EXHIBIT 10.1
EXCHANGE AGREEMENT
BETWEEN
MKTG SERVICES, INC.
AND
CASTLE CREEK TECHNOLOGY PARTNERS LLC
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 Castle Creek Technology Partners LLC, a Delaware limited
liability company ("CCP").
Whereas, CCP owns 11,045 shares of Series E Convertible Preferred Stock
of the Company, having an aggregate stated value of $11,045,000.00 and a current
Liquidation Preference in excess of such amount (the "Series E Preferred
Stock"); and
Whereas, CCP and the Company desire to exchange all of the Series E
Preferred Stock held by CCP, on the terms set forth herein; and
Whereas, the Company and CCP 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. CCP hereby agrees to
deliver to the Company 11,045 shares (the "Exchanged Shares") of Series E
Preferred Stock held by CCP in exchange for (i) the payment by the Company to
CCP of $3,021,840 in cash payable by wire transfer to an account designated by
CCP (the "Cash Consideration") and (ii) the issuance by the Company to CCP 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 CCP. CCP represents and warrants to the
Company as follows:
(a) CCP 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 CCP to the Company, free and clear of all liens, claims, equities,
and encumbrances.
(b) CCP has full and complete authority to enter into this
Agreement and to perform its obligations hereunder. CCP 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 CCP enforceable in accordance with its terms.
(d) There are no arrangements, agreements, or understandings
between CCP and any other person regarding ownership or voting of
securities of the Company.
(e) CCP 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 CCP's representations as expressed
herein.
(f) CCP represents that (i) it is not an affiliate of the
Company, (ii) upon the simultaneous closing of the transactions
contemplated herein and in the RGC Agreement (as defined herein), it
will not be an affiliate of the Company, (iii) it was not an affiliate
within the three preceding months, and (iv) the holding period of the
Exchanged Shares as determined in accordance with Rule 144(d)(3) is 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 CCP 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 CCP'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 CCP'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 CCP 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
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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.
4. Lock-up.
(a) For the period of twelve months from the date hereof,
without the prior written consent of the Company, CCP 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, CCP 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 CCP (an "CCP Affiliate") without the
prior written consent of the Company; provided, however that the CCP
Affiliate agrees to be bound by the provisions of this Section 4.
(c) Notwithstanding anything contained herein to the
contrary, CCP 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 CCP Affiliate.
(d) Notwithstanding anything contained herein to the
contrary, CCP 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, CCP 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 CCP
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
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("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 CCP shall
automatically be null and void.
5. Mutual General Release.
(a) CCP 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 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"). CCP 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 CCP, 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
CCP, 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 CCP to consummate the transactions described in this
Agreement from which the Company and CCP 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 CCP, 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 CCP that are not
materially less beneficial as the Company has conferred upon RGC International
Investors, LDC pursuant to an exchange agreement dated of even date herewith
("RGC Agreement"). The Company further acknowledges that the RGC 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 RGC Agreement, without any further action.
7. Closing. Upon the delivery to the Company by CCP of all of the
Series E Preferred Stock owned by CCP, 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 CCP.
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 CCP and the Company consent to personal and exclusive
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jurisdiction and venue in the federal courts sitting in New York City, New York.
CCP 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 CCP
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 Castle Creek Technology
Partners LLC 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
CASTLE CREEK TECHNOLOGY PARTNERS LLC
By: /s/ Xxxxx Xxxxx
--------------------
Xxxxx Xxxxx
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