STOCK PURCHASE WARRANT
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This Warrant is issued this 3rd day of February, 1999, by MegaMarketing
Corporation, a Georgia corporation (the "Company"), to SIRROM INVESTMENTS, INC.
a Tennessee corporation (SIRROM INVESTMENTS, INC. and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. Issuance of Warrant; Term.
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(a) For and in consideration of SIRROM INVESTMENTS, INC. making an
additional loan to the Company in an amount of Two Million and no/100ths
Dollars ($2,000,000) pursuant to the terms of a secured promissory note of
even date herewith (the "Note") and related loan agreement dated March 6,
1998, as now or hereafter amended, (the "Loan Agreement"), and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase
157,207 shares of the Company's common stock (the "Common Stock"), which
the Company represents equals 2% of the capital stock of the Company on the
date hereof, calculated on a fully diluted basis ("Base Amount") including
the Base Amount, provided that in the event that the indebtedness evidenced
by the Note is outstanding on the following dates, the Base Amount shall be
increased to the corresponding number set forth below (the "Outstanding
Debt Rachets"):
Date Base Amount
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February 2, 2001 320,964 shares of Common Stock, which
the Company represents equals 4% of the
capital stock of the Company on the
date hereof calculated on a fully
diluted basis including the Base
Amount.
February 2, 2002 491,690 shares of Common Stock,
which the Company represents equals 6%
of the capital stock of the Company on
the date hereof calculated on a fully
diluted basis including the Base
Amount.
February 2, 2003 669,839 shares of Common Stock, which the
Company represents equals 8% of the
capital stock of the Company on the
date hereof calculated on a fully
diluted basis including the Base
Amount.
and further provided that if the Company repays the the Notes in full by
July 31, 1999, the initial Base Amount shall be decreased to 77,810 shares
of Common Stock, which the
Company represents equals 1% of the capital stock of the Company on the
date hereof calculated on a fully diluted basis including the Base Amount.
As disclosed in a schedule of shareholders provided to Holder, the
foregoing calculation is based upon the assumption that certain outstanding
shares currently in escrow will be cancelled according to a contractual
arrangement. The actual cancellation cannot occur until the Company's
audited financials for 1998 are available. If the contractual adjustment is
other than as described on the referenced schedule, the Base Amount and the
other amounts of shares of Common Stock specified above shall be adjusted
accordingly.
(b) The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Shares." This Warrant shall be
exercisable at any time and from time to time from the date hereof until
April 30, 2003. For purposes of this Warrant the term "fully diluted
basis" shall be determined in accordance with generally accepted accounting
principles as of the date hereof.
2. Exercise Price. The exercise price (the "Exercise Price") per share
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for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. Exercise. This Warrant may be exercised by the Holder hereof (but
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only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The
Exercise Price shall be payable, at the option of the Holder (pursuant to
documentation reasonably satisfactory to the Company), (i) by certified or bank
check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant having a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant (or instruct
its transfer agent to do so) a certificate or certificates for the total number
of whole Shares for which this Warrant is being exercised in such names and
denominations as are requested by such Holder. If this Warrant shall be
exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to this Warrant. The Company covenants and agrees
that it will pay when due any and all state and federal issue taxes which may be
payable in respect of the issuance of this Warrant or the issuance of any Shares
upon exercise of this Warrant.
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4. Covenants and Conditions. The above provisions are subject to the
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following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be pledged, hypothecated, sold, made subject to a security interest, or
otherwise transferred without (i) an effective registration statement for
such Warrant under the Securities Act and such applicable Blue Sky Laws, or
(ii) an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is not
required under the Securities Act or under any applicable Blue Sky Laws
(the Company hereby acknowledges that Bass, ▇▇▇▇▇ & ▇▇▇▇ is acceptable
counsel). Transfer of the shares issued upon the exercise of this Warrant
shall be restricted in the same manner and to the same extent as the
Warrant and the certificates representing such Shares shall bear
substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights
imposed by the Company, if any, with respect thereto or to the issuance
thereof. The Company shall at all times reserve and keep available for
issuance upon the exercise of this Warrant such number of authorized but
unissued shares of Common Stock as will be sufficient to permit the
exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell or issue
any shares of the Company's capital stock at a price below the fair market
value of such shares, without the prior written consent of the Holder
hereof. In the event that the Company sells shares of the Company's
capital stock in violation of this Section 4(c)
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(exclusive of any stock options permitted under Section 17 hereof), the
number of shares issuable upon exercise of this Warrant shall be equal to
the product obtained by multiplying the number of shares issuable pursuant
to this Warrant prior to such sale by the quotient obtained by dividing (i)
the fair market value of the shares issued in violation of this Section
4(c) by (ii) the price at which such shares were sold.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereof,
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this Warrant may not be transferred, in whole or in part, to any person or
business entity without the prior written consent of the Company provided that
the Holder may transfer this Warrant to any affiliate of Holder, to any lender
of the Holder or any affiliate of Holder or in connection with the sale of all
or substantially all of the assets and/or stock of Holder or any affiliate of
Holder, any such transfer to be accomplished by presentation of the Warrant to
the Company with written instructions for such transfer and other documentation
reasonably required by the Company in order to comply with applicable securities
laws. Upon such presentation for transfer, the Company shall promptly execute
and deliver a new Warrant or Warrants in the form hereof in the name of the
assignee or assignees and in the denominations specified in such instructions.
The Company shall pay all expenses incurred by it in connection with the
preparation, issuance and delivery of Warrants under this Section.
6. Warrant Holder Not Shareholder; Rights Offering; Preemptive Rights;
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Preference Rights. Except as otherwise provided herein, this Warrant does not
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confer upon the Holder, as such, any right whatsoever as a shareholder of the
Company. Notwithstanding the foregoing, if the Company should offer to all of
the Company's shareholders the right to purchase any stock of the Company (other
than options to purchase stock granted to employees of the Company or pursuant
to the Company's stock option plans) then all shares of Common Stock that are
subject to this Warrant shall be deemed to be outstanding and owned by the
Holder and the Holder shall be entitled to participate in such rights offering.
The Company shall not grant any preemptive rights with respect to any of its
capital stock without the prior written consent of the Holder (which consent
shall not be unreasonably withheld, conditioned or delayed). The Company shall
not issue any securities which entitle the holder thereof to obtain any
preference over holders of Common Stock upon the dissolution, liquidation,
winding-up, sale, merger, or reorganization of the Company without the prior
written consent of the Holder (which consent shall not be unreasonably withheld,
conditioned or delayed), unless such rights are also granted to Holder.
7. Observation Rights. The Holder of this Warrant shall (a) receive
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notice of and be entitled to attend or may send a representative to attend all
meetings of the Company's Board of Directors in a non-voting observation
capacity and (b) receive copies of all correspondence, notices, packages and
documents and other information provided to members of the Company's Board of
Directors (including actions taken or to be taken by the Board of Directors on
written consent) from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full. Holder acknowledges that the
relationship between it and the Company places Holder in a position to learn
confidential information, both written and oral, about the Company's business
operations, financial condition, assets and affairs. For purposes of this
agreement, all such information to be provided, together with any other
information regarding the Company that has already been provided to Holder or
its representative and employees, is
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hereinafter collectively referred to as the "Sensitive Material." Holder
acknowledges that it is aware, and that it will advise its officers, directors,
employees, advisors and other representatives that federal and state securities
laws prohibit any person who has received from an issuer material, non-public
information about the issuer and matters which are the subject of this Agreement
from purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
Neither the Company nor its affiliates nor their representatives, agents,
employees or other related persons will have any liability to Holder, its
employees, agents or representatives or any third parties resulting from the use
of the Sensitive Material by Holder which Holder acknowledges to be the
Company's property, to itself and agrees not to use, reveal, transfer, copy or
disclose such Sensitive Material, directly or indirectly, to any other person
for any purpose without the prior written consent of Company. Holder agrees to
execute any additional confidentiality agreement reasonably required by the
Company in connection with any Sensitive Material.
8. Adjustment Upon Changes in Stock.
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(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if this
Warrant had been exercised immediately prior to such stock split, stock
dividend, recapitalization, combination of shares, or other similar event.
If any adjustment under this Section 8(a) would create a fractional share
of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares subject
to this Warrant shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant to this
Section 8(a), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated. For purposes hereof, the granting of stock or options pursuant
to a merger, asset acquisition, option agreement or other transaction where
all of the shareholders of the Company do not participate shall not be
considered a stock split, stock dividend recapitalization, combination of
shares of the Company, or other similar event giving rise to an adjustment.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event where
all of the shareholders of the Company participate, occurring after the
date hereof, as a result of which substantially all shares of Common Stock
shall be changed into the same or a different number of shares of the same
or another class or classes of securities of the Company or another entity,
then the Holder exercising this Warrant shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of shares
which such Holder would have received if this Warrant had been exercised
immediately prior to such merger, consolidation, exchange of shares,
separation, reorganization or liquidation, or other
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similar event. If any adjustment under this Section 8(b) would create a
fractional share of Common Stock or a right to acquire a fractional share
of Common Stock, such fractional share shall be disregarded and the number
of shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an
adjustment pursuant to this Section 8(b), the Company shall forthwith
notify the Holder or Holders of this Warrant of such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
9. Put Agreement.
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(a) The Company hereby irrevocably grants and issues to Holder the
right and option to sell to the Company (the "Put") this Warrant (to the
extent not previously exercised) for a period of 30 days immediately prior
to the expiration thereof, at a purchase price (the "Purchase Price") equal
to the Fair Market Value (as hereinafter defined) of the shares of Common
Stock issuable to Holder upon exercise of this Warrant; provided, however,
that the Put shall terminate upon the closing of a Qualified Public
Offering as defined in Section 12(c).
(b) The Company shall pay to the Holder, in cash or certified or
cashier's check, the Purchase Price in exchange for the delivery to the
Company of this Warrant within thirty (30) days of the receipt of written
notice, addressed as set forth in Section 3 hereto, from the Holder of its
intention to exercise the Put and all other documentation reasonably
required by the Company in connection therewith in order for the Company to
comply with applicable securities laws.
(c) The Fair Market Value of the shares of Common Stock of the Company
issuable pursuant to this Warrant shall be determined as follows:
(i) If after an initial public offering of the Common Stock, the
average of the closing bid and ask prices for the Common Stock (as
quoted on a national exchange) shall be the fair market value. If
prior to a public offering, the Company and the Holder shall each
appoint an independent, experienced appraiser who is a member of a
recognized professional association of business appraisers. The two
appraisers shall determine the value of the shares of Common Stock
which would be issued upon the exercise of the Warrant, taking into
consideration that such shares would constitute a minority interest,
and would lack liquidity, and further assuming that the sale would be
between a willing buyer and a willing seller, both of whom have full
knowledge of the financial and other affairs of the Company, and
neither of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more than 10%
more than the lowest of the appraisals, the Fair Market Value shall be
the average of the two appraisals. If the highest of the two
appraisals is 10% or more than the lowest of the two appraisals, then
a third appraiser shall be appointed by the two appraisers, and if
they cannot agree on a third appraiser, the American Arbitration
Association shall appoint the third appraiser. The third appraiser,
regardless of
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who appoints him or her, shall have the same qualifications as the
first two appraisers.
(iii) The Fair Market Value after the appointment of the third
appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid one-
half by the Company and one-half by the Holder.
10. Registration.
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(a) The Company and the holders of the Shares agree that if at any
time after the date hereof the Company shall propose to file a registration
statement with respect to any of its Common Stock on a form suitable for a
public offering (excluding any registrations pursuant to forms S-4 and S-8
or any successor forms thereof), it will give notice in writing to such
effect to the registered holder(s) of the Shares at least thirty (30) days
prior to such filing, and, at the written request of any such registered
holder, made within ten (10) days after the receipt of such notice, will
include therein at the Company's cost and expense (including the reasonable
fees and expenses of one counsel to such holder(s), but excluding
underwriting discounts, commissions and filing fees attributable to the
Shares included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered by the
Company is underwritten and if the representative of the underwriters
certifies in writing that the inclusion therein of the Shares would
materially and adversely affect the sale of the securities to be sold by
the Company thereunder, then the Company shall be required to include in
the offering only that number of securities, including the Shares, which
the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro
rata among all selling shareholders according to the total amount of
securities entitled to be included therein owned by each selling
shareholder. The obligations of the Company under this Section 10 shall
terminate with respect to a Holder of Shares when such Shares become
eligible for resale in accordance with Rule 144 under the Securities Act of
1933 within a three month period without restrictions as to volume.
(b) Whenever the Company undertakes to effect the registration of any
of the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement covering such Shares and
use its best efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as possible and
to keep such registration effective until the earlier of (A) the date
when all Shares covered by the registration statement have been sold
or (B) two hundred seventy (270) days from the effective date of the
registration statement; provided, that before filing a registration
statement or prospectus or any amendment or supplements thereto, the
Company will furnish to each Holder of Shares covered by such
registration
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statement and the underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such person shall
specifically request exhibits), which documents will be subject to the
review of such Holders and underwriters, and the Company will not file
such registration statement or any amendment thereto or any prospectus
or any supplement thereto (including any documents incorporated by
reference therein) with the Commission if (A) the underwriters, if
any, shall reasonably object to such filing or (B) if information in
such registration statement or prospectus concerning a particular
selling Holder has changed and such Holder or the underwriters, if
any, shall reasonably object. If a Holder objects to the filing of the
registration statement (which objection must be delivered to the
Company in writing), the Company may remove such Holder's Shares from
the offering and proceed to file with no further obligation to such
Holder hereunder.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the
period referred to in Section 10(b)(i) and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement, and cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to
Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of
such registration statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as they
may reasonably request in order to facilitate the disposition of the
Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Shares owned by
such Holder, in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a general
consent to service of process in any such states or jurisdictions.
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(v) Promptly notify each selling Holder of the happening of any
event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and
take all such other actions as the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Shares (including, without limitation, effecting a stock split or a
combination of shares).
(viii) Make available for inspection by any selling Holder or
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the officers, directors, employees and independent
accountants of the Company to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the underwriters,
if any, of the following events and (if requested by any such person)
confirm such notification in writing: (A) the filing of the
prospectus or any prospectus supplement and the registration statement
and any amendment or post-effective amendment thereto and, with
respect to the registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such documents, (B)
any requests by the Commission for amendments or supplements to the
registration statement or the prospectus or for additional
information, (C) the issuance or threat of issuance by the Commission
of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, and
(D) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such
order, if entered.
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(xi) Cooperate with the selling Holder(s) and the underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing the Shares to be sold and not bearing any
restrictive legends, and enable such Shares to be in such lots and
registered in such names as the underwriters may request at least two
(2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than
the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) and the underwriters, if any, with respect to
the Shares and the registration statement as are customarily made by
issuers to selling Shareholders in primary underwritten offerings; (B)
use its best efforts to obtain "cold comfort" letters and updates
thereof from the Company's independent certified public accountants
addressed to the selling Holders and the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in
connection with primary underwritten offerings; (C) deliver such
documents and certificates as may be reasonably requested (1) by the
holders of a majority of the Shares being sold, and (2) by the
underwriters, if any, to evidence compliance with clause (A) above and
with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company; and (D) obtain
opinions of counsel to the Company and updates thereof (which counsel
and which opinions shall be reasonably satisfactory to the
underwriters, if any), covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by the selling Holders and underwriters or
their counsel. Such counsel shall also state that no facts have come
to the attention of such counsel which cause them to believe that such
registration statement, the prospectus contained therein, or any
amendment or supplement thereto, as of their respective effective or
issue dates, contains any untrue statement of any material fact or
omits to state any material fact necessary to make the statements
therein not misleading (except that no statement need be made with
respect to any financial statements, notes thereto or other financial
data or other expertized material contained therein). If for any
reason the Company's counsel is unable to give such opinion, the
Company shall so notify the Holders of the Shares and shall use its
best efforts to remove expeditiously all impediments to the rendering
of such opinion.
(xiv) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which the Shares are sold to
underwriters in a firm or best efforts underwritten offering, or (B)
if not sold to underwriters in
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such an offering, beginning with the first month of the first fiscal
quarter of the Company commencing after the effective date of the
registration statement, which statements shall cover such twelve-month
periods.
(c) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holders pursuant to this Warrant
without the prior written consent of the Holder(s) which shall not be
unreasonably withheld or delayed.
(d) The Company's obligations under Section 10(a) above with respect
to each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement. If
any registration statement including any of the Shares is filed, then the
Company shall indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter within the
meaning of the Securities Act) from any loss, claim, damage or liability
arising out of, based upon or in any way relating to any untrue statement
of a material fact contained in such registration statement or any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such registration
statement; and such holder shall indemnify the Company (and each of its
officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for the Company and each person, if
any, who controls such underwriter within the meaning of the Securities
Act) and each other such holder against any loss, claim, damage or
liability arising from any such statement or omission which was made in
reliance upon information furnished in writing to the Company by such
holder of the Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed
to be issued and outstanding.
11. Certain Notices. In case at any time the Company shall propose to:
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(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
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(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially
all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up the
affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least ten
(10) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least ten (10) days' prior
written notice of the date when the same shall take place. Any notice
required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
12. Rights of Co-Sale. Prior to the completion of a Qualified Public
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Offering (as hereinafter defined) the following shall apply:
(a) Co-Sale Right. Neither ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, nor
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▇▇▇▇ ▇. ▇▇▇▇▇ (individually a "Selling Shareholder" and collectively the
"Selling Shareholders") shall enter into any transaction that would result
in the sale by him of any Common Stock now or hereafter owned by him,
unless prior to such sale the Selling Shareholder shall give notice to
Holder of his intention to effect such sale in order that Holder may
exercise its rights under this Section 12 as hereinafter described. Such
notice shall set forth (i) the number of shares to be sold by the Selling
Shareholder, (ii) the principal terms of the sale, including the price at
which the shares are intended to be sold, and (iii) an offer by the Selling
Shareholder to use his best efforts to cause to be included with the shares
to be sold by him in the sale, on a share-by-share basis and on the same
terms and conditions, the Shares issuable or issued to Holder pursuant this
Warrant.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such offer
--------------------------
in writing within a period of ten (10) days from the date of receipt of the
notice, then the Selling Shareholder shall thereafter be free for a period
of ninety (90) days to sell the number of shares specified in such notice,
at a price no greater than the price set forth in such notice and on
otherwise no more favorable terms to the Selling Shareholder than as set
forth in such notice, without any further obligation to Holder in
connection with such sale. In the event that the Selling Shareholder fails
to consummate such sale within such ninety-day period, the shares specified
in such notice shall continue to be subject to this Section.
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(c) Acceptance of Co-Sale Offer. If Holder accepts such offer in
---------------------------
writing within ten (10) day period, such acceptance shall be irrevocable
unless the Selling Shareholder shall be unable to cause to be included in
his sale the number of Shares of stock held by Holder and set forth in the
written acceptance. In that event, the Selling Shareholder and Holder
shall participate in the sale pro rata, with the Selling Shareholder and
Holder each selling half the total number of such shares to be sold in the
sale. For purposes of this Article 12, a "Qualified Public Offering" shall
be deemed to have occurred if the Company has received net proceeds of
$15,000,000 and its shares are traded on Nasdaq or a United States
securities exchange.
13. Governing Law. This warrant shall be governed by the laws of the
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State of Tennessee applicable to agreements made entirely within the State.
14. Severability. If any provision(s) of this Warrant or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
15. Counterparts. This Warrant may be executed in any number of
------------
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
16. Jurisdiction and Venue. The Company hereby consents to the
----------------------
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any such courts.
17. Stock Options. The Company may grant stock options to employees
--------------
representing up to 20% of the common stock of the Company, provided such options
granted after the date hereof shall have an exercise price equal to or greater
than the fair market value of the shares issuable thereunder on the date of
issuance ("Fair Exercise Price"). Any stock options to employees granted after
the date hereof with an exercise price below the Fair Exercise Price for such
options or representing in excess of 20% of the Common Stock of the Company
shall be subject to the anti-dilution provisions in Section 4(c).
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
MEGAMARKETING CORPORATION, a
Georgia corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Title: ▇▇▇▇ ▇. ▇▇▇▇▇
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SIRROM INVESTMENTS, INC. a
Tennessee corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
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The undersigned Shareholders join in the execution of this Warrant for the
purposes of acknowledging and agreeing to be bound by Section 12 hereof.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇
14
