INVESTMENT AGREEMENT
AGREEMENT (this "Agreement"), made and entered into as of the ____ day
of August 2004, by and between MEDIA SERVICES GROUP, INC., a Nevada corporation
("MSGI"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Davidoff"), Shahrod Hemassi ("Hemassi"),
Wenkai ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"; Parola, Clemente,
Jones, Davidoff, Hemassi, and ▇▇▇▇▇ are sometimes referred to herein
individually as a "Founding Member" and collectively as the "Founding Members").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this
Agreement, (a) MSGI and the Founding Members have entered into that certain
Amended and Restated Limited Liability Company Agreement of Innalogic, LLC
("Innalogic"), dated as of the date hereof (the "LLC Agreement"), and (b) each
of the Founding Members and Innalogic have entered into an Employment Agreement,
dated as of the date hereof (collectively the "Employment Agreements");
WHEREAS, prior hereto the Founding Members have assigned to Innalogic
all right, title and interest in and to certain intellectual property pursuant
to an Assignment Agreement, dated as of June 29, 2004, and the Company has
interests in certain other intellectual property including, without limitation,
trade names, trademarks, service marks, patents (and applications thereof),
copyrights, domain names and URLs, software source code and useable object code,
design documents, schematics, drafts, prototypes, any models, and the Company
has licensed certain third party software (collectively the "Intellectual
Property"); and
WHEREAS, the initial Capital Contribution of MSGI made on the date
hereof includes the MSGI Shares (as defined herein), which Shares are to be
immediately transferred to the Founding Members.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1
1.1 MSGI Share Issuance. Concurrently herewith, MSGI is issuing an
aggregate of 25,000 shares of common stock, par value $0.01 per share, of MSGI
(the "Shares") to the Founding Members in the amounts set forth on Schedule A,
which Shares are deemed issued to Innalogic as part of MSGI's initial Capital
Contribution and immediately tranferred to the Founding Members. Such Shares
have not been registered under the Securities Act of 1933, as amended (the "1933
Act").
1.2 "Piggyback" Registration Rights. At any time, if MSGI shall
determine to proceed with the actual preparation and filing of a new
registration statement under the 1933 Act in connection with the proposed offer
and sale of any of its securities by it or any of its security
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holders (other than a registration statement on Form ▇-▇, ▇-▇ or other limited
purpose form), MSGI will give written notice of its determination to the
Founding Members. Upon the written request from any Founding Member (the
"Requesting Member"), within 20 days after receipt of any such notice from MSGI,
MSGI will, except as herein provided, cause all of the Shares covered by such
request (the "Requested Stock") held by the Requesting Members to be included in
such registration statement, all to the extent requisite to permit the sale or
other disposition by the prospective seller or sellers of the Requested Stock;
provided, further, that nothing herein shall prevent MSGI from, at any time,
abandoning or delaying any registration. If any registration pursuant to this
Section 1.2 shall be underwritten in whole or in part, MSGI may require that the
Requested Stock be included in the underwriting on the same terms and conditions
as the securities otherwise being sold through the underwriters. In such event,
the Requesting Member shall, if requested by the underwriters, execute an
underwriting agreement containing customary representations and warranties by
selling stockholders and a lock-up on the Shares not being sold. If in the good
faith judgment of the managing underwriter of such public offering the inclusion
of all of the Requested Stock would reduce the number of shares to be offered by
MSGI or interfere with the successful marketing of the shares of stock offered
by MSGI, the number of shares of Requested Stock otherwise to be included in the
underwritten public offering may be reduced pro rata (by number of shares) among
the Requesting Members and all other holders of registration rights who have
requested inclusion of their securities or excluded in their entirety if so
required by the underwriter. To the extent only a portion of the Requested Stock
is included in the underwritten public offering, those shares of Requested Stock
which are thus excluded from the underwritten public offering and any other
securities of MSGI held by such holders shall be withheld from the market by the
holders thereof for a period, not to exceed 90 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering. The obligation of MSGI under this Section 1.2
shall not apply after the earlier of (a) the date that all of the Shares have
been sold pursuant to Rule 144 under the 1933 Act or an effective registration
statement, or (b) such time as the Shares are eligible for immediate resale
pursuant to Rule 144(k) under the 1933 Act. Any and all fees and expenses
payable in connection with all such registration rights shall be borne by MSGI
whether or not pursuant to an underwritten public offering and whether or not a
registration statement is filed or becomes effective or whether or not any
Shares are sold pursuant to any registration statement. The Requesting Members
shall cooperate with MSGI in providing the information necessary to effect the
registration of their Shares, including completion of customary questionnaires.
Failure to do so may result in exclusion of such Requesting Members' Shares from
the registration statement.
1.3 Indemnification by MSGI. MSGI shall indemnify and hold harmless
each Founding Member and its agents, brokers, investment advisors and employees
of each of them and each underwriter of the Shares and their officers,
directors, affiliates, partners and any broker or dealer through whom such
Shares may be sold and each person, if any, who controls (within the meaning of
Section 15 of the 1933 Act) such Founding Member or any such underwriter to the
fullest extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses, as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in any registration statement, any prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or
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necessary to make the statements therein (in the case of any prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading (in the case of any prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which they
were made), except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such
Founding Member furnished in writing to MSGI by such Founding Member expressly
for use therein, which information was reasonably relied on by MSGI for use
therein or to the extent that such information relates to such Founding Member
or such Founding Member's proposed method of distribution of Shares and was
reviewed and expressly approved in writing by such Founding Member expressly for
use in any registration statement, such prospectus or such form of prospectus or
in any amendment or supplement thereto.
1.4 Indemnification by Requesting Members. Each Requesting Member
agrees to indemnify and hold harmless MSGI, and its agents, brokers, investment
advisors and employees of each of them and each underwriter of the Shares and
their officers, directors, affiliates, partners and any broker or dealer through
whom such Shares may be sold and each person, if any, who controls (within the
meaning of ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇) ▇▇▇▇ or any such underwriter , to the
same extent as the foregoing indemnity from MSGI to such holder but only with
respect to information furnished in writing by such Requesting Member with
respect to such Requesting Member which contained a material misstatement of
fact or omission of a material fact expressly for use in any registration
statement, any prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (in the case of any
prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made).
1.5 Performance Bonuses. In the event that Innalogic exceeds the Total
Target Amount as set forth on Schedule B, MSGI shall immediately grant to each
Founding Member an option to purchase such number of shares of MSGI common
stock, par value $0.01 per share ("Options"), set forth opposite the name of
such Founding Member on Schedule C attached hereto, as follows:
(a) The Options shall be granted under the Marketing Services
Group, Inc. 1999 Incentive and Nonqualified Stock Option Plan, as amended from
time to time, or such other stock option plan as may be adopted by MSGI (the
"MSGI Option Plan").
(b) The Options shall have an exercise price equal to the fair
market value of MSGI common stock at the time of the grant of the Options. Fair
market value shall be determined as set forth in the MSGI Option Plan.
(c) The Options shall expire on the tenth anniversary of the
date of grant, and shall vest over a three year period with one-third of the
options vesting on the first anniversary of this Agreement, one-third vesting on
the second anniversary of this Agreement, and the remaining third vesting on the
third anniversary of this Agreement; provided that the Options
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shall automatically be vested and immediately exercisable in full upon the
occurrence of any of the events set forth in paragraph 10 of the MSGI Option
Plan now in effect.
(d) If a Founding Member ceases to be employed by Innalogic or
MSGI or any affiliate of either Innalogic or MSGI, the Option granted to such
Founding Member shall be exercisable in accordance with and subject to the terms
and conditions of paragraph 12 of the MSGI Option Plan now in effect.
SECTION 2
2.1 Founding Members Representations and Warranties. In connection with
this Agreement, the Founding Members hereby acknowledge, represent and warrant
to MSGI as follows:
(a) To the extent that any works of authorship, materials,
products, technology or software have been developed or created independently or
jointly by any person other than Innalogic for which Innalogic has, directly or
indirectly paid, other than off-the-shelf technologies, Innalogic has a written
agreement with such person with respect thereto, and Innalogic thereby has
obtained ownership of, and is the exclusive owner of, all Intellectual Property
therein or thereto by operation of law or by valid assignment.
(b) The Founding Members are not aware that any of the
employees, agents, consultants or contractors of Innalogic are obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such person's or
entity's best efforts to promote the Interests of Innalogic, or that would
conflict with Innalogic's business as proposed to be conducted. The Founding
Members are not aware of any current or past infringement, dilution,
misappropriation, breach or other violation by a third party of any of the
Intellectual Property. The source code for the Intellectual Property has not
been disclosed to any third party and none of the source code for the
Intellectual Property has been placed in escrow or is otherwise not in the full
and exclusive control of Innalogic.
(c) No Intellectual Property owned or used by Innalogic is
subject to any outstanding decree, order, judgment, settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by Innalogic. All of the patents, trademark and service ▇▇▇▇ applications for
registration, copyright registrations and domain name registrations indicated in
Schedule 2.1(c) are valid and in full force, are held of record in the name of
Innalogic free and clear of all liens, encumbrances and other claims, are not
the subject of any cancellation or reexamination proceeding or any other
proceeding challenging their extent or validity, and all necessary registration,
maintenance and renewal fees in connection with such Intellectual Property set
forth on Schedule 2.1(c) have been paid. No opposition, extension of time to
oppose, interference, final rejection, or final refusal to register has been
received in connection with any such application. Innalogic has taken all
reasonable steps that are required to protect Innalogic's rights in material
trade secrets, know-how or other confidential or proprietary information
(including, without limitation, source code) of Innalogic or provided by any
other person to Innalogic.
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(d) To the best knowledge of the Founding Members, the
representations and warranties of the Founding Members in this Section 2 do not
contain any untrue statements of fact or omit to state a material fact necessary
in order to make the statements contained in this Section 2 not misleading in
any material respect.
SECTION 3
3.1 Modification. Neither this Agreement nor any provisions hereof
shall be modified, deemed waived, discharged or terminated except by an
instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
3.2 Notices. Any notice, demand or other communication which either
party hereto may be required, or may elect, to give to anyone interested
hereunder shall be sufficiently given if in writing and if (a) properly mailed,
registered or certified mail, return receipt requested, addressed to such
address as may be in the LLC Agreement, or (b) delivered personally at such
address. Notice, demand and/or communication hereunder shall be deemed given on
the earliest of five (5) business days after mailing, or on the date of personal
delivery, whichever is applicable.
3.3 Counterparts. This Agreement may be executed by fax and/or through
the use of separate signature pages or in any number of counterparts, and each
of such fax signatures and counterparts shall, for all purposes, have binding
legal effect and constitute one agreement binding on both parties,
notwithstanding that both parties are not signatories to the same counterpart.
3.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors and permitted assigns.
3.5 Entire Agreement. This Agreement, together with the LLC Agreement
and the Employment Agreements, contains the entire agreement of the parties with
respect to the subject matter hereof, and there are no other or inconsistent
representations, covenants, understandings or other agreements, written or oral,
except as stated or referred to herein.
3.6 Assignability. This Agreement is personal in nature and is not
transferable or assignable by the Purchaser and any attempt to do so shall be
void ab initio.
3.7 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of law principles.
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IN WITNESS WHEREOF, each party, intending to be legally bound, has
caused this Agreement to be executed on its behalf by an officer thereunto duly
authorized, all as of the date first set forth above.
MEDIA SERVICES GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Chief Executive Officer
THE FOUNDING MEMBERS:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ Shahrod Hemassi
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Shahrod Hemassi
By: /s/ Wenkai ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Wenkai ▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
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