EXHIBIT 10.2
STANDSTILL AGREEMENT
BETWEEN
MARKETING SERVICES GROUP, INC.
AND
RGC INTERNATIONAL INVESTORS, LDC
DATED AS OF FEBRUARY 19, 2002
This Standstill Agreement (this "Agreement"), dated as of February 19,
2002 between Marketing Services Group, Inc., a Nevada corporation (the
"Company"), and RGC International Investors, LDC, a Cayman Islands limited
duration company ("RGC").
Whereas, RGC owns 14,100.17274 shares of Series E Convertible Preferred
Stock of the Company, stated value $1,000 per share (the "Series E Preferred
Stock"); and
Whereas, the Company and RGC agree that it is in their mutual interests to
enter into this Agreement as hereinafter described:
Now, therefore, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto covenant and agree as
follows:
1. REPRESENTATIONS OF RGC. RGC represents and warrants to the Company as
follows:
(a) RGC beneficially owns 114,100.17274 shares of Series E Preferred
Stock as of the date of this Agreement, and does not have a right to vote
or direct the vote of any securities of the Company other than to the
extent that shares of the Company's common stock are issued to and held by
RGC upon conversion of shares of Series E Preferred Stock in accordance
with the terms of the Certificate of Designations (as defined below).
(b) On February 18, 2000, RGC purchased 15,000 shares of Series E
Preferred Stock and 122,590 Warrants (as adjusted to reflect the Company's
1 for 6 reverse stock split which became effective on October 15, 2001).
(c) RGC has full and complete authority to enter into this Agreement
and to perform its obligations hereunder. This Agreement constitutes a
valid and binding agreement of RGC enforceable in accordance with its
terms.
(d) There are no arrangements, agreements, or understandings between
RGC and any other person regarding ownership or voting of securities of
the Company.
2. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants to
RGC as follows:
(a) The Company has full and complete authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement
constitutes a valid and binding agreement of the Company enforceable in
accordance with its terms.
(b) The Company has sufficient capital available to fulfill its
payment obligations set forth in Section 4(a) herein.
(c) The execution, delivery and performance of this Agreement by the
Company will not conflict with or result in a breach, violation or default
under the Company's Certificate of Incorporation or Bylaws or any
agreement, contract or instrument to which the Company is a party.
(d) The Company is not required to obtain any consent, authorization
or order of any court, governmental authority, regulatory agency or third
parties in order to execute, deliver or perform its obligations under this
Agreement.
3. OBLIGATIONS OF RGC. (a) During the term of this Agreement (as defined
in Paragraph 5 below), RGC hereby agrees that it will not, without the prior
consent of the board of directors of the Company (the "Board of Directors")
(specifically expressed in a resolution adopted by a majority of the Board of
Directors):
(i) acquire, or permit any affiliate (as such term is defined by
Rule 12b-2 of Regulation 12B under the Securities Exchange Act of
1934, as amended (the "Act")) of RGC acting under RGC's direction or
control to acquire (other than through stock splits or stock
dividends), directly or indirectly or in conjunction with or through
any other person, by purchase or otherwise, beneficial ownership of
any additional securities of the Company;
(ii) make any short sales, enter into any hedging, derivative or
similar transactions regarding securities of the Company;
(iii) directly or indirectly or through any other person, solicit
or permit any affiliate of RGC acting under RGC's direction or control
to solicit proxies under any circumstance; or become a "participant,"
or permit any affiliate of RGC to become a "participant," in any
"election contest" relating to the election of directors of the
Company (as such terms are used in Rule 14a-11 of Regulation 14A under
the Act);
(iv) deposit, or permit any affiliate of RGC acting under RGC's
direction or control to deposit securities of the Company in a voting
trust, or subject, or permit any affiliate of RGC to subject, any
securities of the Company to a voting or similar agreement;
(v) directly or indirectly or through or in conjunction with any
other person, engage in a tender or exchange offer for the securities
of the Company made by any other person or entity;
(vi) take any action alone or in concert with any other person to
acquire or affect the control of the Company or, directly or
indirectly, participate in, or encourage the formation of, any group
seeking to obtain or take control of the Company;
(vii) except as otherwise provided herein, sell, transfer, pledge
or otherwise dispose of or encumber any securities of the Company; or
(viii) publicly announce an intention to do any of the actions
restricted or prohibited under clauses (i) through (vii) of this
Section 3(a).
Notwithstanding anything in this Agreement to the contrary, RGC shall not
be prohibited or restricted from selling, assigning or transferring any shares
of Series E Preferred Stock; provided that the buyer, assignee or transferee
agrees to be bound by the terms of this Agreement.
(b) RGC hereby agrees not to exercise such rights as it may have to
invoke a Trading Market Redemption as described in Article V.B of the
Certificate of Designations, Preferences, and Rights of Series E
Convertible Preferred Stock of The Company (the "Certificate of
Designations")) as a result of the Company's failure to obtain Stockholder
Approval (as defined in Article VI.A(b) of the Certificate of
Designations; provided, however, that such agreement shall expire, and RGC
shall regain all of its rights under the Certificate of Designations as it
had prior to such agreement with respect to a Trading Market Redemption
upon the earlier of (i) September 17, 2002, in the event the Company has
not obtained Stockholder Approval by that date, or (ii) the occurrence of
an event described in Section 5(ii)(y) and (z) below.
4. OBLIGATIONS OF THE COMPANY. The Company hereby agrees:
(a) to repurchase 2,500 shares of Series E Preferred Stock on the date
of execution of this Agreement at a purchase price of $2,500,000 (the
"Payment"); and
(b) to file with the Securities and Exchange Commission, on or before
July 31, 2002 a preliminary proxy statement mutually acceptable to both
parties pursuant to Regulation 14A of the Act that seeks to obtain and
recommend Stockholder Approval no later than September 17, 2002.
5. TERM. The term of this Agreement shall commence upon the occurrence of
each of the following: (a) the receipt by RGC of the Payment and (b) the
execution by the Company and Castle Creek Technology Partners, LLC of a
standstill agreement in the form of this Agreement, and terminate on July 31,
2002; provided, however, (i) this Agreement may be terminated by the Company
upon a breach by RGC of Section 3(a) hereof, and (ii) this Agreement may be
terminated by RGC upon (x) a breach by the Company of any of its obligations
hereunder (including Section 7(a)), (y) a material adverse change in the
business, operations, assets, financial condition or prospects of the Company or
its subsidiaries, or (z) the public announcement of the sale, conveyance or
disposition of all or substantially all of the assets of the Company, the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting power of the Company is disposed of, or the
consolidation, merger or other business combination of the Company with or into
any other entity or entities when the Company is not the survivor. Upon any such
termination, the parties shall have no further obligations under this Agreement.
6. SPECIFIC ENFORCEMENT. The parties hereto recognize and agree that, in
the event that any of the terms of paragraphs 3 and 4 were not performed in
accordance with their specific terms or were otherwise breached, immediate
irreparable injury would be caused, for which there is no adequate remedy at
law. It is accordingly agreed that in the event of a failure by any party to
perform its obligations hereunder, any other party shall be entitled to specific
performance through injunctive relief to prevent breaches of the terms of such
paragraphs and to specifically enforce such paragraphs and the terms and
provisions thereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, without the posting of any
bond or other security, in addition to any other remedy to which the party may
be entitled, at law or in equity.
7. MISCELLANEOUS.
(a) STANDSTILL AGREEMENT WITH CASTLE CREEK TECHNOLOGY PARTNERS LLC.
The Company hereby acknowledges that this Agreement confers economic
benefits upon RGC that are not materially less beneficial as the Company
has conferred upon Castle Creek Technology Partners LLC pursuant to a
standstill agreement dated of even date herewith ("CCP Standstill"). The
Company further acknowledges that the CCP Standstill contains provisions
which are not materially different from this Agreement with respect to
events of termination.
(b) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such which may be hereafter declared invalid,
void or unenforceable.
(c) EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the successors and
assigns, and transferees by operation of law, of the parties hereto or
otherwise bound hereby, whether or not any such person is a party hereto.
Except as otherwise expressly provided for herein, this Agreement shall
not inure to the benefit of, be enforceable by or create any right or
cause of action in any person, including without limitation any
shareholder of the Company, other than the parties hereto.
(e) SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. All
representations, warranties, covenants and agreements made herein shall
survive the execution and delivery of this Agreement.
(f) ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties hereto with respect to the subject matter hereof. No oral
understandings, statements, promises or inducements contrary to the terms
of this Agreement exist.
(g) AMENDMENTS. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto. However, a party may (but is
under no obligation to) waive in writing any condition to the obligations
of the other party hereunder.
(h) PUBLICITY. During the term of this Agreement, no party to this
Agreement shall cause, discuss, cooperate or otherwise aid in the
preparation of any press release or other public announcement or public
filing concerning this Agreement and the transactions contemplate hereby
or any other party to this Agreement or its operations without prior
approval of such other party.
(i) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given if given) by hand delivery, by cable,
telegram or telex, or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the respective parties as follows:
If to the Company:
Marketing Services Group, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: J. Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxx Traurig, LLP
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Annex, Esq.
Facsimile: (000) 000-0000
If to RGC:
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(j) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive law of the State of Delaware without
giving effect to the principles of conflict of laws thereof.
(k) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(l) EFFECT OF HEADINGS. The paragraph headings herein are for
convenience only and shall not affect the construction thereof.
IN WITNESS WHEREOF, Marketing Services Group, Inc. and RGC International
Investors, LDC have caused this Agreement to be duly executed as of the day and
year first above written. MARKETING SERVICES GROUP, INC.
By: /S/ J. XXXXXX XXXXXXX
--------------------------------
J. Xxxxxx Xxxxxxx
Chairman of the Board and
Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.
as General Partner
By: /S/ XXXX X. XXXXXXXX
--------------------------------
Xxxx X. Xxxxxxxx
Managing Director
