-----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, HgBiTxlVL3XBj2IuGa/r4VW0ey7O08TW7//fbgixFNJZdTS0QYva1sjqEH4Kpq+N WiRVcuLWSxbDlNapI/Vi+Q== 0000014280-99-000056.txt : 19991029 0000014280-99-000056.hdr.sgml : 19991029 ACCESSION NUMBER: 0000014280-99-000056 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991028 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: SEC FILE NUMBER: 001-01768 FILM NUMBER: 99736427 BUSINESS ADDRESS: STREET 1: 333 SEVENTH AVENUE STREET 2: 20TH FLOOR 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 10-K/A 1 FORM 10-K/A 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, 1999 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 Identification No.) incorporation or organization) 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-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, 1999 are $82,241,894. As of October 25, 1999, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $204,600,000. As of October 25, 1999, there were 25,420,038 shares of the Registrant's common stock outstanding. Transitional Small Business Disclosure Format (check one): Yes No X Introduction - ------------ On October 8, 1999, Marketing Services Group, Inc. ("MSGI" 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, 1999 (the "1999 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 1999 Form 10K 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-K/A amends the 1999 Form 10-K by deleting therefrom the caption and first paragraph and substituting therefore the following replacements for Items 3, 10, 11, 12 and 13. Item 3- Legal Proceedings - ------------------------- In June 1999, certain employees of SD&A voted against representation by the International Longshore and Warehouse Union ("ILWU"). The ILWU has filed unfair labor practices with the National Labor Relations Board ("NLRB") alleging that the Company engaged in unlawful conduct prior to the vote. The NLRB has issued a complaint seeking a bargaining order and injunctive relief compelling the Company to recognize and bargain with the ILWU. The Company intends to vigorously defend against these charges. An unfavorable finding will not have any direct financial impact on the Company. In September 1999, an action was commenced against the Company by Jason Lyons in the Supreme Court of New York, Kings County alleging damages of $4.3 million in connection with the Company's alleged failure to deliver warrants due the plaintiff. The Company denies all liability and intends to vigorously defend against this action. The Company has been party to certain legal proceedings in the ordinary course of its business. The outcome of these legal proceedings are not expected to have a material adverse effect on the consolidated financial condition, liquidity or expectations of the Company, based on the Company's current understanding of the relevant facts and law. Item 10 - Executive Officers and Directors of the Registrant - ------------------------------------------------------------ The Company's executive officers and directors and their positions with MSGI are as follows: Name Age Position - ---- --- -------- Alan I. Annex 37 Director and Secretary J. Jeremy Barbera 43 Chairman of the Board of Directors and Chief Executive Officer Robert M. Budlow 38 Vice President of MSGI and President of Metro Direct Cindy H. Hill 30 Chief Financial Officer Edward E. Mullen 46 President and Director S. James Coppersmith 67 Director John T. Gerlach 68 Director Seymour Jones 68 Director Michael E. Pralle 43 Director C. Anthony Wainwright 66 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. 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. Barbera has been Chairman and Chief Executive Officer of the Company since April 1997 and was President of the Company from April 1997 to May 1999 and was a Director and Vice President of the Company from October 1996 to April 1997. He has been Chief Executive Officer of Metro Direct since its formation in 1987. Mr. Barbera is a member of the M&A Committee of the Board of Directors. Mr. Barbera has eighteen years of experience in data management services, and over twenty years of experience in the entertainment marketing area. Mr. Barbera is a director of Greatergood.com. Mr. Budlow has been Vice President of the Company since October 1996 and President of Metro Direct since April 1997. Prior thereto, he was Executive Vice President and Chief Operating Officer of Metro since 1990. He has thirteen years of experience in database management services and subscription, membership and donor renewal programs. 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 PricewaterhouseCoopers LLP where she was employed for the previous six years. Ms. Hill is a Certified Public Accountant. Mr. Mullen has been President of the Company since May 15, 1999. Previously, Mr. Mullen served as President and Chief Executive Officer of CMG Direct. Prior to CMG Direct, Mr. Mullen was the founding President of the Massachusetts Interactive Media Council, MIMC, and is credited for the accelerating growth of the Internet industry in Massachusetts. He has held several board of directors positions and has worked with non-profit organizations, including WGBH-TV's Business Executive Council and Business & Education for Schools & Technology (BEST). Mr. Coppersmith has been a Director of the Company since June 1996. Mr. Coppersmith is the chairman of the Compensation Committee and a member of the Audit Committee of the Board of Directors. 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 and The Boston Stock Exchange. Mr. Gerlach has been a Director of the Company since December 1997. Mr. Gerlach is the chairman of the M&A Committee and a member of the Audit Committee and 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; 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. Mr. Jones is the chairman of the Audit Committee. 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 PricewaterhouseCoopers 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. Jones also functions as a consultant to Milberg Factors and CHF Industries and acts as an expert witness in accounting matters. Mr. Jones also serves as a director for Reliance Bank. Mr. Pralle has been a Director of the Company since September 1999. Mr. Pralle was also a director of the Company from May 1998 to April 1999. 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 a member 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 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, American Woodmark Corporation, Danka P.L.C. and Advanced Polymer Systems. 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 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, 1999, 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, 1999, except that Mr. Mullen made one late filing due to administrative timing errors with respect to reporting the initial filing upon being appointed President and to the Board of Directors. 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 $100,000 during the fiscal year ended June 30, 1999: SUMMARY COMPENSATION TABLE Fiscal Year Securities Ended Annual Annual Underlying Name and Principal Position June 30, Salary($) Bonus($) Options/SARs(#) - --------------------------- ------- -------- ------- -------------- J. Jeremy Barbera(1)(2) 1999 298,077 Chairman of the Board, 1998 198,077 50,000 & CEO 1997 120,883 1,000,000 Robert N. Budlow(3) 1999 178,654 VP, MSGI and 1998 144,231 President, Metro Direct 1997 93,750 Cindy Hill 1999 110,096 CFO Edward Mullen(4) 1999 33,649 400,000 President (1)Mr. Barbera was appointed Chairman of the Board, Chief Executive Officer and President effective March 31, 1997. Ed Mullen assumed the position of President upon his appointment in May 1999. 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)The annual salary for Mr. Budlow was $125,000 for 1997. Due to the acquisition of Metro on October 1, 1996, his annual compensation only reflects nine months of salary. During fiscal year end June 30, 1998, Mr. Budlow forgave an increase in his salary from October 1, 1997 to December 31, 1997. As of January 1, 1998, his salary was increased in accordance with his employment agreement. (4)Due to the acquisition of CMG Direct Corporation on May 13, 1999, Mr. Mullen's annual compensation only reflects a month and a half of salary. STOCK OPTION GRANTS The table below provides information relating to stock options granted to the Named Executive Officers during the fiscal year ended June 30, 1999.
OPTIONS GRANTED IN THE LAST FISCAL YEAR Individual Grant ---------------- Number of % of Total Exercise Securities Under- Options/SARs or Base lying Options/ Granted to Employees Price ($ per Expiration Grant Date Name SARs Granted(#) in Fiscal Year(2) share) Date Value - ---- -------------- ---------------- ----- ---- ----- Ed Mullen (1) ..............400,000 41% $5.17 4/06 $8.25
(1) Mr. Mullen's options are exercisable as follows: 133,000 options are available for exercise immediately, and the remaining 267,000 options become exercisable at a rate of 11,125 options monthly for a period 24 months beginning in June 1999. (2) During the fiscal year ended June 30, 1999, all employees and all non-employee Directors of the Company received options to purchase a total of 969,200 shares of Common Stock. AGGREGATE OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table sets forth information regarding the number and value of securities underlying unexercised stock options held by the Named Executive Officers as of June 30, 1999.
Number of Value of Securities Unexercised Underlying In-the- Unexercised Money Options/SARs Options/ SARs at Fiscal at Fiscal Number of Year End(#) Year End ($)(1) Securities Value Exercisable/ Exercisable/ Name Exercised (#) Realized($) Unexercisable Unexercisable - ---- ------------ ---------- ------------- ------------- J. Jeremy Barbera ............50,000 1,494,922 1,000,000/0 23,146,334/0 Robert Budlow .....................- - 40,000/15,000 923,120/346,170 Edward Mullen .....................- - 144,125/255,875 3,029,219/5,377,981 Cindy Hill ...................10,000 372,845 23,334/16,666 384,618/923,120
(1) Fair market value of $26.188 per share at June 30, 1999 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 that described cash and stock retainer. Mr. Pralle has indicated that since his Company is a large shareholder of the Company he would waive that described cash and stock retainer. 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 Chairman of the Board, Chief Executive Officer and President of MSGI by the Board, effective March 31, 1997. Ed Mullen assumed the position of President upon his appointment in May 1999. Mr. Barbera 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, $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. If Mr. Barbera is terminated without cause (as defined in the agreement), then MSGI shall pay him a lump sum payment equal to one year of his salary at the then base rate. 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 entered into an employment agreement effective October 1, 1996, providing for his employment as Executive Vice President of MSGI & President of Metro. The 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 Mr. Budlow gives written notice. The base salary 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 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 provides for the granting to Mr. Budlow of options to acquire Common Stock if and as determined by the Option Plan Committee. If Mr. Budlow is terminated without cause (as defined in the agreement), then MSGI shall pay him a lump sum payment equal to one year of his salary at the then base rate. Mr. Budlow has agreed in his employment agreement (i) not to compete with Metro 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 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. Ms. Hill entered into an employment agreement effective January 1, 1999, providing for employment as Chief Financial Officer of the Company. The agreement provides for a two year term expiring on December 31, 2000 (the "Employment Term"). The base salary during the Employment Term is $125,000 for the first year and $150,000 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 agreements 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 MSGI shall pay her a lump sum payment equal to 6 months of her salary at the then base rate. Ms. Hill has agreed in her employment agreement (i) not to compete with MSGI 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 MSGI, not to solicit or encourage certain clients of MSGI (as more fully described in the relevant employment agreement), to cease doing business with MSGI, and not to do business with any other similar business, for a period of three years from the date of such termination. Mr. Mullen entered into an employment agreement effective May 13, 1999, providing for employment as President of MSGI and certain subsidiaries. The agreement provides for an initial term expiring on May 30, 2003 (the "Employment Term") and is renewable for an additional four-year term unless MSGI or Mr. Mullen gives written notice. The base salary during the Employment Term is an annual rate of $275,000 through June 30, 1999, $300,000 for the period July 1, 1999 through December 31, 1999, $350,000 for the period January 1, 2000 through June 30, 2000. Thereafter during the Employment Term the base salary shall be further increased by 10% of the then current base salary on each July 1st, commencing July 1, 2000 and by $27,500 on each Janaury 1, commencing on January 1, 2001. Mr. Mullen is eligible to receive annual bonuses of up to 75% of the base salary in effect based upon the achievement of earnings and other targeted criteria if and as determined by the Compensation Committee of the Board of Directors. At Mr. Mullen's election, the bonus may be paid half in cash and half in common stock of MSGI. The agreement also provides for the granting to Mr. Mullen of 400,000 options to purchase shares of Common Stock at an exercise price of $5.17 per share. The options vest at a rate of 133,000 immediately and the remaining 267,000 options at a rate of 11,124 options per month for 24 equal monthly installments beginning with June 1999. In addition, Mr. Mullen may be eligible for further granting of stock options on to acquire Common Stock if and as determined by the Compensation Committee. If Mr. Mullen is terminated without cause (as defined in the agreement) due to a change in control of MSGI or Mr. Mullen electively terminates for good reason (as defined in the agreement), then MSGI shall pay him a lump sum payment equal to 24 months of his salary at the then base rate plus two times the historical bonus earned, or shall pay him $300,000 if the date of termination occurs prior to June 30, 2001. Mr. Mullen has agreed in his employment agreement (i) not to compete with MSGI 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 MSGI, not to solicit or encourage certain clients of MSGI (as more fully described in the employment agreement) to cease doing business with MSGI, and not to do business with any other similar business, for a period of one year from the date of such termination. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPAITON The members of the Compensation Committee are S. James Coppersmith, C. Anthony Wainwright, and John Gerlach. Mr. Coppersmith is Chairman of the Committee. 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 25, 1999 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)............................ 2,182,400 8.3% Robert M. Budlow(3)............................. 479,200 1.9% Cindy Hill(4)................................... 26,334 * Edward Mullen(5)................................ 210,875 * Alan I. Annex(6)................................ 59,600 * S. James Coppersmith(7)......................... 96,000 * Seymour Jones(8)................................ 81,000 * C. Anthony Wainwright(9)........................ 108,408 * John Gerlach(10)................................ 46,000 * Michael Pralle.................................. - * All Directors and Executive Officers as a group (10 persons)........................ 3,289,817 12.6% 5% Stockholders: General Electric Capital Corporation(11)........ 4,340,622 17.1% CMGI Inc.(12)................................... 2,321,084 9.1% - ------------- * 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 1,000,000 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, 1999 (3) 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, 1999. (4) Includes 23,334 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, 1999. (5) Includes 210,875 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, 1999. (6) Includes 58,000 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, 1999. (7) Includes 46,000 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, 1999 and 50,000 beneficially owned shares of Common Stock issuable upon the exercise of currently exercisable warrants. (8) Includes 56,000 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, 1999 and 25,000 beneficially owned shares of Common Stock issuable upon the exercise of currently exercisable warrants. (9) Includes 105,000 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, 1999 and 50,000 beneficially owned shares of Common Stock issuable upon the exercise of currently exercisable warrants. (10) Includes 42,000 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, 1999. (11) The address for the 5% Stockholder is as follows: 120 Long Ridge Road, Stamford, Connecticut 06927. (12) The address for the 5% Stockholder is as follows: 100 Brickstone Square, Andover, MA 01810. Item 13 - Certain Relationships and Related Transactions - -------------------------------------------------------- Transactions with Mr. Barbera: On December 2, 1998, MSGI loaned Mr. Barbera $100,000 pursuant to a promissory note. The note bore interest at the rate earned on the Company's money market fund. Principal and interest were payable in full in a lump sum. In April 1999, the promissory note, including accrued interest was repaid. 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 $94,000 during fiscal 1999. 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: Transactions with GE Capital: In connection with the acquisition of CMG Direct Corporation, the Company entered into a promissory note agreement with GE Capital in the amount of $10,000,000. The note is payable in full on November 17, 1999 and accrues interest at the rate of 12% per annum. Interest is payable in arrears on August 17, 1999 and on the maturity date. Concurrent with issuance of the promissory note, the original outstanding warrant which was issued in connection with GE Capital's purchase of redeemable convertible preferred stock was amended. Upon an occurrence of a Qualified Secondary Offering, as defined in the agreement, the Original Warrant was fixed at 200,000 shares with an exercise price of $.01 per share. The amendment changed the amount and exercise price per share to 300,000 shares with an exercise price of one-third of the secondary offering price upon an occurrence of a Qualified Secondary Offering. In August 1999, the warrant was amended a second time to amend the definition of a Qualified Secondary Offering to include a Qualified Private Placement, as defined, and to change the time frame for the completion of a Qualified Secondary Offering or Private Placement from December 31, 1999 to on or after December 20, 1999 through April 30, 2000. In August 1999, the promissory note was amended to extend the maturity date to October 15, 2000 with interest to be paid quarterly and provides for certain increases in the interest rate based on the time the principal remains outstanding. In addition, in the event the Company completes a private placement as defined on or before December 20, 1999, then the maturity date of the promissory note is subject to acceleration. During September 1999, the Company completed a private placement of common stock for net proceeds of approximately $30.8 million. In accordance with the amendment, $5,000,000, net of discount is included in current liabilities and the remaining balance is due on July 1, 2000. Transactions with CMGI, Inc.: On May 13, 1999, MSGI acquired all of the outstanding capital stock of CMG Direct Corporation, a wholly-owned subsidiary of CMGI, Inc. Total consideration for the acquisition was $33,029,237 which included $13,464,857 in cash and an aggregate of 2,321,084 shares of common stock of MSGI valued at $19,334,621. 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 Financial Officer Date: October 28, 1999 -----END PRIVACY-ENHANCED MESSAGE-----