REGISTRATION RIGHTS AGREEMENT
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Registration Rights Agreement, dated as of December 24, 1997,
by and among Marketing Services Group, Inc., a Nevada corporation ("Company")
and General Electric Capital Corporation ("GE Capital" or "Purchaser").
W I T N E S S E T H :
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WHEREAS, Company and Purchaser have entered into that certain
Purchase Agreement, dated as of December 24, 1997 (the "Purchase Agreement"),
pursuant to which Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from Company, an aggregate of 50,000 shares of
Series D Convertible Preferred Stock, $0.01 par value per share ("Convertible
Preferred Stock"), and 10,670,000 Warrants to purchase shares of Common Stock
("Warrants"); and
WHEREAS, in order to induce Purchaser to enter into the
Purchase Agreement and to purchase such shares of Convertible Preferred Stock
and such Warrants, Company has agreed to provide registration rights with
respect thereto;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined
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in the Purchase Agreement are used herein as therein defined, and the following
shall have (unless otherwise provided elsewhere in this Registration Rights
Agreement) the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Agreement" shall mean this Registration Rights Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then
administering the Securities Act and other federal securities laws.
"Conversion Shares" shall mean shares of Common Stock issued
upon conversion of shares of Convertible Preferred Stock or upon exercise of the
Warrants.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Holder" shall mean the holder of Conversion Shares, shares of
Convertible Preferred Stock or Warrants.
"Majority Holders" shall mean Holders holding at the time,
shares of Convertible Preferred Stock, Warrants or Conversion Shares
representing more than 50% of the sum of (x) all then outstanding Conversion
Shares and (y) all shares of Common Stock issuable to the holders of
then-outstanding Convertible Preferred Stock or Warrants upon the conversion or
exercise thereof.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Registrable Securities" shall mean the shares of Common Stock
from time to time issued or issuable to the holders of the Convertible Preferred
Stock or Warrants upon the conversion or exercise thereof or hereafter acquired
by Purchaser or which Purchaser hereafter obtains the right to acquire pursuant
to the terms of the Stockholders Agreement or otherwise.
"Secondary Offering" shall have the meaning set forth in
Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
2. Required Registration. After receipt of a written request
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from the holders of Registrable Securities requesting that Company effect a
registration under the Securities Act covering either at least 20% of the
Registrable Securities initially outstanding, and specifying
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the intended method or methods of disposition thereof, Company shall promptly
notify all Holders in writing of the receipt of such request and each such
Holder may elect (by written notice sent to Company within 10 Business Days from
the date of such Holder's receipt of the aforementioned Company's notice) to
have Registrable Securities included in such registration thereof pursuant to
this Section 2. Thereupon Company shall, as expeditiously as is possible, use
its best efforts to effect the registration under the Securities Act of all
shares of Registrable Securities which Company has been so requested to register
by such Holders for sale, all to the extent required to permit the disposition
(in accordance with the intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered; provided, however, that Company shall not
be required to effect more than two (2) registrations of any Registrable
Securities pursuant to this Section 2 unless Company shall be eligible at any
time to file a registration statement on Form S-3 (or other comparable short
form) under the Securities Act, in which event there shall be no limit on the
number of such registrations pursuant to this Section 2. The rights of the
Holders under this Section 2 shall not become effective until the earlier of
January 1, 2000 or ninety (90) days following the consummation of a Secondary
Offering (as hereinafter defined).
3. Incidental Registration. If Company at any time proposes to
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file on its behalf and/or on behalf of any of its security holders (the
"demanding security holders") a Registration Statement under the Securities Act
on any form (other than a Registration Statement on Form S-4 or S-8 or any
successor form for securities to be offered in a transaction of the type
referred to in Rule 145 under the Securities Act or to employees of Company
pursuant to any employee benefit plan, respectively) for the general
registration of securities (a "Secondary Offering"), it will give written notice
to all Holders at least 30 days before the initial filing with the Commission of
such Registration Statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by Company. The notice
shall offer to include in such filing the aggregate number of shares of
Registrable Securities as such Holders may request.
Each Holder desiring to have Registrable Securities registered
under this Section 3 shall advise Company in writing within 10 Business Days
after the date of receipt of such offer from Company, setting forth the amount
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of such Registrable Securities for which registration is requested. Company
shall thereupon include in such filing the number of shares of Registrable
Securities for which registration is so requested, subject to the next sentence,
and shall use its best efforts to effect registration under the Securities Act
of such shares. If the managing underwriter of a proposed public offering shall
advise Company in writing that, in its opinion, the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by Company or such demanding security
holder would materially and adversely affect the distribution of such securities
by Company or such demanding security holder, then all selling security holders
(including the demanding security holder) shall reduce the amount of securities
each intended to distribute through such offering on a pro rata basis. Except as
otherwise provided in Section 5, all expenses of such registration shall be
borne by Company.
4. Registration Procedures. If Company is required by the
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provisions of Section 2 or 3 to use its best efforts to effect the registration
of any of its securities under the Securities Act, Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a
Registration Statement with respect to such securities and use its best efforts
to cause such Registration Statement to become and remain effective for a period
of time required for the disposition of such securities by the holders thereof,
but not to exceed 180 days;
(b) prepare and file with the Commission
such amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
covered by such Registration Statement until the earlier of such time as all of
such securities have been disposed of in a public offering or the expiration of
180 days;
(c) furnish to such selling security holders
such number of copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and
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such other documents, as such selling security holders may reasonably request;
(d) use its best efforts to register or
qualify the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as each holder of such securities shall request (provided, however,
that Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified or
to file any general consent to service or process), and do such other reasonable
acts and things as may be required of it to enable such holder to consummate the
disposition in such jurisdiction of the securities covered by such Registration
Statement;
(e) furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to Section 2, on the
date that such shares of Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if such Registrable
Securities are not being sold through underwriters, on the date that the
Registration Statement with respect to such shares of Registrable Securities
becomes effective, (1) an opinion, dated such date, of the independent counsel
representing Company for the purposes of such registration, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the Holders making such request, in customary form
and covering matters of the type customarily covered in such legal opinions; and
(2) a comfort letter dated such date, from the independent certified public
accountants of Company, addressed to the underwriters, if any, and if such
Registrable Securities are not being sold through underwriters, then to the
Holder making such request and, if such accountants refuse to deliver such
letter to such Holder, then to Company, in a customary form and covering matters
of the type customarily covered by such comfort letters and as the underwriters
or such Holder shall reasonably request. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in
respect of which such opinion is being given as such Holders may reasonably
request. Such letter from the independent certified public accountants shall
additionally cover such other financial matters (including information as to the
period ending not more than five Business Days prior to the date of such letter)
with respect
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to the registration in respect of which such letter is being given as the
Holders of a majority of the Registrable Securities being so registered may
reasonably request;
(f) enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
(g) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not later than
18 months after the effective date of the Registration Statement, an earnings
statement covering the period of at least 12 months beginning with the first
full month after the effective date of such Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
It shall be a condition precedent to the obligation of Company
to take any action pursuant to this Agreement in respect of the securities which
are to be registered at the request of any Holder that such Holder shall furnish
to Company such information regarding the securities held by such Holder and the
intended method of disposition thereof as Company shall reasonably request and
as shall be required in connection with the action taken by Company.
5. Expenses. All expenses incurred in complying with this
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Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for Company, the reasonable fees and expenses
of counsel for the selling security holders (selected by those holding a
majority of the shares being registered), expenses of any special audits
incident to or required by any such registration and expenses of complying with
the securities or blue sky laws of any jurisdiction pursuant to Section 4(d),
shall be paid by Company, except that:
(a) all such expenses in connection with any
amendment or supplement to the Registration Statement or prospectus filed more
than 180 days after the effective date of such Registration Statement because
any Holder has not
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effected the disposition of the securities requested to be registered shall be
paid by such Holder; and
(b) Company shall not be liable for any
fees, discounts or commissions to any underwriter or any fees or disbursements
of counsel for any underwriter in respect of the securities sold by such Holder.
6. Indemnification and Contribution.
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(a) In the event of any registration of any
Registrable Securities under the Securities Act pursuant to this Agreement,
Company shall indemnify and hold harmless the holder of such Registrable
Securities, such holder's directors and officers, and each other person
(including each underwriter) who participated in the offering of such
Registrable Securities and each other person, if any, who controls such holder
or such participating person within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such
holder or any such director or officer or participating person or controlling
person may become subject under the Securities Act or any other statute or at
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any alleged untrue
statement of any material fact contained, on the effective date thereof, in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such holder or such
director, officer or participating person or controlling person for any legal or
any other expenses reasonably incurred by such holder or such director, officer
or participating person or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that Company shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
actual or alleged untrue statement or actual or alleged omission made in such
Registration Statement, preliminary prospectus, prospectus or amendment or
supplement in reliance upon and in conformity with written information furnished
to Company by such holder specifically for use therein or (in the case of any
registration pursuant
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to Section 2) so furnished for such purposes by any underwriter. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such holder or such director, officer or participating person or
controlling person, and shall survive the transfer of such securities by such
holder.
(b) Each Holder, by acceptance hereof,
agrees to indemnify and hold harmless Company, its directors and officers and
each other person, if any, who controls Company within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which Company or any such director or officer or any such person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon information in writing provided to
Company by such Holder specifically for use in the following documents and
contained, on the effective date thereof, in any Registration Statement under
which securities were registered under the Securities Act at the request of such
holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto. Notwithstanding the provisions of this
paragraph (b) or paragraph (c) below, no Holder shall be required to indemnify
any person pursuant to this Section 6 or to contribute pursuant to paragraph (c)
below in an amount in excess of the amount of the aggregate net proceeds
received by such Holder in connection with any such registration under the
Securities Act.
(c) If the indemnification provided for in
this Section 6 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission
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to state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
7. Certain Limitations on Registration Rights. Notwithstanding
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the other provisions of this Agreement:
(a) Company shall not be obligated to register the
Registrable Securities of any Holder if, in the opinion of counsel to Company
reasonably satisfactory to the Holder and its counsel (or, if the Holder has
engaged an investment banking firm, to such investment banking firm and its
counsel), the sale or other disposition of such Holder's Registrable Securities,
in the manner proposed by such Holder (or by such investment banking firm), may
be effected without registering such Registrable Securities under the Securities
Act; and
(b) Company shall not be obligated to register the
Registrable Securities of any Holder pursuant to Section 2 if Company has had a
registration statement, under which such Holder had a right to have its
Registrable Securities included pursuant to Section 2 or 3, declared effective
within one year prior to the date of the request pursuant to Section 2;
provided, however, that if any Holder elected to have shares of its Registrable
Securities included under such registration statement but some or all of such
shares were excluded pursuant to the penultimate sentence of Section 3, then
such one-year period shall be reduced to six months.
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(c) Company shall have the right to delay
the filing or effectiveness of a registration statement required pursuant to
Section 2 hereof during one or more periods aggregating not more than 60 days in
any twelve-month period in the event that (i) Company would, in accordance with
the advice of its counsel, be required to disclose in the prospectus information
not otherwise then required by law to be publicly disclosed and (ii) in the
judgment of Company's Board of Directors, there is a reasonable likelihood that
such disclosure, or any other action to be taken in connection with the
prospectus, would materially and adversely affect any existing or prospective
material business situation, transaction or negotiation or otherwise materially
and adversely affect Company.
8. Selection of Managing Underwriters. The managing
----------------------------------
underwriter or underwriters for any offering of Registrable Securities to be
registered pursuant to Section 2 shall be selected by the holders of a majority
of the shares being so registered and shall be reasonably acceptable to Company.
9. Restrictions on Sale After Public Offering. Except for
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transfers made in transactions exempt from the registration requirements under
the Securities Act (other than Rule 144 thereunder), Company and each Holder
hereby agree not to offer, sell, contract to sell or otherwise dispose of any of
their Registrable Securities within 180 days after the date of any final
prospectus relating to a public offering of Common Stock, if underwritten,
whether by Company or by any Holders, except pursuant to such prospectus or with
the written consent of the managing underwriter or underwriters for such
offering.
10. Miscellaneous.
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(a) No Inconsistent Agreements. Company will not
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hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders in this Agreement. Except as
described in Schedule 10(a), Company has not previously entered into any
agreement with respect to any of its securities granting any registration rights
to any person.
(b) Remedies. Each Holder, in addition to being
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entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
Company
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agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
(c) Amendments and Waivers. Except as otherwise
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provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departure from the provisions hereof
may not be given unless Company has obtained the written consent of the Majority
Holders.
(d) Notice Generally. Any notice, demand, request,
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consent, approval, declaration, delivery or other communication hereunder to be
made pursuant to the provisions of this Agreement shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy answerback, addressed as follows:
(i) If to any Holder, at its last known address
appearing on the books of Company maintained for such purpose.
(ii) If to Company, at
Marketing Services Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by
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telecopy answerback or three Business Days after the same shall have been
deposited in the United States mail.
(e) Successors and Assigns. This Agreement shall
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inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto including any person to whom Registrable Securities are
transferred.
(f) Headings. The headings in this Agreement are
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for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law; Jurisdiction. This Agreement
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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
10(d) hereof. The parties hereto waive all right to trial by jury in any action
or proceeding to enforce or defend any rights hereunder.
(h) Severability. Wherever possible, each
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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
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
(i) Entire Agreement. This Agreement,
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together with the Purchase Agreement, represents the complete agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MARKETING SERVICES GROUP, INC.
By: _______________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By: _______________________________
Name:
Title:
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