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EXHIBIT 10.13
STOCK PURCHASE WARRANT
This Warrant is issued this 18 day of December, 1997, by TOWNE
SERVICES, INC., 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. For and in consideration of Sirrom
Investments, Inc. making a loan to the Company in an amount of One Million Five
Hundred Thousand and no/100ths Dollars ($1,500,000) pursuant to the terms of a
secured promissory note of even date herewith (the "Note") and related loan
agreement of even date herewith (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 308,982
shares of the Company's common stock (the "Common Stock"), which the Company
represents to equal 2% of the shares of capital stock outstanding on the date
hereof, calculated on a fully diluted basis and assuming exercise of this
Warrant ("Base Amount"), provided that in the event that any portion of 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:
DATE BASE AMOUNT
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January 1, 2000 549,124 shares, which the Company
represents to equal 3.5% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this Warrant
January 1, 2001 796,849 shares, which the Company
represents to equal 5.0% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this Warrant
January 1, 2002 1,052,522 shares, which the Company
represents to equal 6.5% of the shares of
the Company's capital stock outstanding on
the date hereof calculated on a fully
diluted basis after exercise of this Warrant
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 January 31, 2003. In
the event that the Company does not receive an additional $1.5
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million in equity capital by June 30, 1998, the Base Amount and the
corresponding ratchets for the years 2000, 2001, and 2002 will be increased to
5.0%, 6.5%, 8.0% and 9.5%, respectively.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but
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: 0000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxx
00000 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
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 where the Shares subject to the portion of this Warrant that is
surrendered have 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.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
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 sold 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 Xxxxxxxx & Xxxxxxxx, P.C. is acceptable counsel to render such
opinion). 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:
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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 AND 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 AND 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
any shares of the Company's capital stock at a price per share below
the fair market value of such shares, without the prior written consent
of the Holder hereof. In the absence of an established public market
for the shares of stock sold by the Company, fair market value shall be
established by the Company's board of directors in a commercially
reasonable manner. The basis for determination shall be provided in
writing to the Holder hereof. In the event that the Company sells
shares of the Company's capital stock in violation of this Section
4(c), 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,
this Warrant may not be transferred, in whole or in part, to any person or
business entity without prior written consent of the Company, provided that the
Holder may transfer this Warrant to an affiliate, its lenders, or in connection
with the sale of a substantial part of its assets, any such permitted transfer
to be accomplished by presentation of the Warrant to the Company with written
instructions for such
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transfer (and other documentation reasonably required by the Company). 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.
Except as otherwise provided herein, this Warrant does not 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 to its current shareholders
without the prior written consent of the Holder which shall not be unreasonably
withheld or delayed unless such rights are also granted to Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive 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
shall receive a copy of all correspondence and information delivered to the
Company's Board of Directors, 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 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 or 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 required by the Company in connection with any Sensitive Material.
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8. ADJUSTMENT UPON CHANGES IN STOCK.
(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.
(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, occurring after the date hereof, as a result of which
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, or the holders of Common Stock are
entitled to receive cash or other property, then the Holder exercising
this Warrant shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares, cash or other
property 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 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.
(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 after
maturity of the Note, 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.
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(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.
(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,
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 higher of the two appraisals is not
more than 10% more than the lower of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the higher of the two appraisals is 10% or more than the lower
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 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.
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10. REGISTRATION.
(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 S-3 or similar short form registration statement, 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 a single 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
paragraph 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.
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(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 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
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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.
(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
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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.
(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
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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 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 those granted to Holders pursuant to this
Warrant without the prior written consent of the Holder(s).
(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.
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11. CERTAIN NOTICES. In case at any time the Company shall propose
to:
(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 all of its
Common Stock any additional shares of stock in any class or other
rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell of
all or substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind
up of the affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or
securities convertible into its capital stock;
then, where notice to or the consent of the Company's Shareholders is
required, 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) business 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) business 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.
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12. RIGHTS OF CO-SALE. Prior to the completion of an Qualified
Public Offering of the Company's Common Stock, the following shall apply:
(a) Co-Sale Right. None of Xxxx Xxxxxxx, Xxxxx Xxxxxx or Xxxxx
Xxxxxx (the "Management Shareholders") shall enter into any transaction
that would result in the sale by it of any Common Stock now or
hereafter owned by it, unless prior to such sale such Management
Shareholder shall give notice to Holder of its 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 such Management 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 such Management Shareholder to use
his best efforts to cause to be included with the shares to be sold by
it 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 such Management 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 such Management Shareholder than as set forth in such notice,
without any further obligation to Holder in connection with such sale.
In the event that such Management 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.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer
in writing within ten (10) day period, such acceptance shall be
irrevocable unless such Management 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, such Management
Shareholder and Holder shall participate in the sale equally, with such
Management Shareholder and Holder each selling half the total number of
such shares to be sold in the sale. For the purposes of this Article
12, a "Qualified Public Offering" shall be deemed to have occurred if
the Company has received gross proceeds of $15.0 million and its shares
are traded on Nasdaq or a United States securities exchange.
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and
section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set
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forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery or
telecopy or three (3) business days after the date of mailing (or the next
business day after delivery to such courier service), as the case may be, shall
be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Sirrom Investments, Inc.
Xxxxx 000
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Telecopy No. 615/726-1208
with a copy to: Xxxxxxxx & Xxxxxxxx
Suite 200
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx-Xxxx Xxxxxxxx, Esq.
Telecopy No. 615/256-9958
The Address of Company is: Towne Services, Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer and
Chief Financial Officer
Telecopy No. 770/734-2682
with a copy to: Nelson, Mullins, Xxxxx & Xxxxxxxxxxx, L.L.P.
First Union Plaza
000 Xxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy No. 404/817-6224
15. SEVERABILITY. If any provisions(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.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
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17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed
and enforced under the laws of the State of Tennessee applicable to contracts to
be wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
18. 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.
19. JURISDICTION AND VENUE. The Company and each Holder 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 of such courts.
20. EQUITY PARTICIPATION. This Warrant is issued in connection
with the Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. ss.00-00-000, et seq. and that equity
participation be permitted under said statutes and not constitute interest on
the Note. If under any circumstances whatsoever, fulfillment of any obligation
of this Warrant, the Loan Agreement, or any other agreement or document executed
in connection with the Loan Agreement, shall violate the lawful limit of any
applicable usury statue or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled shall be
reduced to such lawful limit, such that in no event shall there occur, under
this Warrant, the Loan Agreement, or any other document or instrument executed
in connection with the Loan Agreement, any violation of such lawful limit, but
such obligation shall be fulfilled to the lawful limit. If any sum is collected
in excess of the lawful limit, such excess shall be applied to reduce the
principal amount of the Note.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
COMPANY: TOWNE SERVICES, INC.,
a Georgia corporation
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Title: Chief Executive Officer
---------------------------
HOLDER: SIRROM INVESTMENTS, INC.,
a Tennessee corporation
By: /s/ Xxxxx Xxxxxx
--------------------------------
Title: Vice President
---------------------------
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Warrant to be executed as of the date first above written for the purpose of
agreeing to the terms and conditions of Section 12 hereof.
MANAGEMENT SHAREHOLDERS: /s/ Xxxx Xxxxxxx
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XXXX XXXXXXX
/s/ Xxxxx Xxxxxx
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XXXXX XXXXXX
/s/ Xxxxx Xxxxxx
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XXXXX XXXXXX