EXHIBIT 10.2
EXCHANGE AGREEMENT
BETWEEN
MKTG SERVICES, INC.
AND
RGC INTERNATIONAL INVESTORS, LDC
DATED AS OF DECEMBER 31, 2002
This Exchange Agreement (this "Agreement"), is entered into as of
December 31, 2002 between MKTG Services, Inc., a Nevada corporation (the
"Company"), and RGC International Investors, LDC, a Cayman Islands limited
duration company ("RGC").
Whereas, RGC owns 10,965.17274 shares of Series E Convertible Preferred
Stock of the Company, having an aggregate stated value of $10,965,172.74 and a
current Liquidation Preference in excess of such amount (the "Series E Preferred
Stock"); and
Whereas, RGC and the Company desire to exchange all of the Series E
Preferred Stock held by RGC, on the terms set forth herein; 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. Exchange of Series E Preferred Stock. RGC hereby agrees to
deliver to the Company 10,965.17274 shares (the "Exchanged Shares") of Series E
Preferred Stock held by RGC in exchange for (i) the payment by the Company to
RGC of $3,000,000 in cash payable by wire transfer to an account designated by
RGC (the "Cash Consideration") and (ii) the issuance by the Company to RGC of
725,203 shares of common stock of the Company (the "Stock Consideration"), which
shares represent 9.9% of the 7,288,473 shares of common stock of the Company as
currently outstanding.
2. Representations of RGC. RGC represents and warrants to the
Company as follows:
(a) RGC has not sold, pledged, hypothecated or otherwise
granted anyone an interest in the Exchanged Shares, that it is the
record and beneficial owner of the Exchanged Shares and acquired the
Exchanged Shares directly from the Company and owns the Exchanged
Shares free and clear of all liens, claims and encumbrances of whatever
nature, kind or description. The Exchanged Shares shall be transferred
by RGC to the Company, free and clear of all liens, claims, equities,
and encumbrances.
(b) RGC has full and complete authority to enter into this
Agreement and to perform its obligations hereunder. RGC represents that
it is familiar with the Company, has reviewed the Company's public
filings, and has been given ample opportunity to ask questions of the
management of the Company with respect to its decision to sell the
Exchanged Shares.
(c) 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.
(e) RGC understands that the Stock Consideration has not
been, and will not be, registered under the Securities Act of 1933, as
amended (the "Securities Act"), by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon,
among other things, the accuracy of RGC's representations as expressed
herein.
(f) RGC represents that based upon information provided by
the Company relating to the number of shares of common stock of the
Company which will be outstanding following the consummation of the
transactions contemplated by this Agreement and the CCP Agreement (as
defined herein) (i) it is not an affiliate of the Company, (ii) upon
the simultaneous closing of the transactions contemplated herein and in
the CCP Agreement, it will not be an affiliate of the Company, (iii) it
was not an affiliate within the three preceding months, and (iv) it has
held the Exchanged Shares for at least two years.
(g) It is understood that the certificates for the Stock
Consideration may bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE LOCK-UP PROVISIONS CONTAINED IN THAT
CERTAIN EXCHANGE AGREEMENT DATED AS OF DECEMBER 31,
2002."
3. 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 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.
(c) 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.
(d) The Company has sufficient capital available to fulfill
its obligations set forth in Section 1 herein. Following the
consummation of the transactions contemplated by this Agreement, the
Company will have sufficient capital to continue its operations as
currently conducted, and to pay its debts and liabilities as they
become due and payable and shall be solvent.
(e) The Exchanged Shares are being exchanged in reliance upon
RGC's representations to the Company contained in Section 2 above.
(f) The Company is issuing the Stock Consideration pursuant
to an exemption from registration under Section 3(a)(9) of the
Securities Act. The Company hereby acknowledges that, based upon RGC's
representations contained herein, the Exchanged Shares will be issued
without a restrictive legend (excluding the legend described in
Section 2(g) above) and may be sold by RGC without registration or the
restrictions set forth in paragraphs (c), (e), (f) and (h) of Rule 144
of the Securities Act. The Company agrees that it shall remove the
legend described in Section 2(g) above from the Exchanged Shares in
accordance with Section 4 herein.
(g) The Company hereby represents, that although it has
conducted in the past and expects to continue discussions with third
parties that could result in a Change of Control (as defined below), it
has no present plans or intentions to enter into any agreement which
would result in a Change of Control. Solely for purposes of this
paragraph, a Change of Control shall have deemed to occur upon a 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 merger, consolidation or other
business combination of the Company with or into any other entity or
entities.
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4. Lock-up.
(a) For the period of twelve months from the date hereof,
without the prior written consent of the Company, RGC shall not, alone
or through or with any other person or entity, in any manner:
(i) offer for sale, sell, pledge, or otherwise
dispose of (or enter into any transaction or device that is
designed to, or could be expected to, result in the
disposition by any person at any time in the future of) the
common stock of the Company; or
(ii) make any short sales, enter into any hedging,
derivative or similar transactions regarding the Company's
common stock.
(b) Notwithstanding anything contained herein to the
contrary, RGC may sell or otherwise transfer the Company's common
stock to an affiliate (as such term is defined in Rule 144 promulgated
under the Securities Act) of RGC (an "RGC Affiliate") without the
prior written consent of the Company; provided, however that the RGC
Affiliate agrees to be bound by the provisions of this Section 4.
(c) Notwithstanding anything contained herein to the
contrary, RGC may, upon the prior written consent of the Company
(which approval shall not be unreasonably withheld), sell or otherwise
transfer the Company's common stock in a private transaction to a
third party which: (i) agrees to be bound by the provisions of this
Section 4, and (ii) is not an RGC Affiliate.
(d) Notwithstanding anything contained herein to the
contrary, RGC shall be entitled, at any time, to engage in a
disposition of the Company's common stock, if the Trading Price (as
defined below) of the Company's common stock exceeds $1.00 (to be
proportionately adjusted in the event of any subdivision or
combination of the Company's common stock) during each Trading Day in
any Trading Period (as defined below). "Trading Price" means an amount
equal to the average of the closing bid and ask prices on a Trading
Day (as defined below) as reported by the Nasdaq SmallCap Market (the
"NasdaqSC") or such other securities exchange on which the Company's
common stock is publicly traded ("Other Exchange"). "Trading Day"
means a day on which the Company's common stock is traded on the
Nasdaq or such Other Exchange, as applicable. "Trading Period" means
the five Trading Days immediately preceding the date of disposition.
(e) Notwithstanding anything contained herein to the
contrary, RGC shall be entitled to engage in a disposition of the
Company's common stock upon the public announcement by the Company of
a 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 merger,
consolidation or other business combination of the Company with or
into any other entity or entities or the filing or commencement of
bankruptcy, insolvency or similar proceedings by or against the
Company.
(f) The Company hereby acknowledges that its executive
officers and directors ("MKTG Insiders") shall be bound by the same
restrictions as contained in this Section 4. Notwithstanding anything
contained herein to the contrary, in the event that any MKTG Insider is
in breach of such provisions, or the application of such provisions is
being waived by the Company, the application of Section 4(a) to RGC
shall automatically be null and void.
(g) The Company hereby acknowledges that if prior to the
expiration of the restrictions contained in this Section 4, it issues
any additional shares of common stock of the Company (other than
issuances pursuant to currently outstanding derivative securities,
and/or issuances pursuant to the exercise of any employee stock options
other than issuances to MKTG Insiders), the holders of such new
securities ("New Stockholders") shall be bound by the same restrictions
as contained in this Section 4. Notwithstanding anything contained
herein to the contrary, in the event that any New Stockholder is in
breach of such provisions, the application of Section 4(a) to RGC shall
automatically be null and void.
5. Mutual General Release.
(a) RGC does hereby release, discharge and acquit forever the
Company, its subsidiaries and affiliates, each of its respective
officers, directors and employees and each of their respective heirs,
administrators, successors and assigns, from any and all actions,
causes of action, suits, debts, accounts, bonds, bills, covenants,
contracts, controversies, agreements, liabilities, damages, costs,
expenses, demands, judgments, executions, variances, claims and other
obligations of whatever kind or nature, in law or in equity, known or
unknown, suspected or unsuspected, arising from, connected or related
to, or caused by any event, occurrence, cause or thing, of any type,
whatsoever, arising or existing, or occurring, in
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whole or in part, at any time from the beginning of the world through
the date hereof, except for any claims arising solely under this
Agreement (collectively, the "Subject Claims"). RGC acknowledges that
it has considered the possibility that it may not fully know the
number or magnitude of all the Subject Claims or other claims which it
has or may have against the Company, its subsidiaries and affiliates,
each of its respective officers, directors and employees and each of
their respective heirs, administrators, successors and assigns, but
nevertheless, intends to assume the risk that it is releasing such
unknown claims and agrees that this Agreement is a full and final
release of any and all Subject Claims, subject to the provisions of
subparagraph (d) below.
(b) The Company does hereby release, discharge and acquit
forever RGC, its subsidiaries and affiliates, each of its respective
officers, directors, partners, agents and employees and each of their
respective heirs, administrators, successors and assigns, from any and
all Subject Claims. The Company acknowledges that it has considered the
possibility that it may not fully know the number or magnitude of all
the Subject Claims or other claims which it has or may have against
RGC, its subsidiaries and affiliates, each of its respective officers,
directors, partners, agents and employees and each of their respective
heirs, administrators, successors and assigns, but nevertheless,
intends to assume the risk that it is releasing such unknown claims and
agrees that this Agreement is a full and final release of any and all
Subject Claims, subject to the provisions of subparagraph (d) below.
(c) This mutual general release is given for good and
valuable consideration and to provide a material inducement to the
Company and RGC to consummate the transactions described in this
Agreement from which the Company and RGC will receive substantial
direct and indirect benefit. This release shall remain in full force
and effect without regard to the expiration provisions under this
Agreement.
(d) In the event that the transactions contemplated by this
Agreement are set aside or avoided, any applicable rights to pursue any
Subject Claims would revert to the Company and RGC, as the case may be,
and the releases given in this Section 5 shall automatically be null
and void.
6. Other Series E Preferred Stockholders. 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 an exchange agreement dated of even date
herewith ("CCP Agreement"). The Company further acknowledges that the CCP
Agreement contains provisions which are not materially different from Sections 4
and 5 of this Agreement. The per share consideration found in Section 1 of this
Agreement and/or the provisions of Sections 4 and 5 of this Agreement, shall be
automatically amended to reflect any additional consideration or modifications
made to such sections in the CCP Agreement, without any further action.
7. Closing. Upon the delivery to the Company by RGC of all of the
Series E Preferred Stock owned by RGC, the Company shall instruct its transfer
agent to issue the shares of its common stock issuable pursuant to Section 1 and
shall deliver the Cash Consideration as instructed by RGC.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive law of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Both RGC and the Company consent to personal and exclusive jurisdiction
and venue in the federal courts sitting in New York City, New York. RGC waives
any local or international law, convention or regulation that might provide an
alternative law or construction.
9. Prior Agreements. Except to the extent required by the terms
hereof, this Agreement supersedes all agreements between the Company and RGC
with respect to the subject matter contained herein, entered into prior to the
date hereof, whether oral or written.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument.
11. Effect of Headings. The paragraph headings herein are for
convenience only and shall not affect the construction thereof.
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IN WITNESS WHEREOF, MKTG Services, Inc. and RGC International
Investors, LDC have caused this Agreement to be duly executed as of the day and
year first above written.
MKTG SERVICES, INC.
By:/s/ 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/ Xxxxxx X. Xxxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxxx
Managing Director
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