STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of December 24, 1997 (this
"Agreement"), by and among Marketing Services Group, Inc., a Nevada corporation
having an office at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Company"), and those stockholders of Company set forth on Annex I hereto
(individually, a "Stockholder" and collectively, the "Stockholders").
W I T N E S S E T H :
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WHEREAS, Company and General Electric Capital Corporation ("GE
Capital" or "Purchaser") have entered into that certain Purchase Agreement,
dated as of December 24, 1997 (the "Purchase Agreement"), pursuant to which
Company has agreed to sell, and Purchaser has agreed to purchase, on the terms
and subject to the conditions set forth therein, 50,000 shares of Series D
Convertible Preferred Stock, $0.01 par value per share ("Convertible Preferred
Stock"), of Company convertible into shares of common stock of Company, $.01 par
value per share ("Common Stock"), and 10,670,000 Warrants to purchase shares of
Common Stock;
WHEREAS, each of the parties hereto (other than Company) are
on the date hereof holders of the number of shares of Convertible Preferred
Stock or Common Stock (all shares of Convertible Preferred Stock and Common
Stock being referred to herein collectively as "Stock") as is set forth on Annex
I hereto (such Stockholders, other than Purchaser and its successors and
assigns, the "Existing Stockholders"); and
WHEREAS, certain terms used in this Agreement are
defined in the Purchase Agreement;
NOW, THEREFORE, in consideration of the agreements, premises
and mutual covenants contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Tag-Along Right.
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(a) No Existing Stockholder shall directly or indirectly sell,
transfer or otherwise dispose of Stock, which after giving effect to all prior
sales, transfers or
other dispositions from and after the date hereof by the Existing Stockholder
constitutes more than twenty percent (20%) of the Common Stock owned by all
Existing Stockholders on the date hereof, in a single transaction or related
series of transactions, to any third party unless the terms and conditions of
such sale, transfer or other disposition (the "Third Party Disposition") to such
third party shall contain an offer to Purchaser, to include in such Third Party
Disposition such number of shares of Common Stock or Convertible Preferred Stock
as is determined in accordance with Section 1(b) below. At least 45 days prior
to effecting any Third Party Disposition, such selling Existing Stockholder (the
"Selling Existing Stockholder") shall promptly cause the terms and conditions of
the Third Party Disposition to be reduced to a reasonably detailed writing
(which writing shall identify the third party purchaser and shall include the
offer to Purchaser to purchase or otherwise acquire its Common Stock or
Convertible Preferred Stock, as the case may be, according to the terms and
subject to the conditions of this Section 1), and shall deliver, or cause the
third party to deliver, written notice (the "Notice") of the terms of such Third
Party Disposition to Purchaser. The Notice shall be accompanied by a true and
correct copy of the agreement, if any, embodying the terms and conditions of the
proposed Third Party Disposition or such written summary thereof if there is no
agreement. At any time after receipt of the Notice (but in no event later than
10 Business Days after receipt), Purchaser may accept the offer included in the
Notice for up to such number of its shares of Common Stock or Convertible
Preferred Stock, as the case may be, as determined in accordance with the
provisions of Section 1(b) below, by furnishing irrevocable written notice of
such acceptance to the Selling Existing Stockholder and to the third party.
(b) In the event that Purchaser elects to accept the offer
included in the Notice described in Section 1(a) above, Purchaser (the "Included
Stockholder") shall have the right to sell, transfer or otherwise dispose of
such number of its shares of Common Stock (including Convertible Preferred
Stock) pursuant to, and upon consummation of, the Third Party Disposition which
is equal to the product of (X) the total number of shares of Common Stock owned
by the Included Stockholder (assuming for the purpose of this calculation, the
conversion of all shares of Convertible Preferred Stock and exercise of all then
exercisable Warrants) and (Y) a fraction, the numerator of which shall equal the
total number of shares of Common Stock to be sold
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to the third party, and the denominator of which shall equal the total number of
shares of Common Stock owned by all Stockholders (assuming for the purposes of
this calculation, the conversion of all shares of Convertible Preferred Stock
and the exercise of all then exercisable Warrants). If the third party purchaser
is not willing to purchase such additional shares, the number of shares to be
sold by the Selling Existing Stockholder and the Included Stockholder shall be
proportionately reduced.
(c) The purchase of Stock pursuant to this Section 1 shall be
made on the same terms (including, without limitation, the per share
consideration and method of payment, and the date of sale, transfer or other
disposition), and subject to the same conditions, if any, as are provided to the
Selling Existing Stockholder and stated in the Notice.
(d) Upon the consummation of the disposition of Stock to the
third party pursuant to the Third Party Disposition, the Selling Existing
Stockholder shall (i) cause the third party to remit directly to the Included
Stockholder the sales price of its Stock disposed of pursuant thereto, and (ii)
furnish such other evidence of the completion and time of completion of such
disposition and the terms thereof as may reasonably be requested by such
Included Stockholder.
(e) If Purchaser has not delivered to the Selling Existing
Stockholder and to the third party written notice of its acceptance of the offer
contained in the Notice within 10 Business Days after the receipt of such
Notice, it shall be deemed to have waived any and all rights pursuant to this
Section 1 with respect to the disposition of its Stock described in the Notice,
and the Selling Existing Stockholder shall have 45 days (calculated from the
first day next succeeding the expiration of the 45 day acceptance period
described above), in which to dispose of the aggregate amount of Stock described
in the Notice to the third party identified in the Notice, on terms not more
favorable to the Selling Existing Stockholder than those which were set forth in
the Notice. If Purchaser has delivered irrevocable written notice of acceptance
as described in the preceding sentence and, if after 30 days following receipt
of the Notice, the Selling Existing Stockholder and the third party shall not
have completed the disposition of Stock to be sold in connection therewith in
accordance with the terms of the Third Party Disposition,
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all the restrictions on the disposition of Stock contained in this Section 1
shall again be in force and effect.
2. Right of First Refusal for New Securities.
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(a) Company hereby grants to Purchaser a right of first
refusal to purchase shares of any New Securities (as defined below) which
Company may, from time to time, propose to sell and issue. Such right of first
refusal shall allow Purchaser to purchase a pro rata portion of the New
Securities proposed to be issued, determined with reference to the aggregate
number of outstanding shares of Common Stock and/or Convertible Preferred Stock
(determined on an as converted basis) and/or Warrants (assuming the exercise of
the then exercisable Warrants) held by Purchaser or its permitted transferees
before the proposed issuance of New Securities. The right of first refusal
granted hereunder shall terminate if unexercised within 10 Business Days after
receipt of the notice described in Section 2(c) hereof.
(b) "New Securities" shall mean any authorized but unissued
shares, and any treasury shares, of capital stock of Company and all rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become, convertible into capital stock; provided,
however, that the term "New Securities" does not include (i) securities issued
pursuant to the acquisition of another corporation by Company by merger,
purchase of all or substantially all of the assets or other reorganization
whereby Company shall become the owner of more than 50% of the voting power of
such corporation; (ii) shares of Common Stock issued in connection with any
stock split or stock dividend of Company; (iii) shares of Common Stock issued
pursuant to any public offering and sale of equity securities of Company
pursuant to an effective registration statement under the Securities Act; (iv)
shares of Common Stock issued pursuant to the conversion of Convertible
Preferred Stock; (v) shares of Common Stock issued upon exercise of the
Warrants; or (vi) shares of Common Stock issued pursuant to the exercise of
options granted to employees, directors or consultants under Company's existing
stock options, existing now or created in the future (to the extent permitted
under the Purchase Agreement) or stock option plans or pursuant to the exercise
of presently outstanding Warrants.
(c) If Company proposes to issue New Securities, it shall give
Purchaser written notice thereof, describing
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the New Securities, the number thereof to be issued, the purchase price therefor
(which shall be payable solely in cash) and the terms upon which Company
proposes to issue the same. Purchaser shall have 10 Business Days from the date
such notice is given to determine whether to purchase all or any portion of its
pro rata share of such New Securities for the purchase price and upon the terms
specified in the notice by giving written notice to Company and stating therein
the number of New Securities to be purchased.
(d) If Purchaser has not elected to purchase all of the New
Securities proposed to be issued (within the time period for notifying Company
set forth above), then Company shall have 60 calendar days in which to complete
the proposed issuance of the portion of the New Securities not purchased by
Purchaser at a price not less than that contained in the notice previously given
to Purchaser and on terms and conditions not more favorable to the third party
than those contained in such notice. If, at the end of such 60-calendar day
period, Company has not completed such issuance of New Securities, Company shall
no longer be permitted to issue such New Securities pursuant to this Section 2
without again fully complying with all of the provisions of this Section 2.
3. Board Observer.
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At any time that GE Capital shall be entitled to designate two
or more members of the Board of Directors and designates fewer than such number,
GE Capital may designate one individual (the "Observer") to attend all meetings
of the Board of Directors (and any committees thereof) in a non-voting observer
capacity. The Observer shall be entitled to receive all reports, presentations
and materials as if the Observer were a member of the Board. Company shall
reimburse each director designated by GE Capital for any reasonable expenses
incurred in connection with meetings of the Board of Directors and committees
thereof, and shall similarly reimburse the Observer.
4. Stockholders' Representations and Warranties. Each
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Stockholder represents and warrants to each of the other Stockholders that there
are no agreements to which such Stockholder is a party with respect to the
voting or transfer of the capital stock of Company or with respect to any other
aspect of Company's affairs, other than this Agreement.
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5. Legend. The Existing Stockholders agree that each
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certificate representing the Stock now or hereafter held by a Stockholder shall
be endorsed with a legend in substantially the following form:
"The shares represented by this certificate are subject to a
certain Stockholders Agreement, dated as of December 24, 1997, which
provides, among other things, for certain restrictions on the transfer
of such shares. A copy of such Agreement is on file at the principal
offices of Marketing Services Group, Inc. and will be furnished upon
request to any holder of the shares represented by this certificate."
6. Equitable Relief. It is hereby acknowledged that
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irreparable harm would occur in the event that any of the provisions of this
Agreement were not performed fully by the parties hereto in accordance with the
terms specified herein, and that monetary damages are an inadequate remedy for
breach of this Agreement because of the difficulty of ascertaining and
quantifying the amount of damage that will be suffered by the parties relying
hereon in the event that the undertakings and provisions contained in this
Agreement were breached or violated. Accordingly, each party hereto hereby
agrees that each other party hereto shall be entitled to an injunction or
injunctions to restrain, enjoin and prevent breaches of the undertakings and
provisions hereof and to enforce specifically the undertakings and provisions
hereof in any court of the United States or any state having jurisdiction over
the matter; it being understood that such remedies shall be in addition to, and
not in lieu of, any other rights and remedies available at law or in equity.
7. Miscellaneous.
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(a) Notices. Any and all notices, designations, consents,
offers, acceptances, or any other communication provided for herein shall be
made in writing by personal- delivery, first-class mail (registered or
certified, with return receipt requested), telecopier (with "answer back"
confirmation), or overnight air courier guaranteeing next day delivery in the
case of Company, at its address set forth at the beginning of this Agreement
(Attn: Xxxxxx Xxxxxxx telecopy No.: (000) 000-0000, and in the case of any
Stockholder, to the address of such party appearing under its or his name on
Annex I hereto (or to such other address as may be designated in writing by any
such party in
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accordance with this Section 7(a)). Such notices or communications shall be
effective and deemed given upon delivery to said address.
(b) Complete Agreement; Amendment. This Agreement constitutes
the complete understanding of the parties with respect to its subject matter and
supersedes any other agreement or understanding relating thereto. No amendment,
change or modification of this Agreement shall be valid, binding or enforceable,
unless the same shall be in writing and signed by GE Capital and the Company and
the Existing Shareholders to the extent their rights and obligations under this
Agreement would be affected thereby.
(c) Termination. This Agreement may be terminated at any time
by an instrument in writing signed by GE Capital.
(d) Waiver. No failure or delay on the part of the
Stockholders or Company or any of them in exercising any right, power or
privilege hereunder, and no course of dealing between the Stockholders or
Company, shall operate as a waiver thereof nor shall any single or partial
exercise of any right, power or privilege hereunder preclude the simultaneous or
later exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights and
remedies which the Stockholders or Company would otherwise have.
(e) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
(f) Governing Law; Waivers. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict of laws provisions thereof. Each of the
parties hereby submits to personal jurisdiction and waives any objection as to
venue in the County of New York, State of New York. Service of process on the
parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 7(a) hereof. The
parties hereto waive all right to trial by jury in any action or proceeding to
enforce or defend any rights hereunder.
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(g) Benefit and Binding Effect. All of the terms and
provisions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns, including any
permitted transferee of their Stock (other than as part of a registered offering
under the Securities Act). References herein to Purchaser shall include
Purchaser and any of its successors and assigns.
(h) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(i) After-Acquired Shares. All of the provisions of this
Agreement shall apply to all of the shares of capital stock of Company now owned
or which may be issued to or acquired by a Stockholder in consequence of any
additional issuance (including, without limitation, by exercise of an option or
any warrant), purchase, exchange, conversion or reclassification of stock,
corporate reorganization, or any other form of recapitalization, consolidation,
merger, stock split or stock dividend, or which are acquired by a Stockholder in
any other manner.
(j) Approvals and Consents. The Stockholders hereby agree, for
themselves, their successors, heirs and legal representatives, to vote at
stockholders' and directors' meetings of Company, to prepare, execute and
deliver or cause to be prepared, executed and delivered such further instruments
and documents, to take such other actions and to adopt such by-laws and
provisions of the certificate of incorporation as may be reasonably required to
more effectively carry out the intent and purposes of this Agreement and the
transactions contemplated hereby. They further agree to cause Company to do the
same.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MARKETING SERVICES GROUP, INC.
By: ________________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By: _______________________________________
Name:
Title:
EXISTING STOCKHOLDERS:
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Xxxxxx Xxxxxxx
____________________________________
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ANNEX I
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Number
Stockholders/Purchaser Class of Securities of Shares
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General Electric Convertible Preferred Stock 50,000
Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Equity Capital Group-
Consumer Products
Telecopy No. (000) 000-0000
with copies to:
General Electric
Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Equity Capital Group
Legal Counsel
Telecopy No. (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxxx, Esq.
Telecopy No. (000) 000-0000
Number
Stockholders/Existing Stockholders Class of Securities of Shares
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Xxxxxx Xxxxxxx Common Stock _________
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