Document:

Exhibit 10.47.2

    
      

    

     

    Exhibit
      10.47.2

     

    

    Registration
      Rights Agreement

     

    This
      Registration Rights Agreement (the “Agreement”)
      is made as of the date set forth below between Smart Online, Inc., a Delaware
      corporation (the “Company”),
      and Canaccord Adams Inc. (the “Holder”).

     

    RECITALS

     

    WHEREAS,
      in connection with the closing of a private placement (the “Private
      Placement”)
      with certain investors (the “Investors”),
      the Company has issued a warrant (the “Warrant”)
      for shares of its common stock (the “Shares”)
      to Holder as consideration for its services as the placement agent in such
      private placement; and

     

    WHEREAS,
      the execution and delivery of this Agreement by the Company is a condition
      to
      issuance of the Warrant.

     

    NOW,
      THEREFORE, the parties hereto agree as follows: 

     

    1.    Registration
      Procedures and Expenses.
      The Company has entered into registration rights agreements with each Investor
      pursuant to which it has covenanted to prepare and file with the Securities
      and
      Exchange Commission (“SEC”)
      a registration statement on Form S-1 (the “Registration Statement”) to enable
      the resale of the shares held by the Investors from time to time. The Company
      shall: 

     

    (a)    subject
      to receipt of necessary information from the Holder, include the Shares issuable
      upon exercise of the Warrant by the Holder on the Registration Statement,
      enabling the Holder to resell the Shares from time to time;

     

    (b)    use
      its best efforts, subject to receipt of necessary information from the Holder
      and the Investors, to cause the Registration Statement to become effective
      as
      soon as practicable;

     

    (c)    use
      its commercially reasonable best efforts to prepare and file with the SEC such
      amendments and supplements to the Registration Statement and the Prospectus
      as
      may be necessary to keep the Registration Statement current and effective for
      a
      period ending on the earlier of (i) the date as all of the Holder’s Shares shall
      have been sold, (ii) the date on which the Holder may sell Shares pursuant
      to
      paragraph (k) of Rule 144 under the Securities Act or any successor rule
      (“Rule
      144”)
      or (iii) such time as all Shares issuable upon exercise of the Warrant such
      Holder have been sold pursuant to a registration statement or Rule 144, and
      to
      notify the Holder promptly upon the Registration Statement and each
      post-effective amendment thereto, being declared effective by the SEC;

     

    (d)    furnish
      to the Holder such number of copies (in paper or electronic version) of the
      Registration Statement and
      the Prospectus (including
      supplemental prospectuses), as the Holder may reasonably request, in order
      to
      facilitate the public sale or other disposition of all or any of the Shares
      by
      the Holder; 

     

    (e)    file
      documents required of the Company for normal blue sky clearance in states
      specified in writing by the Holder; provided, however, that the Company shall
      not be required to qualify to do business or consent to service of process
      in
      any jurisdiction in which it is not now so qualified or has not so consented;
      

     

    
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    (f)    bear
      all expenses (other than underwriting discounts and commissions, if any) in
      connection with the procedures in paragraph (a) through (e) of this Section
      1
      and the registration of the Shares pursuant to the Registration Statement;
      

     

    (g)    advise
      the Holder, promptly after it shall receive notice or obtain knowledge of the
      issuance of any stop order by the SEC delaying or suspending the effectiveness
      of the Registration Statement or of the initiation of any proceeding for that
      purpose; and it will promptly use its commercially reasonable efforts to prevent
      the issuance of any stop order or to obtain its withdrawal at the earliest
      possible moment if such stop order should be issued; and

     

    (h)    with
      a view to making available to the Holder the benefits of Rule 144 or other
      rule
      that may permit the Holder to sell Shares without registration, the Company
      agrees to use its commercially reasonable efforts to: (i) make and keep public
      information available, as those terms are understood and defined in Rule 144,
      until the earlier of (A) such date as all of the Holder’s Shares may be resold
      pursuant to Rule 144(k) or (B) such date as all of the Holder’s Shares shall
      have been sold; (ii) file with the SEC in a timely manner all reports and other
      documents required of the Company under the Securities Act and under the
      Exchange Act; and (iii) furnish to the Holder upon request a written statement
      that the Company has complied with the reporting requirements of the Securities
      Act and the Exchange Act, a copy (in paper or electronic version) of the
      Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form
      10-Q, and (C) such other information as may be reasonably requested that permits
      the selling of any such Shares without registration.

     

    It
      shall be a condition precedent to the obligations of the Company to take any
      action pursuant to this Section 1 that the Holder shall furnish to the Company
      such information and representations regarding the holder, the Shares to be
      sold
      by the Holder, and the intended method of disposition of such securities as
      shall be required to effect the registration of the Shares and/or sale under
      Rule 144.

     

    The
      Company understands that the Holder disclaims being an underwriter, but
      acknowledges that a determination by the SEC that the Holder is deemed an
      underwriter shall not relieve the Company of any obligations it has
      hereunder.

     

    2.    Transfer
      of Shares After Registration; Suspension. 

     

    (a)    The
      Holder agrees that it will not effect any disposition or other transfer of
      the
      Shares or its right to purchase the Shares that would constitute a sale within
      the meaning of the Securities Act other than transactions exempt from the
      registration requirements of the Securities Act, as contemplated in the
      Registration Statement and as described below, and that it will promptly notify
      the Company of any material changes in the information set forth in the
      Registration Statement regarding the Holder or its plan of distribution.

     

    (b)    Except
      in the event that paragraph (c) below applies, the Company shall: (i) if deemed
      necessary by the Company, prepare and file from time to time with the SEC a
      post-effective amendment to the Registration Statement or a supplement to the
      related Prospectus or a supplement or amendment to any document incorporated
      therein by reference or file any other required document so that such
      Registration Statement will not contain an untrue statement of a material fact
      or omit to state a material fact required to be stated therein or necessary
      to
      make the statements therein not misleading, and so that, as thereafter delivered
      to purchasers of the Shares being sold thereunder, such Prospectus will not
      contain an untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein,
      in
      light of the circumstances under which they were made, not misleading; (ii)
      provide the Holder with either copies of any documents filed pursuant to Section
      2(b)(i) or access to such documents electronically; and (iii) upon request,
      inform each Holder who so requests that the Company has complied with its
      obligations in Section 2(b)(i) (or that, if the Company has filed a
      post-effective amendment to the Registration Statement which has not yet been
      declared effective, the Company will notify the Holder to that effect, will
      use
      its best efforts to secure the effectiveness of such post-effective amendment
      as
      promptly as possible and will promptly notify the Holder pursuant to Section
      2(b)(i) hereof when the amendment has become effective).

     

    
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    (c)    Subject
      to paragraph (d) below, in the event: (i) of any request by the SEC or any
      other
      federal or state governmental authority during the period of effectiveness
      of
      the Registration Statement for amendments or supplements to the Registration
      Statement or related Prospectus or for additional information; (ii) of the
      issuance by the SEC or any other federal or state governmental authority of
      any
      stop order suspending the effectiveness of the Registration Statement or the
      initiation of any proceedings for that purpose; (iii) of the receipt by the
      Company of any notification with respect to the suspension of the qualification
      or exemption from qualification of any of the Shares for sale in any
      jurisdiction or the initiation of any proceeding for such purpose; or (iv)
      of
      any event or circumstance which necessitates the making of any material changes
      in the Registration Statement or Prospectus, or any document incorporated or
      deemed to be incorporated therein by reference, so that, in the case of the
      Registration Statement, it will not contain any untrue statement of a material
      fact or omit to state a material fact required to be stated therein or necessary
      to make the statements therein not misleading, and that in the case of the
      Prospectus, it will not contain any untrue statement of a material fact or
      omit
      to state a material fact required to be stated therein or necessary to make
      the
      statements therein, in the light of the circumstances under which they were
      made, not misleading; then the Company shall promptly deliver a certificate
      in
      writing or electronically to the Holder (the “Suspension
      Notice”)
      to the effect of the foregoing and, upon receipt of such Suspension Notice,
      the
      Holder will refrain from selling any Shares pursuant to the Registration
      Statement (a “Suspension”)
      until the Holder is advised in writing by the Company that the current
      Prospectus may be used, and has received copies of any additional or
      supplemental filings that are incorporated or deemed incorporated by reference
      in any such Prospectus. Notwithstanding the foregoing, the right of the Company
      to implement a Suspension shall be limited to two such Suspensions in any
      twelve-month period, each of which may not exceed 45 days. In the event of
      any
      Suspension, the Company will use its reasonable best efforts to cause the use
      of
      the Prospectus so suspended to be resumed as soon as reasonably practicable
      after delivery of a Suspension Notice to the Holder. In addition to and without
      limiting any other remedies (including, without limitation, at law or at equity)
      available to the Holder, the Holder shall be entitled to specific performance
      in
      the event that the Company fails to comply with the provisions of this Section
      2(c). The Holder covenants that from the date hereof it will maintain in
      confidence the receipt and content of any Suspension Notice provided in
      accordance with this paragraph (c) in accordance with and subject to Section
      4.6
      of Annex I to the Securities Purchase Agreement.

     

    (d)    If
      a Suspension is not then in effect, the Holder may sell Shares under the
      Registration Statement, provided that it complies with any applicable prospectus
      delivery requirements. Upon receipt of a request therefor, the Company will
      provide an adequate number of current Prospectuses to the Holder and to any
      other parties requiring such Prospectuses. 

     

    (e)    The
      Company agrees that it shall, upon the Registration Statement being declared
      effective, deliver to its transfer agent an opinion letter of counsel, opining
      that the transfer agent shall issue certificates representing such Shares
      without restrictive legend, provided that the Shares are to be sold pursuant
      to
      the Prospectus contained in the Registration Statement and that at the time
      of
      any sale of the Shares there is no stop order in place regarding the
      Registration Statement. Upon receipt of such opinion, the Company shall cause
      the transfer agent to confirm, for the benefit of the Holder, that no further
      opinion of counsel is required at the time of transfer in order to issue such
      Shares without restrictive legend.

     

    
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    The
      Company shall cause
      its transfer agent to issue
      a certificate without any restrictive legend to a purchaser of any Shares from
      the Holder at Holder’s expense and upon request of the Holder, if (a) the sale
      of such Shares is registered under the Registration Statement (including
      registration pursuant to Rule 415 under the Securities Act); (b) the holder
      has
      provided the Company with an opinion of counsel, in form, substance and scope
      customary for opinions of counsel in comparable transactions, to the effect
      that
      a public sale or transfer of such Shares may be made without registration under
      the Securities Act; or (c) such Shares are sold in compliance with Rule 144
      under the Securities Act. In addition, the Company shall, at the Holder’s
      expense and upon request of the Holder, remove the restrictive legend from
      any
      Shares held by the Holder following the expiration of the holding period
      required by Rule 144(k) under the Securities Act (or any successor rule).

    

    3.    Indemnification.
      For
      the purpose of this Section 3:

     

    (a)    the
      term “Selling
      Shareholder”
      shall mean the Holder and each person, if any, who controls the Holder within
      the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
      Act; 

     

    (b)    the
      term “Registration
      Statement”
      shall mean the final Prospectus, supplement or amendment thereto (or deemed
      to
      be a part thereof) referred to in Section 1; and 

     

    (c)    the
      term “untrue
      statement”
      shall mean any material untrue statement, or any material omission of a
      statement of a material fact required to be made therein or necessary to make
      the statements therein, in the light of the circumstances under which they
      were
      made, not materially misleading.

     

    (d)       
      (i)    The
      Company agrees to indemnify and hold harmless each Selling Shareholder from
      and
      against any losses, or damages to which such Selling Shareholder may incur
      (under the Securities Act or otherwise) insofar as such losses or damages arise
      out of (i) any untrue statement of a material fact contained in the Registration
      Statement, or (ii) any inaccuracy in the representations of the Company
      contained in this Agreement. The Company will reimburse such Selling Shareholder
      for any reasonable legal expense incurred or any out of pocket expenses
      reasonably incurred in defending any such claim or action; provided, however,
      that the Company shall not be liable in any such case to the extent that such
      loss or damage arises out of, or is based upon, an untrue statement made in
      such
      Registration Statement in reliance upon and in conformity with written
      information furnished to the Company by or on behalf of such Selling Shareholder
      for use in preparation of the Registration Statement, or any inaccuracy in
      representations made by such Selling Shareholder in the Holder Questionnaire
      or
      the failure of such Selling Shareholder to comply with its covenants and
      agreements contained in Sections in this Agreement or contained in the
      Securities Purchase Agreement or any statement or omission in any Prospectus
      that is corrected in any subsequent Prospectus that was delivered to the Selling
      Shareholder prior to the pertinent sale or sales by the Selling Shareholder.
      The
      obligation to indemnify shall be limited to the net amount of the proceeds
      received by the Company from the Holder as a result of the
      Offering.

     

    (ii)       
      The
      Holder agrees to indemnify and hold harmless the Company (and each person,
      if
      any, who controls the Company within the meaning of Section 15 of the Securities
      Act, each officer of the Company who signs the Registration Statement and each
      director of the Company) from and against any losses or damage to which the
      Company (or any such officer, director or controlling person) may become subject
      (under the Securities Act or otherwise), insofar as such loss or damage (or
      actions or proceedings in respect thereof) arise out of, or are based upon,
      (i)
      any failure to comply with the covenants and agreements contained in this
      Agreement or of the Securities Purchase Agreement or (ii) any untrue statement
      of a material fact contained in the Registration Statement if, and only if,
      such
      untrue statement was made in reliance upon and in conformity with written
      information furnished by or on behalf of the Holder specifically for use in
      preparation of the Registration Statement. The Holder will reimburse the Company
      (or such officer, director or controlling person), as the case may be, for
      any
      reasonable legal expense or other actual accountable out-of-pocket expenses
      reasonably incurred in defending any such claim, action or proceeding. The
      obligation to indemnify shall be limited to the net amount of the proceeds
      received by the Holder from the sale of the Shares pursuant to the Registration
      Statement.

     

    
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    (iii)      
      Promptly
      after receipt by any indemnified person of a notice of a claim or the beginning
      of any action in respect of which indemnity is to be sought against an
      indemnifying person pursuant to this Section 3, such indemnified person shall
      notify the indemnifying person in writing of such claim or of the commencement
      of such action, but the omission to so notify the indemnifying party will not
      relieve it from any liability which it may have to any indemnified party under
      this Section 3 (except to the extent that such omission materially and adversely
      affects the indemnifying party’s ability to defend such action) or from any
      liability otherwise than under this Section 3. Subject to the provisions
      hereinafter stated, in case any such action shall be brought against an
      indemnified person, the indemnifying person shall be entitled to participate
      therein, and, to the extent that it shall elect by written notice delivered
      to
      the indemnified party promptly after receiving the aforesaid notice from such
      indemnified party, shall be entitled to assume the defense thereof, with counsel
      reasonably satisfactory to such indemnified person. After notice from the
      indemnifying person to such indemnified person of its election to assume the
      defense thereof (unless it has failed to assume the defense thereof and appoint
      counsel reasonably satisfactory to the indemnified party), such indemnifying
      person shall not be liable to such indemnified person for any legal expenses
      subsequently incurred by such indemnified person in connection with the defense
      thereof; provided, however, that if there exists or shall exist a conflict
      of
      interest that would make it inappropriate, in the reasonable opinion of counsel
      to the indemnified person, for the same counsel to represent both the
      indemnified person and such indemnifying person or any affiliate or associate
      thereof, the indemnified person shall be entitled to retain its own counsel
      at
      the expense of such indemnifying person; provided, however, that no indemnifying
      person shall be responsible for the fees and expenses of more than one separate
      counsel (together with appropriate local counsel) for all indemnified parties.
      In no event shall any indemnifying person be liable in respect of any amounts
      paid in settlement of any action unless the indemnifying person shall have
      approved the terms of such settlement; provided that such consent shall not
      be
      unreasonably withheld. No indemnifying person shall, without the prior written
      consent of the indemnified person, effect any settlement of any pending or
      threatened proceeding in respect of which any indemnified person is or could
      reasonably have been a party and indemnification could have been sought
      hereunder by such indemnified person, unless such settlement includes an
      unconditional release of such indemnified person from all liability on claims
      that are the subject matter of such proceeding.

     

    (iv)       
      If
      the indemnification provided for in this Section 3 is unavailable to or
      insufficient to hold harmless an indemnified party under paragraphs 3(d)(i)
      or
      3(d)(ii) above in respect of any loss or damage (or actions or proceedings
      in
      respect thereof) referred to therein, then each indemnifying party shall
      contribute to the amount paid or payable by such indemnified party as a result
      of such loss or damage (or actions in respect thereof) in such proportion as
      is
      appropriate to reflect the relative fault of the Company on the one hand and
      the
      Holder on the other in connection with the statements or omissions or other
      matters which resulted in such loss or damage (or actions in respect thereof),
      as well as any other relevant equitable considerations. The relative fault
      shall
      be determined by reference to, among other things, in the case of an untrue
      statement, whether the untrue statement relates to information supplied by
      the
      Company on the one hand or the Holder on the other and the parties’ relative
      intent, knowledge, access to information and opportunity to correct or prevent
      such untrue statement. The Company and the Holder agree that it would not be
      just and equitable if contribution pursuant to this subsection (d) were
      determined by pro rata allocation (even if the Holder and the Investors were
      treated as one entity for such purpose) or by any other method of allocation
      which does not take into account the equitable considerations referred to above
      in this subsection (d). The amount paid or payable by an indemnified party
      as a
      result of the loss or damage (or actions in respect thereof) referred to above
      in this subsection (d) shall be deemed to include any reasonable legal fees
      incurred by such indemnified party in connection with defending any such action
      or claim. Notwithstanding the provisions of this subsection (d), the Holder
      shall not be required to contribute any amount in excess of the amount by which
      the gross amount received by the Holder from the sale of the Shares to which
      such loss relates exceeds the amount of any damages which the Holder has
      otherwise been required to pay by reason of such untrue statement. No person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any person who was
      not guilty of such fraudulent misrepresentation. 

     

    
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    (e)    The
      parties to this Agreement hereby acknowledge that they are sophisticated
      business persons who were represented by counsel during the negotiations
      regarding the provisions hereof including, without limitation, the provisions
      of
      this Section 3, and are fully informed regarding said provisions. They further
      acknowledge that the provisions of this Section 3 fairly allocate the risks
      in
      light of the ability of the parties to investigate the Company and its business
      in order to assure that adequate disclosure is made in the Registration
      Statement as required by the Securities Act and the Exchange Act.

     

    4.    Termination
      of Conditions and Obligations. The
      conditions precedent imposed by Section 4 of the Securities Purchase Agreement
      or this Agreement upon the transferability of the Shares shall cease and
      terminate as to any particular number of the Shares when such Shares shall
      have
      been effectively registered under the Securities Act and sold or otherwise
      disposed of in accordance with the intended method of disposition set forth
      in
      the Registration Statement covering such Shares or at such time as an opinion
      of
      counsel satisfactory to the Company shall have been rendered to the effect
      that
      such conditions are not necessary in order to comply with the Securities Act.
      

     

    5.    Information
      Available. So
      long as the Registration Statement is effective covering the resale of Shares
      owned by the Holder, the Company will furnish (or, to the extent such
      information is available electronically through the Company’s filings with the
      SEC, the Company will make available) to the Holder: 

     

    (a)    as
      soon as practicable after it is available, one copy of (i) its Annual Report
      to
      Shareholders (which Annual Report shall contain financial statements audited
      in
      accordance with generally accepted accounting principles by a national firm
      of
      certified public accountants) and (ii) if not included in substance in the
      Annual Report to Shareholders, its Annual Report on Form 10-K (the foregoing,
      in
      each case, excluding exhibits); and,

     

    (b)    upon
      the reasonable request of the Holder, an adequate number of copies of the
      Prospectuses to supply to any other party requiring such Prospectuses either
      in
      printed or electronic form.

     

    6.    Limits
      on Additional Issuances.
      Except for the issuance of stock options under the Company’s stock option plan,
      the issuance of warrants to purchase the Company’s common stock, or the issuance
      of common stock under
      the Company’s employee stock purchase plan or upon
      exercise of outstanding options and warrants and the offering contemplated
      hereby, the Company will not, for a period of three (3) months following the
      Closing Date, offer for sale or sell any securities unless, in the opinion
      of
      the Company’s counsel, such offer or sale does not jeopardize the availability
      of exemptions from the registration and qualification requirements under
      applicable securities laws with respect to the Offering. The foregoing shall
      not
      apply to securities issued in connection with any acquisition, including by
      way
      of merger, or purchase of stock or all or substantially all of the assets of
      any
      third party. The foregoing provisions shall not prevent the Company from filing
      a “shelf” registration statement pursuant to Rule 415 under the Securities Act,
      but the foregoing provisions shall apply to any sale of securities
      thereunder.

     

    
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    7.    Notices.
      All
      notices, requests, consents and other communications hereunder shall be in
      writing, shall be delivered (A) if within the United States, by first-class
      registered or certified airmail, or nationally recognized overnight express
      courier, postage prepaid, or by facsimile, or (B) if from outside the United
      States, by International Federal Express (or comparable service) or facsimile,
      and shall be deemed given (i) if delivered by first-class registered or
      certified mail domestic, upon the Business Day received, (ii) if delivered
      by
      nationally recognized overnight carrier, one (1) Business Day after timely
      delivery to such carrier, (iii) if delivered by International Federal Express
      (or comparable service), two (2) Business Days after timely delivery to such
      carrier, (iv) if delivered by facsimile, upon electric confirmation of receipt
      and shall be addressed as follows, or to such other address or addresses as
      may
      have been furnished in writing by a party to another party pursuant to this
      paragraph: 

     

    
      	
            	(a)	
              if
                to the Company, to:

               

              
                Smart
                  Online, Inc

                2530
                  Meridian Parkway, 2nd
                  Floor

                Durham,
                  NC 27713

                Attention: James
                  Gayton, Corporate Counsel

                Telephone: 
                  (919) 765-5000

                

                with
                  a copy to:.

                Smith,
                  Anderson, Blount, Dorsett, 

                Mitchell
                  & Jernigan, LLP

                2500
                  Wachovia Capitol Center

                Raleigh,
                  North Carolina 27602-2611

                Attention:
                  Margaret N. Rosenfeld

                Telephone: (919)
                  821-6714

              

            

    

     

    

    
      	
            	(b)	
              if
                to the Holder to:

               

              
                Canaccord
                  Adams

                99
                  High Street

                Boston,
                  MA 02110

                Attention:
                  John Tesoro

                Telephone:
                  (617) 371-3847

              

            

    

     

    

    

    8.    Amendments;
      Waiver. This
      Agreement may not be modified or amended except pursuant to an instrument in
      writing signed by the Company and the Holder. Any waiver of a provision of
      this
      Agreement must be in writing and executed by the party against whom enforcement
      of such waiver is sought.

     

    9.    Headings.
      The
      headings of the various sections of this Agreement have been inserted for
      convenience of reference only and shall not be deemed to be part of this
      Agreement. 

     

    10.      
      Entire
      Agreement; Severability. This
      Agreement sets forth the entire agreement and understanding of the parties
      relating to the subject matter hereof and supersedes all prior and
      contemporaneous agreements, negotiations and understandings between the parties,
      both oral and written relating to the subject matter hereof. If any provision
      contained in this Agreement is determined to be invalid, illegal or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions contained herein shall not in any way be affected or
      impaired thereby. 

     

    
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    11.       
      Governing
      Law. This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of Delaware,
      without giving effect to the principles of conflicts of law. 

     

    12.       
      Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      constitute an original, but all of which, when taken together, shall constitute
      but one instrument, and shall become effective when one or more counterparts
      have been signed by each party hereto and delivered to the other
      parties.

     

    

     

    

     

    [Remainder
      of Page Intentionally Left Blank]

     

     

     

     

     

     

     

    
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    Please
      confirm that the foregoing correctly sets forth the agreement between us by
      signing in the space provided below for that purpose.

     

    

    
      
        	 	
                CANACCORD
                  ADAMS, INC.

                 

                

                By:
                  /s/
                  James M. Brown

                      
                  Name: James M. Brown

                      
                  Title: Managing Director

                

                 

                Address: 
                  ___________________

                ___________________________

                ___________________________

              

      

    

     

     

     

    AGREED
      AND ACCEPTED:

    

    SMART
      ONLINE, INC.

     

    

     

    By:
      /s/
      Nicholas A. Sinigaglia  

    Name:

    Title:
      

    

    

    

    Dated
      as of:
      February
      27, 2007Exhibit 10.48

    
      

    

     

    Exhibit
      10.48

    

      

      REGISTRATION
        RIGHTS AGREEMENT

      

       

      THIS
        REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of October ___, 2006,
        by and among Smart Online, Inc., a Delaware corporation with its headquarters
        located at 2530 Meridian Parkway, Durham, North Carolina 27713 (the “Company”),
        and the undersigned (together with its Affiliates and any permitted assignees
        or
        transferees of all of its respective rights hereunder, the
“Investor”).

       

           WHEREAS:

       

      A.     In
        connection with the ________________ Agreement by and among Michael Nouri
        (“Nouri”) and the undersigned dated as of the date hereof (the “Stock
        Purchase Agreement”),
        Nouri has agreed, upon the terms and subject to the conditions contained
        therein, to sell to the undersigned shares of the Company’s common stock (the
“Common Stock”), upon the terms and subject to the limitations and conditions
        set forth in the Stock Purchase Agreement; and

       

      B.    To
        induce
        the undersigned to enter into the Stock Purchase Agreement with Nouri and
        in
        consideration of the enforcement rights in favor of the Company contained
        in the
        Stock Purchase Agreement, the Company has agreed to provide the undersigned
        certain registration rights under the Securities Act of 1933, as amended,
        and
        the rules and regulations thereunder, or any similar successor statute
        (collectively, the “1933 Act”), and applicable state securities
        laws;

       

      NOW,
        THEREFORE, in consideration of the promises and the mutual covenants contained
        herein and other good and valuable consideration, the receipt and sufficiency
        of
        which are hereby acknowledged, the Company and the Investor hereby agree
        as
        follows:

       

      1.     DEFINITIONS.

       

      (a)    As
        used
        in this Agreement, the following terms shall have the following
        meanings:

       

      (i)        
        “Affiliate”
        of a Person means a Person that directly or indirectly, through one or more
        intermediaries, controls, is controlled by, or is under common control with,
        the
        first mentioned Person.

       

      (ii)       
        “Blue
        Sky
        Expenses” means all fees and expenses incurred pursuant to Section 3(c) of this
        Agreement.

       

      (iii)      
        “Investor”
        means any person who acquires shares of Common Stock of the Company, or any
        security of the Company pursuant to which the holder has a right to receive
        shares of Common Stock of the Company upon exercise or conversion of such
        security, who agrees to become bound by the provisions of this Agreement
        or a
        counterpart of this Agreement, and permitted transfers and assignees of such
        Investor in accordance with Section 9 hereof.

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      (iv)      
         “Stock
        Purchase Shares” means shares of Common Stock transferred by Nouri to the
        Investor pursuant to the Stock Purchase Agreement.

       

      (v)        
        “Person”
        means any individual, corporation, partnership, joint venture, limited liability
        company, business trust, joint stock company, trust or unincorporated
        organization or any government or any agency or political subdivision
        thereof.

       

      (vi)       
        “register,”
        “registered,” and “registration” refer to a registration effected by preparing
        and filing a Registration Statement or Statements in compliance with the
        1933
        Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing
        for offering securities on a continuous basis (“Rule 415”), and the declaration
        or ordering of effectiveness of such Registration Statement by the
        SEC.

       

      (vii)      
        “Registrable
        Securities” mean (a) the Stock Purchase Shares and (b) any Common Stock of the
        Company issued as (or issuable upon the conversion or exercise of any warrant,
        right or other security which is issued as) a dividend or other distribution
        with respect to, or in exchange for or in replacement of, the Stock Purchase
        Shares, provided, however, that Registrable Securities shall not include
        any
        shares of Common Stock which have previously been registered or which have
        been
        sold to the public either pursuant to a Registration Statement or Rule 144,
        or
        which have been sold in a private transaction in which the transferor’s rights
        under this Agreement are not assigned.

       

      (viii)      
        “Registration
        Expenses” mean all expenses incurred by the Company in effecting any
        registration pursuant to this Agreement, including, without limitation, all
        registration and filing fees, printing expenses, fees and disbursements of
        counsel for the Company, and expenses of any regular or special audits incident
        to or required by any such registration, but shall not include Selling Expenses,
        Blue Sky Expenses, fees and disbursements of counsel for the Investor and
        the
        compensation of regular employees of the Company.

       

      (ix)       
        “Registration
        Period” means the earlier of (i) 120 days after the effective date of the
        Registration Statement; (ii) the date on which all of the Registrable Securities
        have been sold by the Investor; and (iii) the date on which the Registrable
        Securities of the Investor (in the opinion of counsel to the Company) may
        be
        immediately sold to the public without registration or restriction (including
        without limitation as to volume by Investor) under the 1933 Act.

       

      (x)       
        “Registration
        Statement” means a registration statement of the Company under the 1933
        Act.

       

      (xi)       
        “SEC”
        means the United States Securities and Exchange Commission.

       

      
        
           

        

        
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      (xii)      
        “Selling
        Expenses” shall mean all underwriting discounts, selling commissions and stock
        transfer taxes applicable to the sale of Registrable Securities and fees
        and
        disbursements of counsel for any Investor (other than the fees and disbursements
        of counsel included in Registration Expenses).

       

      (b)    Capitalized
        terms used herein and not otherwise defined herein shall have the respective
        meanings set forth in the Stock Purchase Agreement.

       

      2.    REGISTRATION.

       

      (a)    The
        Company shall notify the Investor in writing at least fifteen (15) days prior
        to
        the filing of any Registration Statement under the Securities Act for purposes
        of a public offering of securities of the Company (whether in connection
        with a
        public offering of securities by the Company, a public offering of securities
        by
        shareholders of the Company, or both, but excluding a registration relating
        solely to employee benefit plans, or a registration relating to a corporate
        reorganization or other transaction on Form S-4, or a registration on any
        registration form that does not permit secondary sales) and will afford such
        Investor an opportunity to include in such Registration Statement all or
        part of
        such Registrable Securities held by the Investor as set forth herein. If
        the
        Investor desires to include in any such Registration Statement all or any
        part
        of the Registrable Securities held by such Investor, the Investor shall,
        within
        fifteen (15) days after the above-described notice from the Company, so notify
        the Company in writing. Such notice shall state the intended method of
        disposition of the Registrable Securities by such Investor as set forth herein.
        If the Investor decides not to include all of its Registrable Securities
        in any
        Registration Statement thereafter filed by the Company, the Investor shall
        nevertheless continue to have the right to include any Registrable Securities
        in
        any subsequent Registration Statement or Registration Statements as may be
        filed
        by the Company with respect to offerings of its securities, all upon the
        terms
        and conditions set forth herein.

       

      (b)    Underwriting.
        If the
        Registration Statement under which the Company gives notice under this Section
        2
        is for an underwritten offering, the Company shall so advise the Investor.
        In
        such event, the right of the Investor to be included in a registration pursuant
        to this Section 2 shall be conditioned upon the Investor’s participation in such
        underwriting and the inclusion of the Investor’s Registrable Securities in the
        underwriting to the extent provided herein. If the Investor proposes to
        distribute their Registrable Securities through such underwriting, the Investor
        shall enter into an underwriting agreement in customary form with the
        underwriter or underwriters selected for such underwriting by the Company.
        

       

      (c)    Notwithstanding
        any other provision of this Agreement, if the underwriter determines in good
        faith that marketing factors require a limitation of the number of shares
        to be
        underwritten, the number of shares that may be included in the underwriting
        shall be allocated first to the Company; second, to any shares subject to
        registration rights agreements in effect prior to this Agreement and remaining
        in effect at the time of such underwritten offering; third, to the investors
        who
        are entitled to participate and who have elected to participate in the offering
        pursuant to the terms of this Agreement, on a pro rata basis based upon the
        total number of shares held by each such participating investor that are
        subject
        to piggyback registration rights pursuant hereto; and fourth, to any other
        shareholder of the Company on a pro rata basis. 

       

      
        
           

        

        
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      (d)    If
        any
        Investor disapproves of the terms of any such underwriting, such Investor
        may
        elect to withdraw therefrom by written notice to the Company and the
        underwriter, delivered at least ten (10) business days prior to the effective
        date of the Registration Statement. Any Registrable Securities excluded or
        withdrawn from such underwriting shall be excluded and withdrawn from the
        registration. For any Investor which is a partnership or corporation, the
        partners, stockholders, subsidiaries, parents and Affiliates of such Investor,
        or the estates and family members of any such partners and retired partners
        and
        any trusts for the benefit of any of the foregoing Persons shall be deemed
        to be
        a single “Investor”, and any pro rata reduction with respect to such “Investor”
shall be based upon the aggregate amount of shares carrying registration
        rights
        owned by all entities and individuals included in such “Investor,” as defined in
        this sentence.

       

      (e)    Right
        to Terminate Registration.
        The
        Company shall have the right to terminate or withdraw any registration initiated
        by it under this Section 2 prior to the effectiveness of such registration
        whether or not the Investor has elected to include securities in such
        registration. The Registration Expenses of such withdrawn registration shall
        be
        borne by the Company.

       

      3.    OBLIGATIONS
        OF THE COMPANY.

       

      In
        connection with the registration of the Registrable Securities, the Company
        shall have the following obligations:

       

      (a)    The
        Company shall prepare and file with the SEC such amendments (including
        post-effective amendments) and supplements to the Registration Statements
        and
        the prospectus used in connection with the Registration Statement as may
        be
        necessary to keep the Registration Statement effective at all times during
        the
        Registration Period, and, during such period, comply with the provisions
        of the
        1933 Act with respect to the disposition of all Registrable Securities of
        the
        Company covered by the Registration Statement until such time as all of such
        Registrable Securities have been disposed of in accordance with the intended
        methods of disposition by the Investor as set forth in the Registration
        Statement.

       

      (b)    If
        requested, the Company shall furnish to one legal counsel for all investors
        whose Registrable Securities are included in a Registration Statement (i)
        promptly (but in no event more than two (2) business days) after the same
        is
        prepared and publicly distributed, filed with the SEC, or received by the
        Company, one copy of each Registration Statement and any amendment thereto,
        each
        preliminary prospectus and prospectus and each amendment or supplement thereto,
        and, in the case of the Registration Statement referred to in Section 2(a),
        each
        letter written by or on behalf of the Company to the SEC or the staff of
        the
        SEC, and each item of correspondence from the SEC or the staff of the SEC,
        in
        each case relating to such Registration Statement (other than any portion
        of any
        thereof which contains information for which the Company has sought confidential
        treatment), and (ii) promptly (but in no event more than two (2) business
        days)
        after the Registration Statement is declared effective by the SEC, such number
        of copies of a prospectus, including a preliminary prospectus, and all
        amendments and supplements thereto and such other documents as the Investor
        may
        reasonably request in order to facilitate the disposition of the Registrable
        Securities owned by the Investor. The Company will immediately notify one
        legal
        counsel representing all investors where Registrable

       

      
        
           

        

        
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      Securities
        are included in a Registration Statement by facsimile of the effectiveness
        of
        each Registration Statement or any post-effective amendment. The Company
        will
        promptly respond to any and all comments received from the SEC (which comments
        shall promptly be made available to one legal counsel representing all investors
        whose Registration Securities are included in a Registration Statement upon
        request), with a view towards causing the Registration Statement or any
        amendment thereto to be declared effective by the SEC as soon as reasonably
        practicable, and (ii) promptly file an acceleration request as soon as
        reasonably practicable (but in no event more than two (2) business days)
        following the resolution or clearance of all SEC comments. If applicable,
        following notification by the SEC that any such Registration Statement or
        any
        amendment thereto will not be subject to review, the Company shall promptly
        file
        with the SEC a final prospectus as soon as reasonably practicable (but in
        no
        event more than two (2) business days) following receipt by the Company from
        the
        SEC of an order declaring the Registration Statement effective.

       

      (c)    The
        Company shall use commercially reasonable efforts to (i) register, qualify
        or
        obtain an exemption for the Registrable Securities covered by the Registration
        Statement under such other securities or “blue sky” laws of such jurisdictions
        in the United States as the investors who hold a majority of the Registrable
        Securities being offered by the Registration Statement may reasonably request,
        (ii) prepare and file in those jurisdictions such amendments (including
        post-effective amendments) and supplements to such registrations, qualifications
        and/or exemptions as may be necessary to maintain the effectiveness thereof
        during the Registration Period, (iii) take such other actions as may be
        reasonably necessary to maintain such registrations and qualifications in
        effect
        during the Registration Period, and (iv) take all other actions reasonably
        necessary or advisable to qualify or exempt the Registrable Securities for
        sale
        in such jurisdictions; provided, however, that the Company shall not be required
        in connection therewith or as a condition thereto to (i) qualify to do business
        in any jurisdiction where it would not otherwise be required to qualify but
        for
        this Section 3(c), (ii) subject itself to general taxation in any such
        jurisdiction, (iii) file a general consent to service of process in any such
        jurisdiction, (iv) provide any undertakings that cause the Company undue
        expense
        or burden, or (v) make any change in its certificate of incorporation or
        bylaws.

       

      (d)    As
        promptly as practicable after becoming aware of such event, the Company shall
        notify the Investor of the happening of any event, of which the Company has
        knowledge, as a result of which the prospectus included in any Registration
        Statement, as then in effect, includes an untrue statement of a material
        fact or
        omission to state a material fact required to be stated therein or necessary
        to
        make the statements therein not misleading, and use commercially reasonable
        efforts promptly to prepare a supplement or amendment to any Registration
        Statement to correct such untrue statement or omission, and deliver such
        number
        of copies of such supplement or amendment to the Investor as such Investor
        may
        reasonably request; provided that, for not more than sixty (60) consecutive
        trading days (or a total of not more than ninety (90) trading days in any
        twelve
        (12) month period), the Company may delay the disclosure of material non-public
        information concerning the Company (as well as prospectus or Registration
        Statement updating) the disclosure of which at the time is not, in the good
        faith opinion of the Company, in the best interests of the Company (an “Allowed
        Delay”); provided, further, that the Company shall promptly (i) notify the
        Investor in writing of the existence of material non-public information giving
        rise to an Allowed Delay and (ii) advise the Investor in writing to cease
        all
        sales under such Registration Statement until the end of the Allowed Delay.
        Upon
        expiration of the Allowed Delay, the Company shall again be bound by the
        first
        sentence of this Section 3(d) with respect to the information giving rise
        thereto.

       

      
        
           

        

        
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      (e)    The
        Company shall use commercially reasonable efforts to prevent the issuance
        of any
        stop order or other suspension of effectiveness of any Registration Statement,
        and, if such an order is issued, to obtain the withdrawal of such order within
        a
        reasonable time and to notify the Investor who holds Registrable Securities
        being sold (or, in the event of an underwritten offering, the managing
        underwriters) of the issuance of such order and the resolution
        thereof.

       

      (f)    The
        Company shall permit a single firm of legal counsel designated by investors
        who
        own a majority of the registrable securities offered under the Registration
        Statement to review such Registration Statement and all amendments and
        supplements thereto (as well as all requests for acceleration or effectiveness
        thereof) a reasonable period of time prior to their filing with the SEC.
        The
        role of such legal counsel to the investors shall be to confirm that the
        sections of such Registration Statement covering information with respect
        to the
        investors, the investors’ beneficial ownership of securities of the Company and
        the investors’ intended method of disposition of Registrable Securities shall
        conform to the information provided to the Company by each of the investors,
        subject to review and approval by the Company and its legal counsel. Such
        legal
        counsel for the investors shall not have the right to require changes to
        the
        description of the Company, its business or other matters not related to
        selling
        shareholders.

       

      (g)    The
        Company shall make generally available to its shareholders as soon as
        practicable, but not later than ninety (90) days after the close of the period
        covered thereby, an earnings statement (in form complying with the provisions
        of
        Rule 158 under the 1933 Act) covering a twelve-month period beginning not
        later
        than the first day of the Company’s fiscal quarter next following the effective
        date of the Registration Statement.

       

      (h)     Until
        the
        Registration Statement ceases to be effective, the Company shall make available
        for inspection following reasonable prior written notice by (i) any underwriter
        participating in any disposition pursuant to a Registration Statement, (ii)
        one
        firm of attorneys or other agents retained by the investors who own a majority
        of the registrable securities, and (iii) one firm of attorneys retained by
        all
        such underwriters (collectively, the “Inspectors”) all pertinent financial and
        other records, and pertinent corporate documents and properties of the Company
        (collectively, the “Records”), as shall be reasonably deemed necessary by each
        Inspector to enable each Inspector to exercise its due diligence responsibility,
        and cause the Company’s officers, directors and employees to supply all
        information which any Inspector may reasonably request for purposes of such
        due
        diligence; provided, however, that each Inspector shall hold in confidence
        and
        shall not make any disclosure (except to an Investor) of any Record or other
        information which the Company determines in good faith to be confidential,
        and
        of which determination the Inspectors are so notified, unless (a) the release
        of
        such Records is ordered pursuant to a subpoena or other order from a court
        or
        government body of competent jurisdiction, or (b) the information in such
        Records has been made generally available to the public other than by disclosure
        in violation of this or any other agreement. The Company shall not be required
        to allow such inspection more than once per calendar year. Following such
        due
        diligence review, an Investor may require the Company to withdraw the
        Registrable Securities of such Investor from the Registration Statement,
        if the
        Company does not make changes to the Registration Statement requested by
        such
        Investor.

       

      
        
           

        

        
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      (i)    The
        Company shall not be required to disclose any confidential information in
        such
        Records to any Inspector or to any Investor pursuant to this Agreement until
        and
        unless such Inspector and Investor shall have entered into confidentiality
        agreements (in
        form and
        substance satisfactory to the Company) with the Company with respect thereto.
        The Investor agrees that it shall, upon learning that disclosure of such
        Records
        or other information is sought in or by a court or governmental body of
        competent jurisdiction or through other means, give prompt notice to the
        Company
        and allow the Company, at its expense, to undertake appropriate action to
        prevent disclosure of, or to obtain a protective order for, the Records deemed
        confidential. Nothing herein (or in any other confidentiality agreement between
        the Company and any investor) shall be deemed to limit the Investor’s ability to
        sell Registrable Securities in a manner which is otherwise consistent with
        applicable laws and regulations.

       

      (j)    The
        Company shall provide a transfer agent and registrar, which may be a single
        entity, for the Registrable Securities not later than the effective date
        of the
        Registration Statement.

       

      4.    OBLIGATIONS
        OF THE INVESTOR.

       

      In
        connection with the registration of the Registrable Securities, the Investor
        shall have the following obligations:

       

      (a)    It
        shall
        be a condition precedent to the obligations of the Company to complete the
        registration pursuant to this Agreement with respect to the Registrable
        Securities of a particular Investor that such Investor shall furnish to the
        Company such information regarding itself, the Registrable Securities held
        by it
        and the intended method of disposition of the Registrable Securities held
        by it
        as shall be reasonably required to effect the registration of such Registrable
        Securities and shall execute such documents in connection with such registration
        as the Company may reasonably request. At least five (5) business days prior
        to
        the first anticipated filing date of the Registration Statement, the Company
        shall notify the Investor of the information the Company requires from the
        Investor.

       

      (b)    The
        Investor agrees to cooperate with the Company as reasonably requested by
        the
        Company in connection with the preparation and filing of the Registration
        Statements hereunder, unless the Investor has notified the Company in writing
        of
        such Investor’s election to exclude all of such Investor’s Registrable
        Securities from the Registration Statements.

       

      (c)    In
        the
        event the Company or investors holding a majority of the Registrable securities
        being registered determine to engage the services of an underwriter, the
        Investor agrees to enter into and perform such Investor’s obligations under an
        underwriting agreement, in usual and customary form, including, without
        limitation, customary indemnification and contribution obligations, with
        the
        managing underwriter of such offering and take such other actions as are
        reasonably required in order to expedite or facilitate the disposition of
        the
        Registrable Securities, unless such Investor has notified the Company in
        writing
        of such Investor’s election to exclude all of such Investor’s Registrable
        Securities from such Registration Statement.

       

      (d)    The
        Investor agrees that, upon receipt of any notice from the Company of the
        happening of any event of the kind described in Section 3(d) or 3(e), such
        Investor will immediately discontinue disposition of Registrable Securities
        pursuant to the Registration Statement covering such Registrable Securities
        until such Investor’s receipt of the copies of the supplemented or amended
        prospectus contemplated by Section 3(d) or 3(e) and, if so directed by the
        Company, such Investor shall deliver to the Company (at the expense of the
        Company) or destroy (and deliver to the Company a certificate of destruction)
        all copies in such Investor’s possession, of the prospectus covering such
        Registrable Securities current at the time of receipt of such
        notice.

       

      (e)    No
        Investor may not participate in any underwritten registration hereunder unless
        such Investor if requested by the Company (i) agrees to sell such Investor’s
        Registrable Securities on the basis provided in any underwriting arrangements
        in
        usual and customary form entered into by the Company, (ii) completes and
        executes all questionnaires, powers of attorney, indemnities, underwriting
        agreements and other documents reasonably required under the terms of such
        underwriting arrangements, and (iii) agrees to pay its pro rata share of
        all
        underwriting discounts and commissions and any expenses in excess of those
        payable by the Company pursuant to Section 5 below. Notwithstanding the
        foregoing, there is no obligation on the part of the Company or any underwriter
        to include Registrable Securities of Investor in the securities to be purchased
        or sold by the underwriter.

       

      5.    EXPENSES
        OF REGISTRATION.

       

      (a)    Registration
        Expenses.
        The
        Investors shall bear its proportionate share of the Registration Expenses.
        For
        purposes of this Section 5, an Investor’s proportionate share shall be
        determined by dividing the number of registrable securities for which the
        Investor requested registration by the total number of securities being
        registered pursuant to the Registration Statement. 

       

      (b)    Selling
        Expenses.
        The
        Investor shall bear all of the Selling Expenses incurred with respect to
        the
        Registrable Securities for which the Investor requested registration.

       

      (c)    Blue
        Sky Expenses.
        The
        Investors shall reimburse the Company for all Blue Sky Expenses incurred
        by the
        Company in connection with a request by the investors pursuant to Section
        3(c)
        of this Agreement to register, qualify or obtain an exemption from registration
        of the Registrable Securities under the blue sky laws of any jurisdiction
        in the
        United States.

       

      (d)    Investors’
        Counsel.
        The
        Company shall not be obligated to pay any costs of counsel for incurred by
        the
        Investor.

       

      To
        the
        extent that the Company incurs any Registration Expenses, Selling Expenses,
        or
        Blue Sky Expenses on behalf of any Investor or Investors, such Investor or
        Investors shall reimburse the Company promptly for such expenses as they
        are
        incurred and are due and payable.

       

       

      
        
           

        

        
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      6.     INDEMNIFICATION.

       

      In
        the
        event any Registrable Securities are included in a Registration Statement
        under
        this Agreement:

       

      (a)    To
        the
        extent permitted by law, the Company will indemnify, hold harmless and defend
        (i) the Investor who holds such Registrable Securities, (ii) the directors,
        officers, partners, employees, agents and each person who controls the Investor
        within the meaning of the 1933 Act or the Securities Exchange Act of 1934,
        as
        amended (the “1934 Act”), if any, (iii) any underwriter (as defined in the 1933
        Act) for the Investors, and (iv) the directors, officers, partners, employees
        and each person who controls any such underwriter within the meaning of the
        1933
        Act or the 1934 Act, if any (each, an “Indemnified Person”), against any joint
        or several losses, claims, damages, liabilities or expenses (collectively,
        together with actions, proceedings or inquiries by any regulatory or
        self-regulatory organization, whether commenced or threatened, in respect
        thereof, “Claims”) to which any of them may become subject insofar as such
        Claims arise out of or are based upon: (i) any untrue statement of a material
        fact in a Registration Statement or the omission to state therein a material
        fact required to be stated or necessary to make the statements therein not
        misleading; (ii) any untrue statement of a material fact contained in any
        preliminary prospectus if used prior to the effective date of such Registration
        Statement, or contained in the final prospectus (as amended or supplemented,
        if
        the Company files any amendment thereof or supplement thereto with the SEC)
        or
        the omission to state therein any material fact necessary to make the statements
        made therein, in light of the circumstances under which the statements therein
        were made, not misleading; or (iii) any violation by the Company of the 1933
        Act, the 1934 Act, any other law, including, without limitation, any state
        securities law, or any rule or regulation thereunder relating to the offer
        or
        sale of the Registrable Securities (the matters in the foregoing clauses
        (i)
        through (iii) being, collectively, “Violations”). Subject to the restrictions
        set forth in Section 6(c) with respect to the number of legal counsel, the
        Company shall reimburse the Indemnified Person, promptly as such expenses
        are
        incurred and are due and payable, for any reasonable legal fees or other
        reasonable expenses incurred by them in connection with investigating or
        defending any such Claim. Notwithstanding anything to the contrary contained
        herein, the indemnification agreement contained in this Section 6(a): (i)
        shall
        not apply to a Claim arising out of or based upon a Violation which occurs
        in
        reliance upon and in conformity with information furnished in writing to
        the
        Company by any Indemnified Person or underwriter for such Indemnified Person,
        or
        any of their legal counsel, expressly for use in connection with the preparation
        of such Registration Statement or any such amendment thereof or supplement
        thereto; (ii) shall not apply to amounts paid in settlement of any Claim
        if such
        settlement is effected without the prior written consent of the Company,
        which
        consent shall not be unreasonably withheld; and (iii) with respect to any
        preliminary prospectus, shall not inure to the benefit of any Indemnified
        Person
        if the untrue statement or omission of material fact contained in the
        preliminary prospectus was corrected on a timely basis in the prospectus,
        as
        then amended or supplemented. Such indemnity shall remain in full force and
        effect regardless of any investigation made by or on behalf of the Indemnified
        Person and shall survive the transfer of the Registrable Securities by the
        Investor pursuant to Section 9.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      (b)    In
        connection with any Registration Statement in which the Investor is
        participating, the Investor agrees severally and not jointly to indemnify,
        hold
        harmless and defend, to the same extent and in the same manner set forth
        in
        Section 6(a), the Company, each of its directors, each of its officers who
        signs
        the Registration Statement, each person, if any, who controls the Company
        within
        the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
        shareholder selling securities pursuant to the Registration Statement or
        any of
        its directors or officers or any person who controls such shareholder or
        underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
        and
        together with an Indemnified Person, an “Indemnified Party”), against any Claim
        to which any of them may become subject, under the 1933 Act, the 1934 Act
        or
        otherwise, insofar as such Claim arises out of or is based upon any Violation
        by
        such Investor, in each case to the extent (and only to the extent) that such
        Violation occurs in reliance upon and in conformity with written information
        furnished to the Company by such Investor, or its legal counsel, expressly
        for
        use in connection with such Registration Statement; and subject to Section
        6(c)
        such Investor will reimburse any legal or other expenses (promptly as such
        expenses are incurred and are due and payable) reasonably incurred by them
        in
        connection with investigating or defending any such Claim; provided, however,
        that the indemnity agreement contained in this Section 6(b) shall not apply
        to
        amounts paid in settlement of any Claim if such settlement is effected without
        the prior written consent of such Investor, which consent shall not be
        unreasonably withheld; provided, further, however, that the Investor shall
        be
        liable under this Agreement (including this Section 6(b) and Section 7) for
        only
        that amount as does not exceed the net proceeds to such Investor as a result
        of
        the sale of Registrable Securities pursuant to such Registration Statement.
        Such
        indemnity shall remain in full force and effect regardless of any investigation
        made by or on behalf of such Indemnified Party and shall survive the transfer
        of
        the Registrable Securities by the Investor pursuant to Section 9.
        Notwithstanding anything to the contrary contained herein, the indemnification
        agreement contained in this Section 6(b) with respect to any preliminary
        prospectus shall not inure to the benefit of any Indemnified Party if the
        untrue
        statement or omission of material fact contained in the preliminary prospectus
        was corrected on a timely basis in the prospectus, as then amended or
        supplemented.

       

      (c)    Promptly
        after receipt by an Indemnified Person or Indemnified Party under this Section
        6
        of notice of the commencement of any action (including any governmental action),
        such Indemnified Person or Indemnified Party shall, if a Claim in respect
        thereof is to be made against any indemnifying party under this Section 6,
        deliver to the indemnifying party a written notice of the commencement thereof,
        and the indemnifying party shall have the right to participate in, and, to
        the
        extent the indemnifying party so desires, jointly with any other indemnifying
        party similarly noticed, to assume control of the defense thereof with counsel
        mutually satisfactory to the indemnifying party and the Indemnified Person
        or
        the Indemnified Party, as the case may be; provided, however, that an
        Indemnified Person or Indemnified Party shall have the right to retain its
        own
        counsel with the fees and expenses to be paid by the indemnifying party,
        if, in
        the reasonable opinion of counsel retained by the indemnifying party, the
        representation by such counsel of the Indemnified Person or Indemnified Party
        and the indemnifying party would be inappropriate due to actual or potential
        differing interests between such Indemnified Person or Indemnified Party
        and any
        other party represented by such counsel in such proceeding. The indemnifying
        party shall pay for only one separate legal counsel for the Indemnified Persons
        or the Indemnified Parties, as applicable, and such legal counsel shall be
        selected by the investors holding a majority of the registrable securities
        included in the

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      Registration
        Statement to which the Claim relates (with the approval of a
        majority-in-interest of the investors), if the investors are entitled to
        indemnification hereunder, or the Company, if the Company is entitled to
        indemnification hereunder, as applicable. The failure to deliver written
        notice
        to the indemnifying party within a reasonable time of the commencement of
        any
        such action shall not relieve such indemnifying party of any liability to
        the
        Indemnified Person or Indemnified Party under this Section 6, except to the
        extent that the indemnifying party is actually prejudiced in its ability
        to
        defend such action. The indemnification required by this Section 6 shall
        be made
        by periodic payments of the amount thereof during the course of the
        investigation or defense, as such expense, loss, damage or liability is incurred
        and is due and payable.

       

      7.    CONTRIBUTION.

       

      To
        the
        extent any indemnification by an indemnifying party is prohibited or limited
        by
        law, the indemnifying party agrees to make the maximum contribution with
        respect
        to any amounts for which it would otherwise be liable under Section 6 to
        the
        fullest extent permitted by law; provided, however, that (i) no contribution
        shall be made under circumstances where the maker would not have been liable
        for
        indemnification under the fault standards set forth in Section 6, (ii) no
        seller
        of Registrable Securities guilty of fraudulent misrepresentation (within
        the
        meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
        from
        any seller of Registrable Securities who was not guilty of such fraudulent
        misrepresentation, and (iii) contribution (together with any indemnification
        or
        other obligations under this Agreement) by any seller of Registrable Securities
        shall be limited in amount to the net amount of proceeds received by such
        seller
        from the sale of such Registrable Securities.

       

      8.    REPORTS
        UNDER THE 1934 ACT.

       

      With
        a
        view to making available to the Investor the benefits of Rule 144 promulgated
        under the 1933 Act or any other similar rule or regulation of the SEC that
        may
        at any time permit the Investor to sell securities of the Company to the
        public
        without registration (“Rule 144”), the Company agrees to use its best efforts
        to:

       

      (a)    make
        and
        keep public information available, as those terms are understood and defined
        in
        Rule 144;

       

      (b)    file
        with
        the SEC in a timely manner all reports and other documents required of the
        Company under the 1933 Act and the 1934 Act so long as the Company remains
        subject to such requirements and the filing of such reports and other documents
        is required for the applicable provisions of Rule 144; and

       

      (c)    furnish
        to the Investor so long as such Investor owns Registrable Securities, promptly
        upon request, (i) a written statement by the Company that it has complied
        with
        the reporting requirements of Rule 144, the 1933 Act and the 1934 Act and
        (ii)
        such other information as may be reasonably requested to permit the Investor
        to
        sell such securities pursuant to Rule 144 without registration.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      9.    ASSIGNMENT
        OF REGISTRATION RIGHTS.

       

      The
        Investor may not assign its rights under this Agreement to any Person other
        than
        an Affiliate except with the prior written consent of the Company, which
        consent
        may be withheld in the Company’s sole discretion. Any assignment permitted under
        this Agreement shall be conditioned upon the following: (i) the Investor
        shall
        agree in writing with the transferee or assignee to assign such rights, and
        a
        copy of such agreement shall be furnished to the Company within a reasonable
        time after such assignment; (ii) the Company shall be, within a reasonable
        time
        after such transfer or assignment, furnished with written notice of (a) the
        name
        and address of such transferee or assignee, and (b) the securities with respect
        to which such registration rights are being transferred or assigned; (iii)
        following such transfer or assignment, the further disposition of such
        securities by the transferee or assignee shall be restricted under the 1933
        Act
        and applicable state securities laws; (iv) at or before the time the Company
        receives the written notice contemplated by clause (ii) of this sentence
        prior
        to or contemporaneous with such transfer or assignment, the transferee or
        assignee shall agree in writing with the Company to be bound by all of the
        provisions contained herein; (v) such assignment or transfer shall have been
        made in accordance with the applicable requirements of the Stock Purchase
        Agreement, and (vi) such transferee shall not be a “U.S. person” as that term
        defined in Regulation S promulgated under the 1933 Act.

       

      10.    AMENDMENT
        OF REGISTRATION RIGHTS.

       

      Provisions
        of this Agreement may be amended and the observance thereof may be waived
        (either generally or in a particular instance and either retroactively or
        prospectively), only with written consent of the Company and the investors
        who
        hold a majority of the registrable securities, except that any Person who
        acquires Registrable Securities may become a party to this Agreement by the
        Company and such Person signing a counterpart of this Agreement. Any amendment
        or waiver effected in accordance with this Section 10 shall be binding upon
        the
        Investor and the Company. In the event the Company becomes a subsidiary of
        any
        company whose Common Stock is publicly traded (“Holding Company”), and the
        Investor receives shares of Common Stock of such Holding Company, all
        obligations of the Company under this Agreement shall terminate upon such
        Holding Company assuming this Agreement, which may be done without the consent
        or approval of the Investor.

       

      11.    MISCELLANEOUS.

       

      (a)    A
        Person
        is deemed to be a holder of Registrable Securities whenever such Person owns
        of
        record such Registrable Securities. If the Company receives conflicting
        instructions, notices or elections from two or more Persons with respect
        to the
        same Registrable Securities, the Company shall act upon the basis of
        instructions, notice or election received from the registered owner of such
        Registrable Securities.

       

      (b)    Any
        notices required or permitted to be given under the terms hereof shall be
        sent
        by certified or registered mail (return receipt requested) or delivered
        personally or by courier (including a recognized overnight delivery service)
        or
        by facsimile and shall be effective five days after being placed in the mail,
        if
        mailed by regular United States mail, or upon receipt, if delivered personally
        or by courier (including a recognized overnight delivery service) or by
        facsimile, in each case addressed to a party. The addresses for such
        communications shall be:

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

       

      

       

      If
        to the
        Company:

       

      Michael
        Nouri

      Smart
        Online, Inc.

      Post
        Office Box 12794

      Research
        Triangle Park, NC 27709-2794

      Telephone:
        (919) 765-5000

      E-mail:
        dnouri@us.smartonline.com

       

      If
        to the
        Investor:

       

      to
        the
        address set forth in the Stock Purchase Agreement, or on the address set
        forth
        immediately below such Investor’s name on the agreement entered into pursuant to
        Section 9 of this Agreement.

       

      (c)    Failure
        of any party to exercise any right or remedy under this Agreement or otherwise,
        or delay by a party in exercising such right or remedy, shall not operate
        as a
        waiver thereof.

       

      (d)    THIS
        AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
        THE
        LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO AGREEMENTS MADE AND TO
        BE
        PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
        CONFLICT OF LAWS.

       

      (e)    In
        the
        event that any provision of this Agreement is invalid or unenforceable under
        any
        applicable statute or rule of law, then such provision shall be deemed
        inoperative to the extent that it may conflict therewith and shall be deemed
        modified to conform with such statute or rule of law. Any provision hereof
        which
        may prove invalid or unenforceable under any law shall not affect the validity
        or enforceability of any other provision hereof.

       

      (f)    This
        Agreement constitutes the entire agreement among the parties hereto with
        respect
        to the subject matter hereof and thereof. There are no restrictions, promises,
        warranties or undertakings, other than those set forth or referred to herein
        and
        therein. This Agreement supersedes all prior agreements and understandings
        among
        the parties hereto with respect to the subject matter hereof and
        thereof.

       

      (g)    Subject
        to the requirements of Section 9 hereof, this Agreement shall be binding
        upon
        and inure to the benefit of the parties and their successors and
        assigns.

       

      (h)    The
        headings in this Agreement are for convenience of reference only and shall
        not
        form part of, or affect the interpretation of, this Agreement.

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      (i)    This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original but all of which shall constitute one and the same agreement
        and shall become effective when counterparts have been signed by each party
        and
        delivered to the other party. This Agreement, once executed by a party, may
        be
        delivered to the other party hereto by facsimile transmission of a copy of
        this
        Agreement bearing the signature of the party so delivering this
        Agreement.

       

      (j)    Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      (k)    Except
        as
        otherwise provided herein, all consents and other determinations to be made
        by
        the Investors pursuant to this Agreement shall be made by the investors holding
        a majority of the registrable securities relating to the Registration Statement,
        determined as if all options, warrants and convertible securities then
        outstanding have been issued and/or converted into registrable
        securities.

       

      (l)    The
        Company and the Investor acknowledge that a breach by it of its obligations
        hereunder will cause irreparable harm by vitiating the intent and purpose
        of the
        transactions contemplated hereby. Accordingly, each party acknowledges that
        the
        remedy at law for breach of its obligations under this Agreement will be
        inadequate and agrees, in the event of a breach or threatened breach of any
        of
        the provisions under this Agreement, that the other parties shall be entitled,
        in addition to all other available remedies in law or in equity, and in addition
        to the penalties assessable herein, to an injunction or injunctions restraining,
        preventing or curing any breach of this Agreement and to enforce specifically
        the terms and provisions hereof, without the necessity of showing economic
        loss
        and without any bond or other security being required.

       

      (m)    The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent, and no rules of strict construction
        will
        be applied against any party.

       

      (n)    The
        Investor may not bring any legal or other action or proceeding for breach
        of
        this Agreement or arising out of any matter related to this Agreement, unless
        the investors who own a majority of the registrable securities relating to
        the
        Registration Statement consent to the bringing of such action. Any claim
        may be
        settled by the Company and the investors who own a majority of such registrable
        securities.

       

      [The
        Remainder of this Page is Blank.]

       

      

       

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

      IN
        WITNESS WHEREOF, the Company and the undersigned Investor have caused this
        Agreement to be duly executed as of the date on the first page of this
        Agreement.

      

      

      SMART
        ONLINE, INC.

      

      By:
        ______________________________

      Name:
        ___________________________

      Title:
        ____________________________

      

      

      

      _________________________________:

      

      

      _________________________________

      

      Address:_____________________________

      ____________________________________

      Telephone:___________________________

      Facsimile:____________________________

      Email:_______________________________

      Initial
        Number of Registrable Securities: _______

       

       

       

       

      14

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