STOCK PURCHASE WARRANT
----------------------
This STOCK PURCHASE WARRANT ("Warrant") is issued this 2nd day of
February, 1999, by MegaMarketing Corporation, a Georgia corporation (the
"Company"), to FLAG FINANCIAL CORPORATION ("Flag"), a Georgia corporation and
the sole shareholder of Citizens Bank, Vienna, Georgia (Flag 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 CITIZENS BANK
-------------------------
making a loan to the Company in an amount of Two Million Five Hundred Thousand
and no/100ths Dollars ($2,500,000.00) pursuant to the terms of a promissory note
of even date herewith (the "Note"), 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 Twenty-five Thousand (25,0000) shares of
the Company's common stock (the "Common Stock"). 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 February 28, 2004 (the "Expiration Date").
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 Four Dollars and Seventeen Cents ($4.17), subject to
adjustment as provided below.
3. Exercise.
--------
(a) This Warrant may be exercised by the Holder hereof (but only
on the conditions hereinafter set forth) in whole or in part, upon
delivery of written notice of intent to exercise to the Company in the
manner at the address of the Company set forth below, 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, (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. In the absence of an established public market for the Common
Stock, the Company's board of directors shall establish fair market value
in a commercially reasonable manner. 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 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 fewer 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
1
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.
(b) Notwithstanding Section 3(a), in no event shall Holder
be entitled to exercise this Warrant to the extent that after such
exercise, the sum of (1) the number of shares of Common Stock beneficially
owned and through Holder (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion
of the Warrant), and (2) the number of shares of Common Stock issuable
upon the exercise of the Warrant, would result in beneficial ownership by
Holder of more than 4.99% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934 (as amended), except as otherwise provided in clause (1) of
such sentence.
4. Covenants, Representations, 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 Powell,
Goldstein, Xxxxxx & Xxxxxx is acceptable counsel). Transfer of the Shares
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 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.
2
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,
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 represents that as of the date hereof the Company
has outstanding 6,719,425 shares of Common Stock and 141,120 shares of
Series A Convertible Preferred Stock (with each share of Series A
Convertible Preferred Stock being convertible into four shares of Common
Stock). The Company has no other equity securities outstanding.
(d) The Company shall provide Holder with the same rights to
participate as a selling shareholder in connection with public offerings
of the Common Stock as are enjoyed by the members of the Company's senior
management team.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereof,
-------------------
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. 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 securities of the Company, 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.
7. 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
3
Warrant shall receive, for the aggregate Exercise Price, 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 subsection 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 subsection, 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 Exercise Price, 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
subsection 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 subsection, 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.
8. 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 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;
4
(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, 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
twenty (20) 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 twenty (20) 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.
9. 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.
10. 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, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
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 two (2) 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: Citizens Bank
000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: J. Xxxxxx Xxxxxxx, Xx.
Telecopy No.: (000) 000-0000
with a copy to: Xxxxx X. Xxxxxxxx, Esq.
Powell, Goldstein, Xxxxxx & Xxxxxx
000 Xxxxxxxxx Xxxxxx
0
Xxxxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
The Address of Company is: MegaMarketing Corporation
0000 Xxxx Xxxxxxx Xxxx.
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxx
Telecopy No.: (000) 000-0000
6
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Telecopy No.: (000) 000-0000
11. 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.
12. 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.
13. Governing Law and Amendments. This Warrant shall be construed and
----------------------------
enforced under the laws of the State of Georgia 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.
14. Counterparts. This Warrant may be executed in any number of
------------
counterparts and by 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.
15. Usury Savings Provisions. This Warrant is issued in connection with
------------------------
the Note. It is intended that this Warrant not constitute interest on the Note.
If under any circumstances whatsoever, fulfillment of any obligation of this
Warrant, the Note, or any other agreement or document executed in connection
therewith, shall violate the lawful limit of any applicable usury statute 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 Note, or any other
document or instrument executed in connection with the Note, 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.
7
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
COMPANY:
-------
MEGAMARKETING CORPORATION,
a Georgia corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Title: Executive Vice President
------------------------
HOLDER:
------
FLAG FINANCIAL CORPORATION
By: /s/ Xxx Xxxxxxx
-------------------------------
Title: President/CEO
------------------------
8
