-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PVBNzozJfH5fFxlz7vG8GgMuPi6oBnd/IIYbdtA8p3/Eq9D+X71HjKuKkA5fgG9i NJYWMCBy7MIFbfu/P44MPw== 0000014280-98-000044.txt : 19981029 0000014280-98-000044.hdr.sgml : 19981029 ACCESSION NUMBER: 0000014280-98-000044 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19981028 SROS: NASD 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: 10KSB/A SEC ACT: SEC FILE NUMBER: 001-01768 FILM NUMBER: 98731703 BUSINESS ADDRESS: STREET 1: 333 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 2125947688 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: SPORTS TECH INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL HOLDINGS INC DATE OF NAME CHANGE: 19920518 10KSB/A 1 FORM 10KSBA UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/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, 1998 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 (I.R.S. Employer incorporation or organization) 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: (212) 594-7688 -------------- Securities registered pursuant to Section 12(b) of the Act: None -------------- Securities registered pursuant to Section 12(g) of the Act: None -------------- 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-B 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-KSB or any amendment to this Form 10-KSB. [ ] The issuer's revenues for its fiscal year ended June 30, 1998 are $51,174,063. As of October 19, 1998, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $29,755,934. As of October 19, 1998, there were 13,023,005 shares of the Registrant's common stock outstanding. Transitional Small Business Disclosure Format (check one): Yes No X --- --- Introduction - ------------ On September 28, 1998, Marketing Services Group, Inc. ("MSGI" or the "Company"), filed with the Securities and Exchange Commission (the "Commission") its Annual Report on Form 10-KSB for its fiscal year June 30, 1998 (the "1998 Form 10-KSB"). The information called for by items 9, 10, 11 and 12 of Part III of Form 10-KSB was not included in the body of the 1998 Form 10KSB 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 with in such 120 day period, this Form 10-KSB/A amends the 1998 Form 10-KSB by deleting therefrom the caption and first paragraph and substituting therefore the following replacements for Items 9, 10, 11 and 12. Item 9 - Executive Officers and Directors of the Registrant and Significant Employees ------------------------------------ The Company's executive officers, directors and significant employees and their positions with MSGI are as follows: Name Age Position - -------------------- --- ---------------------------------------------------- J. Jeremy Barbera 42 Chairman of the Board of Directors, Chief Executive Officer, President and Chief Operating Officer Cindy H. Hill 29 Chief Financial Officer Scott Anderson 41 Vice President, Finance and Treasurer Alan I. Annex 36 Director and Secretary James Brown 33 Director S. James Coppersmith 65 Director John T. Gerlach 65 Director Seymour Jones 67 Director Michael E. Pralle 42 Director C. Anthony Wainwright 65 Director Robert M. Budlow 37 Vice President of MSGI and President of Metro Direct Janet Sautkulis 42 Chief Operating Officer, Metro Direct Krista Mooradian 32 President, SD&A Thomas Scheir 45 Chief Operating Officer, SD&A Stephen M. Reustle 43 President and Chief Executive Office, Media Marketplace, Inc. Brian Coughlan 30 President, Pegasus Internet, Inc. Mr. Barbera has been Chairman, Chief Executive and Operating Officer and President of the Company since April 1997 and was a Director and Vice President of the Company from October 1996 to April 1997. He has been Chief Executive Officer of Metro since its formation in 1987. Mr. Barbera has eighteen years of experience in data management services, and over twenty years of experience in the entertainment marketing area. Ms. Hill has been Chief Financial Officer of the Company since June 1, 1998, and was Corporate Controller of the Company from January to May 1998. Prior thereto, she was a manager in the Business Assurance Division of Coopers & Lybrand, LLP, where she was employed for the previous six years. Ms. Hill is a Certified Public Accountant Mr. Anderson has been Vice President, Finance since June 1, 1998, Treasurer since May 1997 and was Chief Financial Officer from May 1996 to May 1998, Controller from May 1995 to May 1996 and a Director of the Company from May 1996 to August 1996. Prior thereto, from December 1994 to April 1995, he was associated with the accounting firm of Coopers & Lybrand L.L.P. and, from 1998 to 1994, he was manager in the assurance department of an affiliate of the accounting firm of Deloitte & Touche LLP. Mr. Anderson is a Certified Public Accountant. Mr. Annex has been a Director and Secretary of the Company since May 1997. He has been a partner in the law firm of Camhy Karlinsky & Stein LLP since July 1995, where he practices corporate and securities law. Camhy Karlinsky & Stein LLP is the Company's legal counsel. From July 1994 to June 1995, Mr. Annex was Counsel to said firm. Prior thereto he was associated with Proskauer Rose, LLP. Mr. Annex is also a director of Pacific Coast Apparel, Inc. Mr. Brown has been a Director of the Company since February 1998. Mr. Brown is currently Vice President and Industry Leader in GE Capital's Equity Capital Group, where he is responsible for making strategic private equity investments. From 1994 to 1995, Mr. Brown joined Lehman Brothers in its Corporate Planning area to restructure the firm. From 1992 to 1994, Mr. Brown was with Bain & Co. where he consulted with Fortune 500 clients on strategic, operational and financial issues. Prior thereto, he was an analyst for CBS and AC Nielsen. Mr. Coppersmith has been a Director of the Company since June 1996. He was Chairman of the Board of Trustees of Boston's Emerson College from 1994 until his term expired in December 1997. Until his retirement in 1994, Mr. Coppersmith held various senior executive positions with Metromedia Broadcasting where he managed its television operations in Los Angeles, New York, and Boston and served as President and General Manager of Boston's WCVB-TV, an ABC affiliate owned by The Hearst Corporation. Mr. Coppersmith also serves as a director for B.J.'s Wholesale Club, Sun America Asset Management Corporation, Uno Restaurant Corp., Kushner-Locke, Inc., and The Boston Stock Exchange. Mr. Gerlach has been a Director of the Company since December 1997. He is presently Director of the graduate business program and an associate professor of finance at Sacred Heart University in Fairfield, CT. Previously, Mr. Gerlach was an Associate 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.; LB USA (subsidiary of a French company); Akona Corp.; the Board of Regents at St. John's University in Collegeville, MN; and is a member of an advisory board for the College of Business & Administration at Drexel University. Mr. Jones has been a Director of the Company since June 1996. Since September 1995, Mr. Jones has been a professor of accounting at New York University. Prior thereto, from April 1974 to September 1995, Mr. Jones was a senior partner of the accounting firm of Coopers & Lybrand, L.L.P. Mr. Jones has over 35 years of accounting experience and over ten years of experience as an arbitrator and as an expert witness, particularly in the area of mergers and acquisitions. Mr. Pralle has been a Director of the Company since May 1998. Mr. Pralle is currently the President of GE Capital's Equity Capital Group, with responsibility for making common equity, convertible preferred stock and debt investments in private and public companies in the US, Europe and Asia. He joined GE Capital in 1989 and, prior to his current appointment in 1996, was most recently President, GE Capital Asia Pacific. Before joining GE Capital, Mr. Pralle spent six years with management consultants, McKinsey & Co. in their London and Hong Kong offices. Mr. Wainwright has been a Director of the Company since August 1996 and was also a Director of the Company from the acquisition of SD&A until May 1996. Mr. Wainwright is currently Vice Chairman of the advertising agency McKinney & Silver and was Chairman and Chief Executive Officer of the advertising firm Harris Drury Cohen, Inc., from 1995 to 1996. From 1994 to 1995, he served as a senior executive with Cordient PLC's Compton Partners, a unit of the advertising firm Saatchi & 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 Caribiner International, Gibson Greetings, Inc., Del Webb Corporation and American Woodmark Corporation. Mr. Budlow has been Vice President of the Company since October 1996 and President of Metro since April 1997. Prior thereto, he was Executive Vice President and Chief Operating Officer of Metro since 1990. He has twelve years of experience in database management services and subscription, membership and donor renewal programs. Ms. Sautkulis serves as Chief Operating Officer of Metro Direct, having previously served as Executive Vice President. Prior to joining Metro Direct, she held various positions at Jetson Direct Mail and Belth Associates. Ms. Sautkulis has more than twenty years experience in database management, list brokerage and lettershop services specializing in the business-to-business sector. Ms. Mooradian has been President of SD&A since 1997. For the past five years, she has held various positions of increasing responsibility within SD&A. Mr. Scheir has been Vice President and Chief Operating Officer of SD&A since September 1996. Prior thereto, from 1990 to September 1996, he was Chief Financial Officer of SD&A, and from 1983 to 1990, he served as Business Manager of SD&A. Mr. Reustle has been President and Chief Executive Officer of MMI since December 1997, Managing Partner from June 1980 to December 1997 and Vice President of Finance from 1978 to 1980. Prior thereto, Mr. Reustle was a Certified Public Accountant at Arthur Andersen LLP, where he was employed from 1976 to 1978. Mr. Coughlan has been President of Pegasus Internet since June 1998. Having previously served as Creative Director, he brings over ten years of interactive design and project management experience to Pegasus. Compliance with Section 16(A) of the Exchange Act - ------------------------------------------------- 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 National 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, 1998, 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, 1998, except that Mr. Barbera, Mr. Pralle and Mr. Gerlach each made one late filing due to administrative timing errors on their part with respect to reporting repayment of convertible debt to Mr. Barbera and an initial filing upon being appointed to the Board of Directors for Messrs. Pralle and Gerlach. Item 10 - 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 $100,000 during the fiscal year ended June 30, 1998: SUMMARY COMPENSATION TABLE Fiscal Year Securities Ended Annual Annual Underlying Name and Principal Position June 30, Salary ($) Bonus($) Options/SARs(#) - --------------------------- ------- ---------- -------- --------------- J. Jeremy Barbera(1) (2) Chairman of the Board, 1998 198,077 50,000 CEO, President & COO 1997 120,883 1,000,000 Thomas Scheir(3) 1998 175,000 2,500 Executive VP, SD&A 1997 154,521 60,000 40,000 1996 128,461 60,000 12,500 Krista Mooradian(3) 1998 175,000 29,625 President, SD&A 1997 127,936 25,000 20,000 1996 85,092 29,372 5,375 Robert N. Budlow(4) 1998 144,231 President, Metro Direct 1997 93,750 Janet Sautkulis(4) 1998 144,231 COO, Metro Direct 1997 93,750 Stephen Reustle(5) 1998 145,833 President & CEO, MMI - ---------- (1) Mr. Barbera was appointed Chairman of the Board, Chief Executive Officer, President and Chief Operating Officer effective March 31, 1997. Prior thereto, commencing with the October 1, 1996 acquisition of Metro, he was Vice President of MSGI and President and CEO of Metro. Pursuant to an employment agreement dated May 27, 1997, his annual salary increased from $150,000 to $250,000 through May 31, 1998. As of June 30, 1997, Mr. Barbera's salary reflects earnings for the nine months from the date of Metro's acquisition. (2) During fiscal year end June 30, 1998, Mr. Barbera forgave all interest due him on a note payable and forgave an increase in his annual salary from May 27, 1997 to December 31, 1997. In consideration for this, the Board of Directors granted Mr. Barbera options to acquire 50,000 shares of Common Stock at the then current fair market price. (3) During fiscal year end June 30, 1998, Mr. Scheir and Ms. Mooradian forgave an increase in their salaries from January 1, 1998 to June 30, 1998. Effective July 1, 1998, their salaries were increased in accordance with their respective employment agreements. (4) The annual salaries for Mr. Budlow and Ms. Sautkulis are $125,000 each for 1997. Due to the acquisition of Metro on October 1, 1996, their annual compensation only reflects nine months of salary. During fiscal year end June 30, 1998, Mr. Budlow and Ms. Sautkulis forgave an increase in their salaries from October 1, 1997 to December 31, 1997. As of January 1, 1998, salaries were increased in accordance with their respective employment agreements. (5) The annual salary for Mr. Reustle is $250,000 for 1998. Due to the acquisition of Media Marketplace, Inc. on December 7, 1997, his annual compensation only reflects seven months of salary. STOCK OPTION GRANTS The table below provides information relating to stock options granted to the Named Executive Officers during the fiscal year ended June 30, 1998. OPTIONS GRANTED IN THE LAST FISCAL YEAR Individual Grant ---------------- Number of % of Total Exercise Securities Options/SARs or Base Underlying Granted to Price Options/SARs Employees in ($ per Expiration Name Granted (#) Fiscal Year(4) share(5)) Date - ---- ----------- -------------- --------- ---- J. Jeremy Barbera... 50,000 3.8% 4.6875 11/04 Thomas Scheir....... 2,500 .02% 4.1875 12/04 Krista Mooradian.... 29,625(1) 2.3% 4.1875 12/04 Robert Budlow....... 55,000(2) 4.2% 4.1875 12/04 Janet Sautkulis..... 55,000(3) 4.2% 4.1875 12/04 - ---------- (1) Ms. Mooradian's options are exercisable as follows: 10,000 options are available for exercise immediately, 10,000 options become available in August 1998, with the remaining 9,625 options exercisable in August 1999. (2) Mr. Budlow's options are exercisable as follows: 25,000 options are available for exercise immediately, 15,000 options become available in October 1998, with the remaining 15,000 options exercisable in October 1999. (3)Ms. Sautkulis' options are exercisable as follows: 25,000 options are available for exercise immediately, 15,000 options become available in October 1998, with the remaining 15,000 options exercisable in October 1999. (4)During the fiscal year ended June 30, 1998, all employees and all non-employee Directors of the Company received stock options for a total of 1,302,100 shares of Common Stock. (5)Exercise price is the closing price of the Common Stock as reported on The Nasdaq SmallCap Market on the date of the grant, unless otherwise identified. 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, 1998. Number of Securities Underlying Value of Unexercised Unexercised Options/SARs In-the-Money Options/ SARs at Fiscal Year End (#) at Fiscal Year End ($) (1) Name Exercisable/Unexercisable Exercisable/Unexercisable - ---- ------------------------- ------------------------- J. Jeremy Barbera.. 716,667/333,333 278,001/139,000 Thomas Scheir...... 55,000/0 50,495/0 Krista Mooradian... 35,375/19,625 23,989/0 Robert Budlow...... 25,000/30,000 0/0 Janet Sautkulis.... 25,000/30,000 0/0 - ---------- (1) Fair market value of $3.438 per share at June 30, 1998 was used to determine the value of in-the-money options. COMPENSATION OF DIRECTORS Commencing July 1, 1998, Directors who are not employees of the Company will receive an annual retainer fee of $10,000, $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 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 the described cash retainer. Pursuant to a resolution of the Board of Directors on May 27, 1997, non-employee members of the Board agreed to serve without cash compensation for fiscal 1998. It was agreed that each outside director be compensated with options to purchase 100,000 shares of common stock of the Company at an exercise price of $2.625 per share, with 50% immediately exerciseable, 25% exercisable on May 27, 1998 and 25% exercisable on May 27, 1999. Messrs. Annex, Coppersmith, Jones and Wainwright each received options to purchase 100,000 shares of Common Stock. Mr. Gerlach received options to purchase 50,000 shares of Common Stock at an exercise price of $4.50 per share with 1/3 immediately exercisable and 1/3 exercisable in December 1998 and 1/3 exercisable in December 1999 upon his appointment to the Board of Directors. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT The Company has entered into employment agreements with each of its named executives. Mr. Barbera was appointed to the position of Chief Executive Officer of MSGI by the Board, effective March 31, 1997. He had previously served as President and CEO of Metro under an employment contract dated October 1, 1996. Under the contract, Mr. Barbera's base salary was $150,000 for the first year of employment. On May 27, 1997, the Company amended and restated Mr. Barbera's employment contract, based on the additional responsibilities he assumed on March 31, 1997. Under the terms of the amended contract, Mr. Barbera's employment term is for three years beginning May 27, 1997, and is automatically renewable for an additional three year period, unless the Company or Mr. Barbera gives written notice; his amended annual base salary for the first year of the amended employment term is $250,000, with $300,000 for the second year and $350,000 for the third year. Mr. Barbera is also eligible to receive raises and bonuses in each year of the employment contract, at the determination of the Compensation Committee of the Board of Directors of the Company, based on earnings and other targeted criteria. On May 27, 1997, Mr. Barbera was granted options to acquire 1,000,000 shares of Common Stock of the Company; 333,334 exercisable at $2.625 per share, 333,333 exercisable at $3.00 per share and 333,333 exercisable at $3.50 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. In a separate agreement, Mr. Barbera forgave the increase in his annual salary from May 27, 1997 to December 31, 1997. Mr. Barbera has agreed in his employment agreement (i) not to compete with MSGI 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 MSGI and its subsidiaries, not to solicit or encourage certain clients of MSGI or its subsidiaries, to cease doing business with MSGI 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. Mr. Budlow and Ms. Sautkulis entered into separate employment agreements effective October 1, 1996, providing for employment as Executive Vice President & Chief Operating Officer of Metro and as Executive Vice President & General Manager of Metro, respectively. Each agreement provides for an initial term expiring on September 30, 1999 (the "Employment Term") and is renewable for an additional three-year term unless Metro or the employee gives written notice. The base salary for each of Mr. Budlow and Ms. Sautkulis during the Employment Term is $125,000 for the first year, $165,000 for the second year and $200,000 for the third year. Mr. Budlow and Ms. Sautkulis are each 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 agreements also provide for the granting to Mr. Budlow and Ms. Sautkulis of options to acquire Common Stock if and as determined by the Option Plan Committee. Each has agreed in his or her respective employment agreement (i) not to compete with Metro or to be associated with any other similar business during the Employment Term, except that may each own up to 5% of the outstanding Common Stock of certain corporations, as described more fully in the relevant employment agreement, and (ii) upon termination of employment with Metro, not to solicit or encourage certain clients of Metro (as more fully described in the relevant employment agreement), to cease doing business with Metro, and not to do business with any other similar business, for a period of three years from the date of such termination. Mr. Scheir entered into an employment agreement effective as of April 25, 1995, providing for his employment as the Chief Financial Officer of SD&A. The agreement provides for an initial term expiring on April 25, 1997, and is renewable for an additional one-year term at the discretion of the employee covered thereby, subject to termination as provided therein. Mr. Scheir's base salary during his employment term is $125,000 for the first year, $150,000 for the second year and $175,000 for the third year. At the end of each year, in the sole discretion of the board of directors of SD&A and Mr. Scheir may be paid a cash bonus. The agreement also provides for other fringe benefits as may be approved by the board of directors of SD&A. Mr. Scheir has agreed in his employment agreement not to (i) own, become employed by, or become a partner of any similar business during the term of his employment agreement, except that each may own 1% or less of any similar business or (ii) compete with SD&A for a period of three years after the termination of his employment. Mr. Scheir entered into an agreement in the subsequent period to be employed as SD&A's Chief Operating Officer through December 31, 1999, with an annual base salary of $175,000 through December 31, 1997, $200,000 in calendar 1998 and $250,000 in calendar 1999. Effective July 1, 1997, Ms. Mooradian entered into an employment agreement to serve as President of SD&A until December 31, 1999, with an annual base salary of $175,000 through December 31, 1997, $200,000 in calendar 1998 and $250,000 in calendar 1999. Effective December 29, 1997, Mr. Reustle entered into an employment agreement to serve as President and Chief Executive Officer of Media Marketplace, Inc. until December 31, 2000, with an annual base salary of $250,000 for each year of the employment term. Item 11 - Security Ownership of Certain Beneficial Owners and Management - -------------------------------------------------------------------------- The following table sets forth certain information regarding the beneficial ownership of Common Stock as of September 30, 1998 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. 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)............................ 4,283,266 26.7% Robert M. Budlow(3)............................. 569,200 4.3% Janet Sautkulis(3).............................. 206,400 1.6% Thomas Scheir(4)................................ 63,375 * Krista Mooradian(5)............................. 35,375 * Alan I. Annex(6)................................ 82,850 * S. James Coppersmith(7)......................... 125,000 * Seymour Jones(8)................................ 100,000 * C. Anthony Wainwright(9)........................ 143,408 1.1% John Gerlach(10)................................ 20,667 * All Directors and Named Executive Officers as a group (16 persons)(11)................ 6,480,783 38.5% 5% Stockholders: Naomi Bodner(12)................................ 1,266,599 9.7% Laura Huberfeld(12)............................. 1,539,599 11.8% Morgan Grenfell Asset Management Limited(13).... 709,300 5.4% General Electric Capital Corporation(14)........ 4,451,458 34.0% - ---------- * Less than 1% (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 716,667 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998. Includes 2,266,599 beneficially owned shares through Ms. Huberfeld, Ms. Bodnor and the Huberfeld/Bodnor Partnership who have appointed Mr. Barbera a their proxy until December 17, 1998. (3) Includes 25,000 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998. (4) Includes 55,000 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998. (5) Includes 35,375 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998. (6) Includes 75,000 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998, and 6,250 beneficially owned shares issuable upon the exercise of currently exercisable warrants owned by Camhy Karlinsky & Stein, LLP. Mr. Annex is one of thirteen partners in such firm. (7) Includes 75,000 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998 and 50,000 beneficially owned shares of Common Stock issuable upon the exercise of currently exercisable warrants. (8) Includes 75,000 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998 and 25,000 beneficially owned shares of Common Stock issuable upon the exercise of currently exercisable warrants. (9) Includes 90,000 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998 and 50,000 beneficially owned shares of Common Stock issuable upon the exercise of currently exercisable warrants. (10) Includes 16,667 beneficially owned shares of Common Stock issuable upon the exercise of options which are currently exercisable or are exercisable within 60 days of September 30, 1998. (11) Of the total shares of Common Stock, convertible debt, stock options and warrants beneficially held by the Company's directors and named executive officers, 115,000 shares of Common Stock are owned by family members. (12) The address for each of the 5% Stockholders is as follows: c/o Broad Capital Associates, Inc., 152 West 57th Street, New York, New York 10019. Beneficially owned shares of Common Stock held in partnerships and joint tenancy include 539,599 shares. (13) The address for the 5% Stockholder is as follows: 10 Finsbury Circus, London, EC2M, England. (14) Includes 4,451,458 beneficially owned shares of Common Stock issuable upon the conversion of 50,000 shares of redeemable convertible Preferred Stock. The address for the 5% Stockholder is as follows: 260 Long Ridge Road, Stamford, Connecticut 06927. Item 12 - Certain Relationships and Related Transactions - -------------------------------------------------------- Transactions with Mr. Dunn: In connection with the acquisition of SD&A on April 25, 1995, Alliance issued promissory notes in an aggregate principal amount of $4.5 million to Mr. Dunn. Interest on such notes was payable monthly at a rate equal to the prime rate of Bank of America, NT&SA, as in effect from time to time, subject to a maximum of 10% and a minimum of 8%. Principal payments were due quarterly, and originally $1.5 million was due in quarterly installments during fiscal 1996. All of the outstanding common shares of SD&A were initially pledged to collateralize such notes but were released in June 1996. In connection with such notes, an operating covenants agreement between the Company and Mr. Dunn included, among other things, provisions requiring that SD&A have a minimum level of working capital and cash levels, subject to periodic increases based on sales, before dividend payments could be made to the parent company. In June 1996, the operating covenants agreement was terminated. Prior to October 1995, the Company made all principal payments when due. Each of the principal payments due October 1, 1995, January 1, 1996 and April 1, 1996 were deferred as they became due and thereafter from time to time. In June 1996, principal payments of approximately $2.0 million were made and the remaining obligations were restructured such that the remaining $2.1 million is now payable in installments of $58,333 per month, plus interest at 8%, starting September 19, 1996. As of June, 1997, due to a pending change in financing relationships, the May and June, 1997 payments had not been made. These payments were paid in full in August, 1997. SD&A leases its corporate business premises from Mr. Dunn. The lease requires monthly rental payments of $11,805 through January 1, 1999, with an option to renew. SD&A incurs all costs of insurance, maintenance and utilities. Total rent paid by SD&A to Mr. Dunn during 1998 and 1997 was approximately $142,000 and $138,000, respectively. Bank Credit Line: Mr. Dunn was a guarantor of SD&A's credit line until December 1996. Transactions with Mr. Barbera: In October 1996, the Company consummated its acquisition of Metro. In February 1996, Mr. Barbera, then a shareholder of Metro, borrowed $50,000 from Metro. Interest on such indebtedness accrues at a rate of 6% per annum. The principal of such indebtedness, together with accrued interest thereon, was repayable in four equal quarterly installment starting March 31, 1998. In December 1997, Mr. Barbera repaid the entire outstanding balance plus interest thereon. With the October 1, 1996 acquisition of Metro, Mr. Barbera received a 6% promissory note for $600,000, due and payable, together with interest, on June 30, 1998. In April 1997, the Company repaid $100,000 of the promissory note. In January 1998, the remaining $500,000 of principal was repaid. In November 1997, Mr. Barbera forgave all interest due him on notes payable from July 1, 1997, through December 31, 1997, and forgave an increase in his annual salary from May 27, 1997 to December 31, 1997. In consideration for this, the Board of Directors granted Mr. Barbera options to acquire 50,000 shares of Common Stock at the then current fair market price. Transactions with Mr. Budlow and Ms. Sautkulis: With the October 1, 1996 acquisition of Metro, Mr. Budlow and Ms. Sautkulis, former shareholders of Metro, received 6% promissory notes totaling $300,000 and $100,000, respectively. Such notes were originally due and payable, together with interest, on June 30, 1998. In July 1997, the Company prepaid the full principal amounts due to Mr. Budlow and Ms. Sautkulis. Mr. Budlow and Ms. Sautkulis forgave an increase in their respective salaries from October 1, 1997 to December 31, 1997. Transactions with Mr. Annex: Mr. Annex, Secretary and a Director of the Company, is a partner in the law firm of Camhy Karlinsky & Stein LLP, which provides legal services to the Company. The Company incurred expenses aggregating approximately $176,000 and $110,000 during fiscal 1998 and 1997, respectively. Mr. Annex has informed the Company that such fees did not represent more than 5% of such firms 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 the Company's Outside Board of Directors: In May 1997, the Company's outside directors each received options for 100,000 common shares (400,000 in the aggregate), exercisable at $2.625 per share, of which one half vested immediately and one fourth vest in each of May 1998 and May 1999. In August 1996, Mr. Jones purchased from the Company, for $2,500 in the aggregate, warrants exercisable for 50,000 shares of Common Stock at an exercise price of $2.50 per share for the first 25,000 shares, $3.00 per share for the next 15,000 shares and $3.50 per share for the remaining 10,000 shares. The warrants are currently exercisable and expire on April 15, 2000. Subsequently, Mr. Jones gifted warrants for 25,000 shares to an unaffiliated third party. In September 1996, Mr. Coppersmith purchased from the Company, for $2,500 in the aggregate, warrants exercisable for 50,000 shares of Common Stock at an exercise price of $2.50 per share for the first 25,000 shares, $3.00 per share for the next 15,000 shares and $3.50 per share for the remaining 10,000 shares. The warrants are currently exercisable and expire on May 15, 2000. On June 3, 1996, the Company entered into an agreement with Mr. C. Anthony Wainwright to retain his services as a financial consultant and advisor to the Company on a non-exclusive basis for a period of two years. As compensation for such services, Mr. Wainwright is entitled to receive the sum of $1,000 per month for the term of the agreement plus all out-of-pocket expenses incurred by Mr. Wainwright in the performance of such services, provided that prior authorization from the Company shall have been received with respect to any such expense. In addition, pursuant to the terms of such agreement, Mr. Wainwright has the right, which right, as of the date hereof, has not been exercised, to purchase from the Company, for $2,500 in the aggregate warrants exercisable for 50,000 shares of Common Stock at an exercise price of $4.00 per share for the first 25,000 shares, $4.50 per share for the next 15,000 shares and $5.00 per share for the remaining 10,000 shares. The warrants may be exercised over a four-year period commencing June 3, 1996. The agreement is only assignable without the prior written consent of the other party in the event of a sale of all or substantially all of the business of the party desiring to assign the agreement. The agreement also provides for indemnification of Mr. Wainwright and his affiliates (and their respective directors, officers, stockholders, general and limited partners, employees, agents and controlling persons and the successors and assigns of all of the foregoing) by the Company for any losses or claims arising out of the rendering of the services called for in the agreement, other than for negligence or willful misconduct. Transactions with 5% Stockholders. Each of 2,000 shares of redeemable convertible preferred stock held by Naomi Bodner and Laura Huberfeld plus accumulated accrued dividends thereon and the 235 shares held by their partnership plus accrued dividends were converted into 826,302, 826,302 and 97,091 shares of Common Stock, respectively, in a December 23, 1996 recapitalization. In March 1997, the Company accepted offers from certain warrant-holders to exercise their warrants for 3,152,500 shares of Common Stock at discounted exercise prices. In this transaction, Ms. Bodner, Ms. Huberfeld and their partnership exercised warrants for 1,000,000, 1,000,000 and 117,500 shares of Common Stock respectively. Ms. Huberfeld, Ms. Bodner and the Huberfeld/Bodner partnership have appointed Jeremy Barbera as their proxy to vote 1,000,000, 727,000 and 539,599 shares of Common Stock, respectively, for a period until December 17, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-KSB/A to be signed on its behalf by the undersigned hereunto duly authorized. MARKETING SERVICES GROUP, INC. By: /s/ J. Jeremy Barbera --------------------------------------------- Name : J. Jeremy Barbera Title : Chief Executive Officer By: /s/ Cindy H. Hill --------------------------------------------- Name : Cindy H. Hill Title : Chief Financial Officer Date: October 27, 1998 -----END PRIVACY-ENHANCED MESSAGE-----