0000014280-01-500040.txt : 20011031
0000014280-01-500040.hdr.sgml : 20011031
ACCESSION NUMBER: 0000014280-01-500040
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011029
FILED AS OF DATE: 20011029
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MARKETING SERVICES GROUP INC
CENTRAL INDEX KEY: 0000014280
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389]
IRS NUMBER: 880085608
STATE OF INCORPORATION: NV
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-01768
FILM NUMBER: 1769083
BUSINESS ADDRESS:
STREET 1: 333 SEVENTH AVENUE
STREET 2: 20TH FLOOR
CITY: NEW YORK
STATE: NY
ZIP: 10001
BUSINESS PHONE: 917-339-7200
MAIL ADDRESS:
STREET 1: 333 SEVENTH AVENUE
CITY: NEW YORK
STATE: NY
ZIP: 10001
FORMER COMPANY:
FORMER CONFORMED NAME: ALL-COMM MEDIA CORP
DATE OF NAME CHANGE: 19950823
FORMER COMPANY:
FORMER CONFORMED NAME: BRISTOL HOLDINGS INC
DATE OF NAME CHANGE: 19920518
FORMER COMPANY:
FORMER CONFORMED NAME: SPORTS TECH INC
DATE OF NAME CHANGE: 19920703
10-K/A
1
form10ka.txt
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to_______________________
Commission file number 0-16730
MARKETING SERVICES GROUP, INC.
(Name of small business issuer in its charter)
Nevada 88-0085608
------ ----------
(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification No.)
333 Seventh Avenue, 20th Floor
New York, New York 10001
------------------ --------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (917) 339-7100
--------------
Securities registered pursuant to Section 12(b) of the Act: None
--------------
Securities registered pursuant to Section 12(g) of the Act:
--------------
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
The issuer's revenues for its fiscal year ended June 30, 2001 are $127,722,689.
As of October 22, 2001, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $20,625,647.
As of October 22, 2001, there were 5,620,603 shares of the Registrant's common
stock outstanding.
Introduction
------------
On September 28, 2001, Marketing Services Group, Inc. ("MKTG" or the "Company"),
filed with the Securities and Exchange Commission (the "Commission") its Annual
Report on Form 10-K for its fiscal year June 30, 2001 (the "2001 Form 10-K").
The information called for by items 10, 11, 12 and 13 of Part III of Form 10-K
was not included in the body of the 2001 Form 10-K as filed, but was
incorporated by reference to the Company's Proxy Statement which was expected to
be filed with the Commission within the 120-day period. Because the Company is
not in fact filing its Proxy Statement within such 120 day period, this Form
10-K/A amends the 2001 Form 10-K by deleting therefrom the caption and first
paragraph and substituting therefore the following replacements for Items 10,
11, 12 and 13.
Item 10 - Executive Officers and Directors of the Registrant
------------------------------------------------------------
The Company's executive officers and directors and their positions with MKTG are
as follows:
Name Age Position
--------------------------- --- ----------------------------------
Alan I. Annex 39 Director and Secretary
J. Jeremy Barbera 45 Chairman of the Board of Directors
and Chief Executive Officer
David Greenspan 44 Chief Operating Officer
Cindy H. Hill 32 Chief Accounting Officer
Thomas Smith 54 Chief Operating Officer
John T. Gerlach 69 Director
Seymour Jones 70 Director
C. Anthony Wainwright 68 Director
Mr. Annex has been a Director and Secretary of the Company since May 1997. Mr.
Annex is a member of the M&A Committee of the Board of Directors. Mr. Annex has
been a partner in the law firm of Greenberg Traurig LLP since August 2000, where
he practices corporate and securities law. Greenberg Traurig is the Company's
legal counsel. Prior thereto, he was a partner in the law firm Camhy Karlinsky &
Stein LLP from July 1995 to July 2000. From July 1994 to June 1995, Mr. Annex
was Counsel to said firm. Prior thereto he was associated with Proskauer Rose,
LLP.
Mr. Barbera has been Chairman of the Board and Chief Executive since April 1997,
and served as a Director and officer since October 1996 when they acquired MSGI
Direct - New York in an exchange of stock. He founded MSGI Direct - New York in
1987, which was twice named to the Inc. 500 list of the fastest growing private
companies in America. Prior to founding MSGI Direct - New York, Mr. Barbera held
various management positions at Lincoln Center for the Performing Arts as well
as scientific research positions at NASA/Goddard Space Flight Center yielding 20
years of experience in the areas of entertainment marketing and database
management services. Mr. Barbera is a Physicist educated at New York University,
and graduated from the MIT Enterprise Forum at the Sloan School of Management.
2
Mr. Greenspan has been Chief Operating Officer since August 2001. Prior thereto
he was Chief Integration Officer from May 2000 to August 2001. Prior to joining
the Company, he co-founded and served as Executive Vice President of Clemente,
Greenspan & Co. Mr. Greenspan has spent almost 20 years providing strategic
marketing, and operational advice to both small and large organizations. He has
broad-based experience helping management: devise acquisition and exit
strategies, hone corporate vision, lead product development initiatives,
integrate processes, and deliver on operational goals.
Ms. Hill has been Chief Accounting Officer of the Company since January 2000,
prior thereto she was Chief Financial Officer of the Company from June 1998 to
December 1999, and Corporate Controller of the Company from January to May 1998.
Prior thereto, she was a manager in the business assurance division of
PricewaterhouseCoopers, LLP, where she was employed for the previous six years.
Ms. Hill is a Certified Public Accountant.
Mr. Smith has been Chief Operating Officer since August 2001. Prior thereto he
was Senior Vice President of Northeast Operations from February 2001 to July
2001 and has been the President of the Company's subsidiary, MSGI Direct -
Boston, Inc. since November 1999. Prior thereto he was a partner at Customer
Management Group from August 1999 to October 1999, he was an Executive Vice
President of CPS Direct from October 1995 to August 1999 and prior to that he
was Senior Vice President of Sales and Marketing with Harte-Hankes from April
1984 to October 1995. Mr. Smith is a seasoned direct marketing executive with
over 22 years experience.
Mr. Gerlach has been a Director of the Company since December 1997. Mr. Gerlach
is the chairman of the M&A Committee and the chairman of the Audit Committee and
a member of the Compensation Committee of the Board of Directors. He is
presently Senior Executive Professor of the graduate business program and an
associate professor of finance at Sacred Heart University in Fairfield, CT.
Previously, Mr. Gerlach was a Director in Bear Stearns' corporate finance
department, with responsibility for mergers and financial restructuring
projects; he was President and Chief Operating Officer of Horn & Hardart,
supervising restaurant and mail order subsidiaries, including Hanover Direct;
and he was the Founder and President of Consumer Growth Capital, a venture
capital firm. Mr. Gerlach also serves as a director for Uno Restaurant Co.; SAFE
Inc.; Cycergie (a French company); Akona Corp.; the Board of Regents at St.
John's University in Collegeville, MN.
Mr. Jones has been a Director of the Company since June 1996. Mr. Jones is a
member of the Audit Committee. Since September 1993, Mr. Jones has been a
professor of accounting at New York University. From April 1974 to September
1995, Mr. Jones was a senior partner of the accounting firm of
PricewaterhouseCoopers L.L.P. Mr. Jones has over 40 years of public accounting
experience including experience as an arbitrator and as an expert witness,
particularly in the areas of fraud, mergers and acquisitions and accounting
matters. Mr. Jones also functions as a consultant to Milberg Factors, CHF
Industries, Dubilier & Co., and World Diagnostics, Inc. Mr. Jones also serves as
a director for Reliance Bank.
Mr. Wainwright has been a Director of the Company since May 1991. Mr. Wainwright
is the chairman of the Compensation Committee of the Board of Directors. Mr.
Wainwright is currently Vice Chairman of the advertising agency McKinney &
Silver and was Chairman of the advertising firm Harris Drury Cohen, Inc., from
1995 to 1997. From 1994 to 1995, he served as a Chairman with Cordient PLC's
Compton Partners, a unit of the advertising firm Saatchi &
3
Saatchi World Advertising, and, from 1989 to 1994, as Chairman and Chief
Executive Officer of Campbell Mithun Esty, a unit of Saatchi & Saatchi in New
York. Mr. Wainwright also serves as a director of Audio Visual Service Corp.,
Del Webb Corporation, American Woodmark and, Danka P.L.C.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission (the
"Commission") and the NASDAQ Market. Officers, directors and greater than ten
percent stockholders are required by the Commission's regulations to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has received
and written representations from certain reporting persons that they were not
required to file reports on Form 5 for the fiscal year ended June 30, 2000, the
Company believes that all its officers, directors and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during the fiscal year ended June 30, 2001.
Item 11 - Executive Compensation:
---------------------------------
The following table provides certain information concerning compensation of the
Company's Chief Executive Officer and any other executive officer of the Company
who received compensation in excess of $100,000 during the fiscal year ended
June 30, 2001 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Fiscal Securities
Year Underlying
Ended Annual Annual Options/
Name and Principal June 30, Salary ($) Bonus SARs (#)
------------------ -------- ---------- ----- --------
Position
--------
J. Jeremy Barbera (1) 2001 456,642 - -
Chairman of the 2000 356,730 - 137,500
Board and CEO 1999 298,077 - -
Michael Dzvonik (2) 2001 300,000 - -
Former Chief 2000 83,695 - 41,667
Operating Officer
Rudy Howard (3) 2001 300,000 150,000 -
Former Chief 2000 117,692 - 62,500
Financial Officer
Cindy Hill 2001 200,000 - -
Chief Accounting 2000 135,336 - 16,667
Officer 1999 110,096 - -
4
SUMMARY COMPENSATION TABLE CONTINUED
Fiscal Securities
Year Underlying
Ended Annual Annual Options/
Name and Principal June 30, Salary ($) Bonus SARs (#)
------------------ -------- ------------ ----- --------
Position
--------
David Greenspan (4) 2001 250,000 - 33,334
Chief Operating 2000 42,308 - -
Officer
Thomas Smith (5) 2001 195,519 - -
Chief Operating 2000 79,773 - 4,167
Officer
----------
(1) The annual salary for Mr. Barbera commencing January 1, 2000 was raised
from $350,000 to $500,000. Notwithstanding, Mr. Barbera forgave this
increase for the period January 2000 through December 2000. Approximately
$20,000 of the total amount included in Other Annual Compensation
represents amounts paid for parking on behalf of Mr. Barbera.
(2) The annual salary for Mr. Dzvonik was $300,000 for 2000. Due to the
Company's acquisition of Grizzard Communications Group, Inc. ("Grizzard')
on March 22, 2000, Mr. Dzvonik's annual compensation for 2000 only reflects
approximately three months salary. On July 31, 2001 in connection with the
sale of Grizzard, Mr. Dzvonik ceased being an officer of MKTG and Mr.
Dzvonik elected to remain with the Grizzard entity.
(3) The annual salary for Mr. Howard was $300,000 for 2000. Due to his
appointment in February 2000, Mr. Howard's annual compensation for 2000
only reflects approximately four months salary. In August 2001, Mr. Howard
was terminated without cause and is no longer an officer of the Company.
(4) The annual salary for Mr. Greenspan was $250,000 for 2000. Due to his
appointment in May 2000, Mr. Greenspan's annual compensation for 2000 only
reflects approximately two months salary.
(5) The annual salary for Mr. Smith was $135,000 in 1999. Due to his
appointment in November 1999, Mr. Smith's annual compensation for 1999 only
reflects approximately eight months salary.
5
STOCK OPTION GRANTS
OPTIONS GRANTED IN THE LAST FISCAL YEAR (1)
Individual Grant
----------------------------------------------------------------------------------------------
Number of % of Total Options/
Securities SARs Granted to Exercise or
Underlying Options/ Employees in Fiscal Base Price Expiration Grant
SARs Granted (#) Year (3) ($ per share) Date Date Value
---------------- -------- ------------- ---- ----------
David Greenspan (2) 33,334 21% $26.625 07/10 $26.625
-----------------------
(1) All such numbers have been adjusted to reflect the Company's one-for-six
reverse stock split effective on October 15, 2001.
(2) Mr. Greenspan's options are exercisable as follows: 959 on July 1, 2000,
and 925 per month for 35 months.
(3) During the fiscal year ended June 30, 2001, the Company granted options to
purchase a total of 155,834 shares of Common Stock.
AGGREGATE OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth information regarding the number and value
of securities underlying unexercised stock options held by the Named
Executive Officers as of June 30, 2001. All option amounts have been
adjusted to reflect the Company's one-for-six reverse stock split which
became effective on October 15, 2000.
Number of Securities Value of unexercised
Underlying Unexercised In-the-Money Options/
Number of Options/SARs at Fiscal SARs at Fiscal Year
Securities Value Year End (#) End ($)(1)
Exercised (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
J. Jeremy Barbera - - 235,417/68,750 0/0
Michael Dzvonik - - 13,889/27,778 0/0
Rudy Howard - - 12,732/8,102 0/0
Cindy Hill - - 17,779/15,555 0/0
David Greenspan - - 11,114/22,220 0/0
Thomas Smith - - 2,201/1,967 0/0
-----------
(1) Fair market value of $4.92 per share at June 30, 2001 was used to determine
the value of in-the-money options.
6
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer fee of
$25,000, $1,000 for each Board Meeting attended, $500 for each standing
committee meeting attended and $500 for each standing committee meeting for the
Chairman of such Committee. Such Directors will also be reimbursed for their
reasonable expenses for attending board and committee meetings, and will receive
an annual grant of options on June 30 of each year to acquire 10,000 shares of
common stock for each fiscal year of service, at an exercise price equal to the
fair market value on the date of grant. Any Director who is also an employee of
the Company is not entitled to any compensation or reimbursement of expenses for
serving as a Director of the Company or a member of any committee thereof. Mr.
Annex has indicated that since his firm acts as counsel to the Company he would
waive that described cash and stock retainer. The Directors agreed to waive the
annual option grant for the fiscal year ended June 30, 2001.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
The Company has entered into employment agreements with each of its Named
Executive Officers.
Mr. Barbera was appointed to the position of Chairman of the Board, Chief
Executive Officer and President of MKTG by the Board, effective March 31, 1997.
Stephen Killeen assumed the position of President upon his appointment in July
2000. Mr. Barbera had previously served as President and CEO of MSGI Direct -
New York, Inc. Mr. Barbera entered into a new employment agreement effective
January 1, 2000. The agreement provides for a three year term expiring December
31, 2002 (the "Employment Term"). The base salary during the employment term is
$500,000 for the first year and an amount not less than $500,000 for the
remaining two years. Mr. Barbera is eligible to receive bonuses equal to 100% of
the base salary each year at the determination of the Compensation Committee of
the Board of Directors of the Company, based on earnings and other targeted
criteria. Mr. Barbera has forgone the increase in his salary from January 1,
2000 through December 31, 2000. On May 27, 1997, Mr. Barbera was granted options
to acquire 166,667 shares of Common Stock of the Company; 55,556 exercisable at
$15.75 per share, 55,556 exercisable at $18.00 per share and 55,556 exercisable
at $21.00 per share. One third of the options in each tranche vest immediately
and one third of each tranche will become available on each of the next two
anniversary dates. On June 30, 2000, Mr. Barbera was granted options to acquire
137,500 shares of Common Stock of the Company at $26.625 per share; 68,750
exercisable on December 31, 2000; 34,375 exercisable on December 31, 2001 and
2002. If Mr. Barbera is terminated without cause (as defined in the agreement),
then MKTG shall pay him a lump sum payment equal to 2.99 times the compensation
paid during the preceding 12 months and all outstanding stock options shall
fully vest and become immediately exercisable.
Mr. Barbera has agreed in his employment agreement (i) not to compete with MKTG
or its subsidiaries, or to be associated with any other similar business during
the employment term, except that he may own up to 5% of the outstanding common
stock of certain corporations, as described more fully in the employment
agreement, and (ii) upon termination of employment with MKTG and its
subsidiaries, not to solicit or encourage certain clients of MKTG or its
subsidiaries to cease doing business with MKTG and its subsidiaries and not to
do business with any other similar business for a period of three years from the
date of such termination.
7
Mr. Howard entered into an employment agreement effective January 1, 2000
providing for his employment as Chief Financial Officer of MKTG. The agreement
provided for a three year term expiring December 31, 2003 (the "Employment
Term"). The base salary during the Employment Term was $300,000 for the first
year and not less than $300,000 for the remaining two years. Mr. Howard was
eligible to receive bonuses equal to 50% of the base salary each year at the
determination of the Audit Committee of the Board of Directors of the Company,
based on earnings and other targeted criteria. On January 27, 2000, Mr. Howard
was granted options to acquire 41,667 shares of Common Stock of the Company at
$17.625 per share which were exercisable equally over a period of 24 months
beginning January 27, 2000. On June 30, 2000, Mr. Howard was granted options to
acquire 20,834 shares of Common Stock of the Company at $4.4375 per shares which
were exercisable equally over a period of 24 months beginning January 27, 2000.
On January 2, 2001, the January 2000 grant of 41,667 options was cancelled. In
August 2001, Mr. Howard was terminated without cause (as defined in the
agreement), and in accordance with the employment agreement MKTG paid him a lump
sum payment of $1,345,500, equal to 2.99 times the compensation paid during the
preceding 12 months and all out outstanding stock options became fully vested
and immediately exercisable.
Ms. Hill entered into an employment agreement effective January 1, 2000,
providing for employment as Chief Accounting Officer of the Company. The
agreement provides for a two year term expiring on December 31, 2001 (the
"Employment Term"). The base salary during the Employment Term is $200,000 for
the first year and not less than $200,000 for the second year. Ms. Hill is
eligible to receive raises and bonuses based upon the achievement of earnings
and other targeted criteria if and as determined by the Compensation Committee
of the Board of Directors. The agreement also provide for the granting to Ms.
Hill of options to acquire Common Stock if and as determined by the Compensation
Committee. If Ms. Hill is terminated without cause (as defined in the
agreement), then MKTG shall pay her a lump sum payment equal to two times the
then base rate.
Ms. Hill has agreed in her employment agreement (i) not to compete with MKTG or
to be associated with any other similar business during the Employment Term,
except that she may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in her employment agreement, and (ii) upon
termination of employment with MKTG, not to solicit or encourage certain clients
of MKTG (as more fully described in the relevant employment agreement), to cease
doing business with MKTG, and not to do business with any other similar
business, for a period of three years from the date of such termination.
Mr. Killeen entered into an employment agreement effective July 7, 2000
providing for his employment as President of MKTG. The agreement provided for a
three year term expiring June 30, 2003 (the "Employment Term"). The base salary
during the Employment Term was $400,000 for the first year and not less than
$400,000 for the remaining two years. Mr. Killeen was eligible to receive
bonuses equal to 50% of the base salary each year at the determination of the
Compensation Committee of the Board of Directors of the Company, based on
earnings and other targeted criteria. On July 7, 2000, Mr. Killeen was granted
options to acquire 66,667 shares of Common Stock of the Company at $4.50 per
share of which one third were exercisable on July 7, 2000 and the remaining two
thirds vested equally over 24 months beginning August 7, 2000. In February 2001,
the employment of Mr. Killeen was terminated without cause (as defined in the
agreement), and MKTG is obligated to pay him a payment of $1,794,000 equal to
2.99 times the compensation paid during the preceding 12 months and all out
outstanding stock options became fully vested and immediately exercisable.
8
Mr. Dzvonik entered into an employment agreement effective March 22, 2000
providing for his employment as Chief Operating Officer of MKTG. The agreement
provided for a three year term expiring March 21, 2003 (the "Employment Term").
The base salary during the Employment Term was $300,000 for the first year and
not less than $300,000 for the remaining two years. Mr. Dzvonik was eligible to
receive bonuses equal to 50% of the base salary each year at the determination
of the Compensation Committee of the Board of Directors of the Company, based on
earnings and other targeted criteria. On March 22, 2000, Mr. Dzvonik was granted
options to acquire 250,000 shares of Common Stock of the Company at $4.4375 per
share of which one third are exercisable on March 22, 2001, one third on March
22, 2002 and one third on March 22, 2003. In July 2001, in connection with the
sale of its wholly owned subsidiary Grizzard, Mr. Dzvonik ceased being an
Officer of MKTG and Mr. Dzvonik elected to remain with the Grizzard entity.
Mr. Greenspan entered into an employment agreement effective May 1, 2000
providing for his employment as Chief Integration Officer of MKTG. The agreement
provides for a three year term expiring on May 1, 2003 (the "Employment Term").
In August 2001, Mr. Greenspan was named Co-Chief Operating Officer. The base
salary during the Employment Term is $250,000 per year. Mr. Greenspan is
eligible to receive bonuses based upon achievement of earnings and other
targeted criteria if and as determined by the Compensation Committee of the
Board of Directors. The agreement also provides for the granting to Mr.
Greenspan of options to acquire Common Stock if and as determined by the
Compensation Committee. If Mr. Greenspan is terminated without cause (as defined
in the agreement), then MKTG shall pay him a lump sum payment equal to one year
of his salary at the then base rate.
Mr. Greenspan has agreed in his employment agreement (i) not to compete with
MKTG or to be associated with any other similar business during the Employment
Term, except that he may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in his employment agreement, and (ii) upon
termination of employment with MKTG, not to solicit or encourage certain clients
of MKTG (as more fully described in the relevant employment agreement) to cease
doing business with MKTG and not to do business with any other similar business,
for a period of three years from the date of such termination.
Mr. Smith entered into an employment agreement effective April 1, 2001 providing
for his employment as Executive Vice President of North East Operations. In
August 2001, Mr. Smith was named Co-Chief Operating Officer. The agreement
provides for a term expiring December 31, 2002 ("Employment Term"). The base
salary during the Employment Term is $250,000. Mr. Smith is eligible to receive
bonuses at the determination of the Compensation Committee of the Board of
Directors of the Company, based on earnings and other targeted criteria. If Mr.
Smith is terminated without cause (as defined in the agreement), then MKTG shall
pay him a lump sum payment equal to the base salary for a period of six months.
Mr. Smith has agreed in his employment agreement (i) not to compete with MKTG or
to be associated with any other similar business during the Employment Term,
except that he may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in his employment agreement, and (ii) upon
termination of employment with MKTG, not to solicit or encourage certain clients
of MKTG (as more fully described in the relevant employment agreement) to cease
doing business with MKTG and not to do business with any other similar business,
for a period of three years from the date of such termination.
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are C. Anthony Wainwright, and John
Gerlach. Mr.Wainwright is Chairman of the Committee. There were no compensation
interlocks.
Mr. Gerlach and Mr. Wainwright served as members of the Compensation Committee
of the Company's Board of Directors during all of fiscal year 2001. None of such
persons is an officer or employee, or former officer or employee of the Company
or any of its subsidiaries.
No interlocking relationships exist between the member of the Company's Board of
Directors or Compensation Committee and the Board of Directors or Compensation
Committee of any other Company, nor has any such relationship existed in the
past.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of October 29, 2001 by: (i) each Director and each
of the Named Executive Officers; (ii) all executive officers and Directors of
the Company as a group; and (iii) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock. (All such
numbers have been adjusted to reflect the Company's one-for-six reverse stock
split which became effective on October 15, 2001).
Amount and Nature of
Common Stock
Beneficially Owned
Name and Address of Beneficial Holder (1) Number Percent
----------------------------------------- ------ -------
Directors and Named Executive Officers:
J. Jeremy Barbera(2).............................................. 668,750 8.62%
Michael Dzvonik(3)................................................ 47,180 *
David Greenspan (4)............................................... 18,419 *
Rudy Howard(5).................................................... 20,834 *
Cindy Hill(6)..................................................... 21,390 *
Thomas Smith(7)................................................... 6,946 *
Alan I. Annex(8).................................................. 14,604 *
Seymour Jones(9).................................................. 17,727 *
C. Anthony Wainwright(10)......................................... 12,402 *
John Gerlach(11).................................................. 19,750 *
All Directors and Executive Officers as a group (12 persons)...... 847,998 14.17%
5% Stockholders:
GE Capital Corporation(12)........................................ 2,501,771 32.23%
CMGI Inc.(13)..................................................... 386,848 4.98%
---------------
* Less than 1%
10
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Exchange Act. All information with respect to beneficial
ownership has been furnished by the respective Director, executive officer
or stockholder, as the case may be. Except as otherwise noted, each person
has an address in care of the Company.
(2) Includes 235,417 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(3) Includes 13,889 beneficially owned shares of Common Stock issuable upon the
exercise of options of which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(4) Includes 16,669 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(5) Includes 20,834 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(6) Includes 20,557 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(7) Includes 2,779 beneficially owned shares of Common Stock Issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(8) Includes 13,834 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(9) Includes 11,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29 October 29, 2001.
(10) Includes 10,834 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(11) Includes 17,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of October 29, 2001.
(12) Includes 1,778,334 beneficially owned shares of Common Stock issuable upon
the exercise of warrants which are currently exercisable or are exercisable
with 60 days of October 29, 2001. The address for the 5% Stockholder is as
follows: 120 Long Ridge Road, Stamford, Connecticut 06927.
(13) The address for the 5% Stockholder is as follows: 100 Brickstone Square,
Andover, MA 01810.
11
Item 13 - Certain Relationships and Related Transactions
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Transactions with Mr. Barbera: During the year end June 30, 2001, the Company
entered into a promissory note agreement with Mr. Barbera for up to $1,000,000,
due and payable at maturity, January 1, 2002. The promissory note bears interest
at 15% per annum and includes certain prepayment penalties. During the year
ended June 30, 2001, the Company received advances of $900,000 and made
repayments of $650,000. As of June 30, 2001, there was approximately $250,000 of
principal outstanding and $150,000 of accrued interest and penalties. In August
2001, the entire principal and accrued interest was paid.
Transactions with Mr. Annex: Mr. Annex, Secretary and a Director of the Company,
is a partner in the law firm of Greenberg Traurig LLP, which provides legal
services to the Company. The Company incurred expenses aggregating approximately
$1,015,000 during fiscal 2001. Mr. Annex has informed the Company that such fees
did not represent more than 5% of such firm's revenues for its fiscal years
ending during such periods. The Company believes that the fees for services
provided by the law firm were at least as favorable to the Company as the fees
for such services from unaffiliated third parties.
Transactions with 5% Stockholders: In 1999 a lawsuit under Section 16(b) of the
Securities Exchange Act of 1934 was commenced against General Electric Capital
Corporation ("GECC") by Mark Levy, derivatively on behalf of the Company, to
recover short swing profits allegedly obtained by GECC in connection with the
purchase and sale of MKTG securities. The case is pending in the name of Mark
Levy v. General Electric Capital Corporation, in the United States District
Court for the Southern District of New York, Civil Action Number 99 Civ. 10560
(AKH). While the Levy case was pending, the Company and GECC engaged in
negotiations pertaining to the warrant, dated December 24, 1997, in favor of
GECC to purchase, at consideration of $0.01 per share, up to 1,778,334 shares of
MKTG common stock subject to certain adjustments. Extensive negotiations among
counsel for the plaintiff, counsel for the Company, and counsel for GECC, as
well as direct negotiations between the Company and GECC, resulted in a
preliminary settlement of the court action against GECC for alleged short swing
profits and all other issues under the warrant. The parties entered into a
stipulation of settlement, subject to court approval. In August 2001, the court
declined to approve the stipulation of settlement. The plaintiff has filed a
motion for summary judgment. Accordingly, the Levy case remains pending and
there are no changes to the warrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
MARKETING SERVICES GROUP, INC.
By: /s/ Jeremy Barbera
------------------------------------
Name : J. Jeremy Barbera
Title : Chief Executive Officer
By: /s/ Cindy H. Hill
---------------------------
Name : Cindy H. Hill
Title : Chief Accounting Officer
Date: October 29, 2001