (15) days after receipt of written notice to the Company
thereof;
(c) Voluntary Bankruptcy or Insolvency
Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated,
(v) become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing;
(d) Involuntary Bankruptcy or Insolvency
Proceedings. Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of the Company or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to the Company or the
debts thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within 30 days of
commencement;
(e) Misrepresentations. Any
of the representations and warranties of the Company in the Note Purchase
Agreement or the Security Agreement proves to have been false or misleading in
any material respect when made or furnished or deemed made;
(f) Judgments. One or
more judgments, decrees or orders (excluding settlement orders) for the payment
of money shall be entered against the Company or any of its subsidiaries
involving in the aggregate a liability of $1,000,000 or more, and any such
judgment, decree or order shall continue without discharge or stay for a period
of sixty (60) days; or
(g) Cross-Defaults. The
Company or any of its subsidiaries shall default in the performance or
observance of any agreement or instrument relating to any indebtedness, or any
other event shall occur or condition exist, and the effect of such default,
event or condition is to cause or permit the holder or holders of any such
indebtedness to cause indebtedness, in excess of $500,000 individually or in the
aggregate, to become due prior to its stated maturity.
-4-
5. Rights of
Investor upon Default. Upon the occurrence or existence of any Event of
Default (other than an Event of Default described in Sections 4(c) or 4(d)) and at any time
thereafter during the continuance of such Event of Default, Investor may, with
the consent of the Agent, by written notice to the Company, declare all
outstanding Obligations payable by the Company hereunder to be immediately due
and payable without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived. Upon the occurrence
or existence of any Event of Default described in Sections 4(c) and 4(d), immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived. In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default and subject to the consent of the Agent,
Investor may exercise any other right power or remedy granted to it by the
Transaction Documents or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.
6. Conversion.
(a) Optional Conversion. At the
Maturity Date, each Investor shall have the option to convert the entire
principal amount of this Note then outstanding into Common Stock. The number of
shares of Common Stock that this Note may be converted into shall be determined
by dividing the principal amount then outstanding by the Conversion Price at the
time of conversion. If the Investor elects to convert this Note at
maturity, it shall provide the Company with written notice of its election at
least one (1) day prior to the Maturity Date. Upon conversion, the Investor
shall deliver to the Company the original of this Note (or a notice to the
effect that the original Note has been lost, stolen or destroyed and an
agreement reasonably acceptable to the Company whereby the holder agrees to
indemnify the Company from any loss incurred by it in connection with this
Note). However, upon such conversion of this Note, this Note shall be deemed
converted and of no further force and effect, whether or not the Note is
delivered for cancellation as set forth in the preceding sentence. If there
shall occur a Change of Control, the Company shall give written notice to the
Investor at least five (5) days prior to any closing thereof and the Investor’s
election to convert this Note shall be conditional upon the consummation
thereof.
(b) Mechanics of Optional
Conversion. As soon as practicable following surrender by the
Investor of the original of this Note, the Company shall issue and deliver to
Investor a certificate or certificates for the shares of Common Stock into which
the Note has been converted (bearing such legends as may be required or
advisable in the opinion of counsel to the Company). Such conversion
shall be deemed to have been made immediately prior to the close of business on
the Maturity Date, and the Investor shall be treated for all purposes as the
record holder or holders of such Common Stock on such date.
(c) Fractional Shares; Interest; Effect
of Conversion. No fractional shares shall be issued upon conversion of
this Note. In lieu of the Company issuing any fractional shares to
Investor upon the conversion of this Note, the Company shall pay to Investor an
amount equal to the product obtained by multiplying the Conversion Price by the
fraction of a share not issued pursuant to the previous
sentence. Upon conversion of this Note in full and the payment of any
amounts specified in this Section 6(c), the Company
shall be forever released from all its obligations and liabilities under this
Note.
-5-
7. Successors and
Assigns. Subject to the
restrictions on transfer described in Sections 9 and 10 below, the rights and
obligations of the Company and Investor shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the
parties.
8. Waiver and
Amendment. Any provision of
this Note may be amended, waived or modified upon the written consent of the
Company and the holders of a Requisite Percentage.
9. Transfer of this
Note or Securities Issuable on Conversion Hereof. With respect to
any offer, sale or other disposition of this Note or securities into which such
Note may be converted, Investor will give written notice to the Company prior
thereto, describing briefly the manner thereof, together with (unless waived by
the Company) a written opinion of Investor’s counsel, or other evidence if
reasonably satisfactory to the Company, to the effect that such offer, sale or
other distribution may be effected without registration or qualification (under
any federal or state law then in effect). Upon receiving such written notice and
reasonably satisfactory opinion, if so requested, or other evidence, the
Company, as promptly as practicable, shall notify Investor that Investor may
sell or otherwise dispose of this Note or such securities, all in accordance
with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 9 that the
opinion of counsel for Investor, or other evidence, is not reasonably
satisfactory to the Company, the Company shall so notify Investor promptly after
such determination has been made. Each Note thus transferred and each
certificate representing the securities thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities
Act. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions. Subject to the foregoing,
transfers of this Note shall be registered upon registration books maintained
for such purpose by or on behalf of the Company. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for
the purpose of receiving all payments of principal and interest hereon and for
all other purposes whatsoever, whether or not this Note shall be overdue and the
Company shall not be affected by notice to the
contrary. Notwithstanding anything in this Section 9 to the contrary,
no opinion of counsel shall be required with respect to any transfer by an
Investor to its officers, directors, partners, members or other
affiliates.
10. Assignment by the
Company. Neither this Note
nor any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, in whole or in part, by the Company without the
prior written consent of the holders of a Requisite Percentage.
-6-
11. Notices. All notices,
requests, demands, consents, instructions or other communications required or
permitted hereunder shall be in writing and faxed, mailed or delivered to each
party at the respective addresses of the parties as set forth in the Note
Purchase Agreement, or at such other address or facsimile number as the Company
shall have furnished to Investor in writing. All such notices and
communications will be deemed effectively given the earlier of (i) when
received, (ii) when delivered personally, (iii) one business day after
being delivered by facsimile (with receipt of appropriate confirmation),
(iv) one business day after being deposited with an overnight courier
service of recognized standing or (v) two days after being deposited in the
U.S. mail, first class with postage prepaid.
12. Pari Passu
Notes. Investor
acknowledges and agrees that the payment of all or any portion of the
outstanding principal amount of this Note and all interest hereon shall be pari passu in right of
payment and in all other respects to the other Notes issued pursuant to the Note
Purchase Agreement or pursuant to the terms of such Notes. In the
event Investor receives payments in excess of its pro rata share of the
Company’s payments to the Investors of all of the Notes, then Investor shall
hold in trust all such excess payments for the benefit of the holders of the
other Notes and shall pay such amounts held in trust to such other holders upon
demand by such holders.
13. Usury. In the event any interest is
paid on this Note which is deemed to be in excess of the then legal maximum
rate, then that portion of the interest payment representing an amount in excess
of the then legal maximum rate shall be deemed a payment of principal and
applied against the principal of this Note.
14. Waivers. The Company hereby waives
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor and all other notices or demands relative to this
instrument.
15. Remedies
Cumulative. The remedies of Investor as provided herein and in the Note
Purchase Agreement and in any other documents governing or securing repayment
hereof shall be cumulative and concurrent and may be pursued singly,
successively, or together, at the sole discretion of Investor to the extent
provided herein and in the Note Purchase Agreement and may be exercised as often
as occasion therefore shall arise. No act or omission of the
Investor, including specifically, but without limitation, any failure to
exercise any right, remedy or recourse, shall be effective as a waiver of any
right of the Investor hereunder, unless set forth in a written document executed
by the Investor, and then only to the extent specifically recited therein. A
waiver or release with reference to one event shall not be construed as
continuing, as a bar to, or as a waiver or release of any subsequent right,
remedy or recourse as to any subsequent event. All notices, waivers,
releases and/or consents by an Investor shall be directed to the Company only
through the Agent.
16. No Rights of a
Stockholder. Nothing contained in this Note shall be construed as
conferring upon the Investor or any other Person the right to vote or consent or
to receive notice as an stockholder in respect of meetings of stockholders for
the election of directors of the Company or any other matters or any rights
whatsoever as a stockholder of the Company prior to the time that this Note is
converted pursuant to Section
6.
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17. Governing
Law. This Note and all
actions arising out of or in connection with this Note shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law provisions of the State of Delaware, or of any other
state.
(Signature Page
Follows)
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The Company has caused this Note to be
issued as of the date first written above.
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SMART
ONLINE, INC.
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a
Delaware corporation
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By:
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Name:
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Title:
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[SIGNATURE
PAGE TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY
NOTE,
DATED ____________, ISSUED TO ___________________ BY SMART ONLINE,
INC.]
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