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Exhibit 10.6

 
RESTRICTED STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT, made and entered into as of the _____ day of
__________, 20____, by and between Smart Online, Inc., a Delaware corporation
(the “Company”), and __________________, an individual (“Grantee”).

WHEREAS, in consideration of the services of Grantee, the Company is desirous of
giving Grantee shares of common stock of the Company under the Company’s 2004
Equity Compensation Plan (the “Plan”) (all capitalized terms not otherwise
defined herein shall have the meaning set forth in the Plan), subject to the
restrictions set forth below.

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises set
forth below and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1.     Restricted Stock Award. The Company shall issue ____________ (_______)
shares of the common stock of the Company (the “Securities”) to Grantee, as part
of Grantee’s compensation. The Securities are subject to the restrictions set
forth in Section 4 below.

2.    Director Representations. Grantee hereby acknowledges and represents the
following:

(a)    Compensation. Grantee acknowledges that the Securities is part of his or
her compensation from the Company.

(b)    Investment. Grantee will treat the Securities as if acquired for
investment for Grantee’s own account and not with a view to, or for resale in
connection with, any distribution thereof, and Grantee has no present intention
of selling or distributing the Securities. Grantee 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.

(c)    Taxes. Grantee has not relied upon the Company with respect to any tax
consequences related to the acquisition or disposition of the Securities.
Grantee acknowledges that Grantee may incur a substantial tax liability. Grantee
assumes full responsibility for all such consequences and the filing of all tax
returns and elections the Grantee may be required or find desirable to file in
connection therewith. In the event any valuation of the Securities purchased
pursuant to its exercise must be made under federal or state tax laws and such
valuation affects any return or election of the Company, Grantee agrees that the
Company may determine such value and that Grantee will observe any determination
so made by the Company in all returns and elections filed by Grantee. In the
event the Company is required by applicable law to collect any withholding,
payroll or similar taxes by reason of the grant of the Securities, Grantee
agrees that the Company may withhold such taxes from any monetary amounts
otherwise payable by the Company to Grantee and that, if such amounts are
insufficient to cover the taxes required to be collected by the Company, Grantee
will pay to the Company such additional amounts as are required.

 

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(d)    No Registration Obligation. The Company will be under no obligation to
register the Securities or to comply with any exemption available for sale of
the Securities by Grantee without registration, and the Company is under no
obligation to act in any manner so as to make Rule 144 promulgated under the
Securities Act of 1933 available with respect to any sale of the Securities by
Grantee.

(e)    Underwriter Restrictions. In the event any underwriter of securities of
the Company requests Grantee to sign any agreement restricting resale of the
Securities in connection with any public offering by the Company, Grantee agrees
to sign such agreement, provided the officers of the Company have signed an
agreement no less restrictive. The Company may instruct its transfer agent not
to transfer the Securities if requested by an underwriter as described above.

(f)    Compliance with Securities Laws. Grantee hereby agrees to comply with any
plan, policy or other document of the Company approved by the Board of Directors
of the Company to ensure compliance with securities laws, rules and regulations
both prior to the Termination of Service of Grantee and for one (1) year
thereafter. The Company may impose stop transfer restrictions with respect to
the Securities to enforce this provision.

(g)    Legends. Each certificate representing 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,
including the provisions of any existing “lock-up” or similar agreements between
Grantee and the Company, and including the following legend as required in
Section 4, below:

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ASSIGNED, CONVEYED
OR PLEDGED ONLY UPON COMPLIANCE WITH THE TERMS AND CONDITIONS OF A RESTRICTED
STOCK AGREEMENT, AS THE SAME MAY BE AMENDED OR REPLACED FROM TIME TO TIME, A
COPY OF WHICH IS ON FILE WITH, AND AVAILABLE FOR INSPECTION AT THE OFFICES OF
THE SECRETARY OF THE CORPORATION.
 
3.    Condition to Issuance. 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 issuance of the
Securities by the Company and shall survive thereafter.

4.    Restrictions. The Securities described above shall be subject to the
following restrictions:

(a)    Restriction Period; Lapse of Restriction. For a period of one (1) year
following the date of this Agreement, the Grantee agrees not to transfer, assign
or sell the Securities, without the express written consent of the Company,
which may be granted or withheld in the sole discretion of the Company. This
restriction shall expire and cease to be of any effect with respect to the
Securities as follows:

 
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(i)         One-third of the Securities as of the date of this Agreement;

(ii)        One-third of the Securities as of the first anniversary of the date
of this Agreement; and

(iii)       One-third of the Securities as of the second anniversary of the date
of this Agreement.

Provided, however, that this restriction shall lapse with respect to an
increment as specified only if Grantee is employed with the Company on the
specified date for such increment. Shares representing the Securities shall bear
a legend to such effect.

The schedule set forth above is cumulative, so that the Securities as to which
the restriction has lapsed on and after a date indicated by the schedule may be
transferred, assigned, or sold at any subsequent date.

(b)    Acceleration of Lapse of Restriction. Upon a Change of Control or
Corporate Reorganization, as defined below, the restriction set forth in Section
5(a) shall accelerate so as to lapse as to all of the Securities to which the
restriction applies on the date of such event.

(i)         A “Change in Control” shall be deemed to have occurred if, after the
class of stock then subject to this Agreement becomes publicly traded, (1) the
direct or indirect beneficial ownership (within the meaning of Section 13(d) of
the Act and Regulation 13D thereunder) of fifty percent (50%) or more of the
class of securities then subject to this Agreement is acquired or becomes held
by any person or group of persons (within the meaning of Section 13(d)(3) of the
Act), but excluding the Company and any employee benefit plan sponsored or
maintained by the Company, or (2) assets or earning power constituting more than
fifty percent (50%) of the assets or earning power of the Company and its
subsidiaries (taken as a whole) is sold, mortgaged, leased or otherwise
transferred, in one or more transactions not in the ordinary course of the
Company’s business, to any such person or group of persons; provided, however,
that a Change in Control shall not be deemed to have occurred upon an investment
by one or more venture capital funds, Small Business Investment Companies (as
defined in the Small Business Investment Act of 1958, as amended) or similar
financial investors. For the purposes of this Agreement, the class of stock then
subject to this Agreement shall be deemed to be “publicly traded” if such stock
is listed or admitted to unlisted trading privileges on a national securities
exchange or as to which sales or bid and offer quotations are reported in the
automated system operated by the National Association of Securities Dealers,
Inc.

(ii)        A “Corporate Reorganization” means the happening of any one (1) of
the following events: (1) the dissolution or liquidation of the Company; (2) a
capital reorganization, merger or consolidation involving the Company, unless
(A) the transaction involves only the Company and one or more of the Company’s
parent corporation and wholly-owned (excluding interests held by employees,
officers and directors) subsidiaries; or (B) the shareholders who had the power
to elect a majority of the board of directors of the Company immediately prior
to the transaction have the power to elect a majority of the board of directors
of the surviving entity

 
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immediately following the transaction; (3) the sale of all or substantially all
of the assets of the Company to another corporation, person or business entity;
or (4) an acquisition of Company stock, unless the shareholders who had the
power to elect a majority of the board of directors of the Company immediately
prior to the acquisition have the power to elect a majority of the board of
directors of the Company immediately following the transaction; provided,
however, that a Corporate Reorganization shall not be deemed to have occurred
upon an investment by one or more venture capital funds, Small Business
Investment Companies (as defined in the Small Business Investment Act of 1958,
as amended) or similar financial investors.

5.    Effect of Termination of Service. The restriction on the Securities shall
lapse as specified in Section 4 above until the Termination of Service of
Grantee for reasons other than death, Disability or Retirement. Pursuant to
Section 7.6 of the Plan, where the Termination of Service is for death,
Disability or Retirement, than the Committee shall determine, in its sole
discretion, whether to waive any remaining restriction.

All shares of the Securities still subject to the restriction set forth in
Section 5 shall be forfeited by Grantee and reacquired by the Company on such
date. Upon such date, Grantee shall have no further rights to any Securities to
which the restriction has not lapsed.
 
6.    Rights as Stockholder. Grantee shall have all rights as a stockholder with
respect to the Securities; provided, however, any dividends or distributions on
the Securities shall be automatically deferred and reinvested as restricted
Securities subject to the same restrictions set forth in this Agreement.

7.    Incorporation of the Plan. The terms and conditions included in the Plan,
the receipt of a copy of which Grantee hereby acknowledges by execution of this
Agreement, are incorporated by reference herein, and to the extent that any
conflict may exist between any term or provision of this Agreement and any term
or provision of the Plan, such term or provision of the Plan shall control.

8.    Governing Law. 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 Grantee, Grantee’s heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company and its successors and assigns.

9.    Miscellaneous. This Agreement and the Plan constitute 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, other than any existing
“lock-up” or similar agreements between the parties which by their terms would
apply to the Securities. This Agreement may be amended only by a writing
executed by all parties hereto. This Agreement may be executed in one or more
counterparts.

[Remainder of the page intentionally left blank.]

 
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IN WITNESS WHEREOF, Grantee has executed this Restricted Stock Agreement
effective as of the date first written above.

GRANTEE:
SMART ONLINE, INC.:
       
By:________________________
By:_________________________
 
Name: ______________________
 
Title: _______________________

Print Name:__________________
Address:_____________________
                _____________________
_____________________
 
 
 
 
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