SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities and Exchange Act of 1934
Filed by:
[X] The Registrant
[ ] A Party Other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Solicitation Material Pursuant to Rule 14a-11(c) or Rule 240.14a-12
MARKETING SERVICES GROUP, INC.
-----------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11:
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box in any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Number:
(3) Filing Party:
(4) Date filed:
<PAGE>
MARKETING SERVICES GROUP, INC.
333 Seventh Avenue
New York, New York 10001
(212) 594-7688
February 27, 1998
Dear Stockholders:
On behalf of the Board of Directors and management of Marketing Services Group,
Inc., I cordially invite you to attend the 1997 Annual Meeting of Stockholders
to be held on Friday, April 3, 1998, at 9:30 a.m., at the offices of Camhy
Karlinsky & Stein LLP, 1740 Broadway, 16th Floor, New York, New York 10019.
The matters to be acted upon at the meeting are fully described in the attached
Notice of Annual Meeting of Stockholders and Proxy Statement. In addition,
several of the directors and executive officers of the Company will be present
to respond to any questions that you may have. Accompanying the attached Proxy
Statement is the Company's Annual Report on Form 10-KSB/A for the fiscal year
ended June 30, 1997. This report describes the financial and operational
activities of the Company.
Whether or not you plan to attend the Annual Meeting, please sign and date the
enclosed proxy card and return it in the accompanying envelope as promptly as
possible. If you attend the Annual Meeting, and I hope you will, you may vote
your shares in person, even if you have previously mailed in a proxy card.
We look forward to greeting you at the meeting.
Sincerely,
J. Jeremy Barbera
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
MARKETING SERVICES GROUP, INC.
333 Seventh Avenue
New York, New York 10001
(212) 594-7688
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 3, 1998
----------------------------------------
TO THE STOCKHOLDERS OF
MARKETING SERVICES GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of MARKETING SERVICES GROUP, INC., a Nevada corporation, (hereinafter
"MSGI" or the "Company"), will be held at the offices of Camhy Karlinsky &
Stein, LLP, 1740 Broadway, 16th Floor, New York, New York 10019 on Friday, April
3, 1998, at 9:30 a.m., for the following purposes:
(1) To elect directors of the Company to hold office until the next
Annual Meeting or until their respective successors are duly elected
and qualified;
(2) To consider and vote upon a proposal to amend the Company's
certificate of incorporation ("Certificate of Incorporation") in
order to increase the number of shares of common stock of the Company
("Common Stock") authorized for issuance thereunder;
(3) To vote upon a proposal to ratify the Board of Directors selection of
Coopers & Lybrand L.L.P. as the Company's independent auditors for
the current fiscal year;
(4) To consider and vote upon a proposal to amend the Certificate of
Incorporation in order to increase the number of shares of preferred
stock of the Company ("Preferred Stock") authorized for issuance
thereunder and;
(5) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February 23, 1998 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting or any adjournments thereof. Representation of at
least a majority of all outstanding shares of Common Stock and Preferred Stock
is required to constitute a quorum. Accordingly, it is important that your stock
be represented at the meeting. The list of stockholders entitled to vote at the
meeting will be available for examination by any stockholder at the Company's
offices at 333 Seventh Avenue, New York, New York 10001, during business hours
for ten (10) days prior to April 3, 1998.
Whether or not you plan to attend the Annual Meeting, please complete, date and
sign the enclosed proxy card and mail it promptly in the self-addressed envelope
enclosed for your convenience. You may revoke your proxy at any time before it
is voted.
By Order of the Board of Directors
Alan I. Annex
Secretary
New York, New York
February 27, 1998
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. ACCORDINGLY, WE URGE YOU TO DATE, SIGN AND RETURN
THE ENCLOSED PROXY CARD REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING.
- -------------------------------------------------------------------------------
<PAGE>
MARKETING SERVICES GROUP, INC.
333 Seventh Avenue
New York, New York 10001
(212) 594-7688
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 3, 1998
Approximate Mailing Date of Proxy Statement and Form of Proxy - March 3, 1998.
INFORMATION CONCERNING VOTE
GENERAL
This Proxy Statement and the enclosed form of proxy is furnished in connection
with the solicitation of proxies by the Board of Directors of MARKETING SERVICES
GROUP, INC., a Nevada corporation, (hereinafter "MSGI" or the "Company") for use
at the Annual Meeting of Stockholders to be held on Friday, April 3, 1998, at
9:30 a.m. and at any and all adjournments thereof (the "Annual Meeting"), with
respect to the matters referred to in the accompanying notice. The Annual
Meeting will be held at the offices of Camhy Karlinsky & Stein, LLP, 1740
Broadway, 16th Floor, New York, New York 10019.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record of the Company's common stock, $.01 par value per
share ("Common Stock"), and Series D preferred stock, $.01 par value per share
(the "Preferred Stock"), at the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. Holders of the Common
Stock (the "Common Stockholders") entitled to vote will be entitled to one vote
for each share of Common Stock that they hold. Holders of the Preferred Stock
(the "Preferred Stockholders") entitled to vote shall be entitled to the number
of shares of Common Stock into which their Preferred Stock is convertible. As of
the Record Date, the total number of common share equivalents eligible to vote
at the Annual Meeting was 17,534,674, consisting of 13,085,288 shares of Common
Stock and 50,000 shares of Preferred Stock convertible into an aggregate of
4,449,386 shares of Common Stock.
REVOCABILITY OF PROXIES
A stockholder who executes and mails a proxy in the enclosed return envelope may
revoke such proxy at any time prior to its use, by notice in writing to the
Chief Executive Officer of the Company, at the above address, or by revocation
in person at the Annual Meeting. Unless so revoked, the shares represented by
duly executed proxies received by the Company prior to the Annual Meeting will
be presented at the Annual Meeting and voted in accordance with the
stockholder's instructions marked thereon. If no instructions are marked
thereon, proxies will be voted (1) FOR the election as directors of the nominees
named below under the caption "ELECTION OF DIRECTORS (2) FOR the amendment to
the Certificate of Incorporation to increase the number of shares of Common
Stock authorized for issuance, as discussed below under the caption "PROPOSAL TO
AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK AUTHORIZED FOR ISSUANCE"; (3) FOR the ratification of the Board of
Directors' selection of Coopers & Lybrand L.L.P. as the Company's independent
auditors for the current fiscal year, as discussed below under the caption
"RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS", and (4) FOR the amendment
to the Certificate of Incorporation to increase the number of shares of
Preferred Stock authorized for issuance, as discussed below under the caption
"PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
SHARES OF PREFERRED STOCK AUTHORIZED FOR ISSUANCE".
VOTING PROCEDURES
All votes shall be tabulated by the inspector of elections appointed for the
Annual Meeting, who shall separately tabulate affirmative and negative votes,
abstentions and broker non-votes. The presence of a quorum for the Annual
Meeting, defined here as a majority of the Common Stock and Preferred Stock
issued and outstanding entitled to vote at the Annual Meeting, in person or by
proxy, is required. The Preferred Stockholders shall be entitled to vote as a
Common Stockholder, the number of shares of Preferred Stock and paid in kind
stock dividends as convertable into Common Stock on the Record Date. Votes
withheld from the director nominees and abstentions will be counted in
determining whether a quorum has been reached. Broker-dealer non-votes are not
counted for quorum purposes.
Assuming a quorum has been reached, a determination must be made as to the
results of the vote on each matter submitted for stockholder approval. Director
nominees must receive a majority of the votes cast at the meeting. The proposal
to increase the number of shares of Common Stock authorized for issuance must be
approved by a majority of the common shares outstanding. The ratification of the
selection of independent auditors must be approved by a majority of the votes
cast at the meeting. The proposal to increase the number of shares of preferred
stock authorized for issuance must be approved by a majority of the common and
preferred shares outstanding.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated seven (7) individuals to serve as Directors
at the Annual Meeting, including one director to be elected by the Preferred
Stockholders and six directors to be elected by the Common Stockholders and
Preferred Stockholders. It is intended that each proxy received by the Company
from Common Stockholders will be voted FOR the election, as directors of the
Company, of the nominees listed below, unless authority is witheld by the
stockholder executing the proxy. Shares may not be voted cumulatively. Each of
such nominees has consented to being nominated and to serve as a director of the
Company if elected. If any nominee should become unavailable for election or
unable to serve, it is intended that the proxies will be voted for a substitute
nominee designated by the Board of Directors. At the present time, the Board of
Directors knows of no reason why any nominee might be unavailable for election
or unable to serve. The proxies cannot be voted for a greater number of persons
than the number of nominees named herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
DIRECTOR NOMINEES
The following table sets forth certain information with respect to the
nominees for directors:
Name Age Position
- ---- --- --------
General Nominees:
- -----------------
Alan I. Annex 36 Director and Secretary
J. Jeremy Barbera 41 Chairman of the Board of Directors, Chief
Executive Officer, President & Chief
Operating Officer
S. James Coppersmith 64 Director
John T. Gerlach 65 Director
Seymour Jones 66 Director
C. Anthony Wainwright 64 Director
Nominee for Election by Preferred Stock:
- ----------------------------------------
James Brown 33 Director
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 of 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. Barbera has been Chairman, Chief Executive and Operating Officer and
President of the Company since March 31, 1997, and was a Director and Vice
President of the Company from October 1996 to March 1997. He has been Chief
Executive Officer of the Metro Direct subsidiary since its formation in 1987.
Mr. Barbera has sixteen years of experience in data management services, and
over twenty years of experience in the entertainment marketing area.
Mr. Coppersmith has been a Director of the Company since June 1996. Since
1994, Mr. Coppersmith has been Chairman of the Board of Trustees of Boston's
Emerson College. Until his retirement in 1994, he 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 WABAN,
Inc., Sun America Asset Management Corporation, Chyron Corporation, Uno
Restaurant Corp., Kushner-Locke, Inc. and The Boston Stock Exchange.
Mr. Gerlach has been a Director of the Company since December 1997. Mr. Gerlach
presently serves as Director of the graduate business program and as an
associate professor of finance at Sacred Heart University in Fairfield,
Connecticut. Previously, he was an Associate Director in the Bear Stearns'
corporate finance department with responsibility for mergers and financial
restructuring projects; he was President and Chief Operating Officer of Horn &
Hardart, where he supervised 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 (Collegeville, MN) and sits on an advisory
board for the College of Business and 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. Wainwright has been a Director of the Company since August 1996 and was also
a Director of the Company from the acquisition of Alliance until May 1996. Prior
thereto, he was a director of Alliance. 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 Co.
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 joined Bain & Co. where he consulted with Fortune 500 clients on
strategic, operational and financial issues. Prior thereto, Mr. Brown was an
analyst for CBS and AC Nielsen.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company currently consists of seven members and is
divided into three classes (designated Class I, Class II and Class III). Class I
consists of Messrs. Annex and Gerlach, whose term will expire in 1999; Class II
consists of Messrs. Jones and Barbera whose term will expire in 2000; and Class
III consists of Messrs. Brown, Coppersmith and Wainwright whose term will expire
in 2001. At the 1997 Annual Meeting, each class of directors will stand for
election for their respective terms. After the 1997 Annual Meeting, Directors
nominated to the class of Directors whose term is expiring at that annual
meeting will be elected for a term of three years, and the remaining Directors
will continue in office until their respective terms expire. Accordingly, at
each annual meeting, at least two of the Company's seven Directors will be
elected and each Director will be required to stand for election once every
three years. The Preferred Stockholders have the option to elect an additional
Class I or Class II director.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company currently receive an annual
retainer fee of $10,000 to $15,000 depending on the amount of committees served.
Such Directors will also be reimbursed for their reasonable expenses for
attending board and committee meetings. 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.
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 the fiscal
year ended June 30, 1997. It was agreed that each outside director, at that
time, 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
exercisable, 25% exercisable on May 27, 1998 and 25% exercisable on May 27,
1999.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDEES
The Board of Directors held three meetings during fiscal year 1997. The Board of
Directors has a Compensation Committee and an Audit Committee. No member of the
Board of Directors attended fewer than 75% of the meetings of the Board and of
the committee of which he was a member.
The Compensation Committee formulates the Company's policy on compensation of
executive officers, reviews, approves and recommends to the Board of Directors
the terms and conditions of all employee benefit plans or changes thereto, and
administers the Company's stock option plan. During fiscal year 1997, the
members of the Compensation Committee were Messrs. Coppersmith and Wainwright.
For fiscal 1998, the members are Messres Annex, Coppersmith and Wainwright. The
Compensation Committee did not hold any meetings during fiscal 1997.
The Audit Committee appoints the independent public accountants of the Company,
reviews the scope and fees of the prospective annual audit, reviews the results
thereof with the Company's independent public accountants, reviews compliance
with existing major accounting and financial policies of the Company, reviews
the adequacy of the financial organization of the Company, reviews management's
procedures and policies relative to the adequacy of the Company's internal
accounting controls and compliance with federal and state laws relating to
accounting practices and reviews and approves (with the concurrence of a
majority of the independent directors of the Company) transactions, if any, with
affiliated parties. During fiscal year 1997, the members of the Audit Committee
were Messrs. Coppersmith and Jones. For fiscal 1998, the members are Messrs.
Coppersmith, Gerlach and Jones. The Audit Committee held one meeting during
fiscal 1997.
EXECUTIVE OFFICERS
In addition to Mr. Barbera, the executive officers of the Company are the
following:
Scott A. Anderson has been Chief Financial Officer of the Company since May
1996, Treasurer since May 1997, and was 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 1988 to 1994, he was a manager in the
assurance department of an affiliate of the accounting firm of Deloitte &
Touche, LLP. Mr. Anderson is a Certified Public Accountant.
Robert M. Budlow has been a 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 the subsidiary since 1990. He has
twelve years of experience in database management services and subscription,
membership and donor renewal programs.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY 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 $100,000 during the fiscal year ended
June 30, 1997:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Fiscal Other Compensation Awards
Year Annual Restricted Securities
Ended Annual Annual Compen- Stock Underlying
Name and Principal Position June 30, Salary ($) Bonus($) sation($) Awards($) Options/SARs(#)
- --------------------------- -------- ---------- -------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Jeremy Barbera(1),Chairman of the
Board, CEO, President & COO 1997 120,883 1,000,000
Stephen Dunn(2) 1997 254,521
President & CEO, SD&A 1996 228,462 5,000
1995 42,308
Thomas Scheir(2) 1997 154,521 60,000 40,000
Executive VP, SD&A 1996 128,461 60,000 12,500
1995 21,635
Krista Mooradian(2) 1997 127,936 25,000 20,000
VP, SD&A 1996 85,092 29,372 5,375
1995 12,692 2,060
Robert N. Budlow(3)
President, Metro Direct 1997 93,750
Janet Sautkulis(3), COO, Metro Direct 1997 93,750
Barry Peters(2)(4) 1997 118,776 409,200 300,000
Former Chairman of the Board 1996 100,626 32,058 150,000
& CEO (to 3/31/97) 1995 26,442
E. William Savage(2)(4) 1997 108,699 367,500 300,000
Former President, COO, Secretary 1996 100,626 32,058 150,000
& Treasurer (to 3/31/97) 1995 26,442
</TABLE>
- -----------------
(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)Prior to the acquisition of Alliance in April, 1995 none of the Named
Executive Officers was an officer or employee of the Company. In addition,
because the acquisition of Alliance took place in April, 1995, the
compensation shown for each of the Named Executive Officers for the fiscal
year ended June 30, 1995 reflects only two months of compensation in such
fiscal year.
(3)The annual salaries for Mr. Budlow and Ms. Sautkulis are $125,000 each. Due
to the acquisition of Metro on October 1, 1996, their annual compensation
only reflects nine months of salary.
(4)Messrs. Peters and Savage left the service of the Company effective March
31, 1997. Other annual compensation for 1997 includes compensation under
separation agreements. The total other annual compensation paid through June
30, 1997 was $135,120 and $130,921, to Peters and Savage, respectively.
<PAGE>
STOCK OPTION GRANTS
The table below provides information relating to stock options granted to the
Named Executive Officers during the fiscal year ended June 30, 1997.
OPTIONS GRANTED IN THE LAST FISCAL YEAR
Individual Grants
------------------------------------------------------------
Number of % of Total Market
Securities Options/SARs Exercise Price
Underlying Granted to or Base on Expira-
Options/SARs Employees in Price ($ per Date of tion
Name Granted (#) Fiscal Year(2) share(3)) Grant($) Date
- ---- ------------ -------------- ------------ -------- -------
J. Jeremy Barbera... 333,334(1) 47% 2.625 5/27/04
333,333(1) 3.00 2.625 5/27/04
333,333(1) 3.50 2.625 5/27/04
Thomas Scheir....... 40,000 2% 2.625 5/27/04
Krista Mooradian.... 20,000 1% 2.625 5/27/04
Barry Peters........ 150,000 14% 2.50 5.375 9/25/03
150,000 3.00 5.375 9/25/03
E. William Savage... 150,000 14% 2.50 5.375 9/25/03
150,000 3.00 5.375 9/25/03
- -------------
(1) Mr. Barbera's options are exercisable as follows: 1/3 of each tranche is
available for exercise immediately, 1/3 of each tranche becomes available in
May, 1998, with the remaining 1/3 exercisable in May, 1999.
(2) During the fiscal year ended June 30, 1997, all employees and all
non-employee Directors of the Company received stock options for a total of
2,117,000 shares of Common Stock.
(3) Exercise price is the closing sales price of the Common Stock as reported on
The Nasdaq SmallCap Market on the date of the grant, unless otherwise
identified.
The following table sets forth information regarding the number and value of
securities underlying unexercised stock options held by the Named Executive
Officers as of June 30, 1997.
AGGREGATE OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
Value of Unexercised
Number of Securities Underlying In-the-Money
Unexercised Options/SARs Options/SARs at
at Fiscal Year End (#) Fiscal Year End($)(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
J. Jeremy Barbera........... 333,334/666,666 $69,445/$138,889
Stephen Dunn................ 5,000/0 0/0
Thomas Scheir............... 52,500/0 34,063/0
Krista Mooradian............ 25,375/0 16,047/0
Barry Peters................ 450,000/0 281,250/0
E. William Savage........... 450,000/0 281,250/0
-------------
(1) Fair market value of $3.125 per share at June 30, 1997 was used to determine
the value of in-the-money options.
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. Dunn and Mr. Scheir entered into separate employment agreements effective as
of April 25, 1995, providing for their employment as the President and the Chief
Financial Officer of SD&A, respectively. Each 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. Dunn's base salary during his employment term is
$225,000 for the first year, $250,000 for the second year and $275,000 for the
third year. 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,
each of Mr. Dunn and Mr. Scheir may be paid a cash bonus. The agreements also
provide for other fringe benefits as may be approved by the board of directors
of SD&A. Each of Mr. Dunn and Mr. Scheir has agreed in his respective 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.
On April 25, 1997, Mr. Dunn informally agreed to extend his full-time employment
with SD&A until December 31, 1997. During this period, he retained his title of
Chief Executive Officer of SD&A and Vice President of MSGI. On November 19,
1997, an agreement was signed with Mr. Dunn and MSGI whereby it was agreed that
Mr. Dunn shall be entitled to the full $850,000 earn out in respect of the year
ending June 30, 1997 and is payable $425,000 in cash and $425,000 in shares of
MSGI. In addition, Mr. Dunn agreed to cease serving as Chief Executive Officer
of SD&A and Vice President of MSGI as of December 31, 1997. In addition, Mr.
Dunn will continue to serve as a consultant for up to a maximum average of 20
hours per week as requested by SD&A. In consideration for such consulting
services, MSGI has agreed to pay Mr. Dunn $125 for each hour of consulting
services actually rendered. 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.
Mr. Peters and Mr. Savage served in the capacity of Chairman of the Board &
Chief Executive Officer of the Company and President & Chief Operating Officer
of the Company, respectively. Their employment with the Company terminated
effective March 31, 1997 and they entered into settlement agreements which
included cash -payments and promissory notes payable. The notes are payable in
equal monthly installments, starting May 14, 1997. Amounts payable on the notes
at June 30, 1997 totaled $448,000. Additionally, for a period of one year from
the date of the settlement agreements, each former executive receives medical
benefits for himself and his immediate family and continued use of a leased
automobile.
<PAGE>
PROPOSAL TWO
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
Subject to approval by the Company's stockholder's the Board of Directors has
adopted an amendment to the Company's Certificate of Incorporation, as amended,
to increase the number of authorized shares of Common Stock from 36,250,000 to
75,000,000.
As of February 23, 1998, the Company had a total of 34,222,299 shares of Common
Stock issued and outstanding and reserved for issuance, including 13,085,288
shares issued and outstanding, 11,344,734 shares reserved for issuance upon
exercise of outstanding warrants and warrant commitments to purchase Common
Stock, 4,964,347 shares reserved for issuance upon conversion of convertible
preferred stock and dividends, 3,921,130 shares reserved for issuance upon
exercise of options under the 1991 Stock Option Plan, 685,000 shares reserved
for issuance to former owners of certain subsidiaries as earn out payments for
achievement of targeted subsidiary earnings, 210,000 shares reserved for
issuance upon conversion of convertible debt and interest, and 11,800 shares
held in treasury.
The Board of Directors believes that it is important to ensure that the Company
will continue to have an adequate number of authorized and unissued shares of
Common Stock available for future use. If this amendment is adopted by the
Stockholders, the additional authorized Common Stock would be available for
issuance from time to time in the future for such corporate purposes as
financings, acquisitions, stock splits and stock dividends, as the Board of
Directors may deem appropriate, without the necessity of further amendment to
the Restated Certificate of Incorporation. The Company has no current plans,
agreements, commitments or understandings with respect to the issuance of any of
the additional shares of Common Stock which would be authorized by the proposed
Amendment to the Company's Restated Certificate of Incorporation.
The issuance of additional shares of Common Stock, while providing desirable
flexibility in carrying out corporate purposes, could have the effect of making
it more difficult for a third party to acquire, or discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company. In
addition, the issuance of additional shares of Common Stock could also lead to
the dilution of existing stockholders.
The proposed amendment must be approved by the holders of a majority of the
outstanding shares of Common Stock and a majority of the holders of the
outstanding shares of Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
<PAGE>
PROPOSAL THREE
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of Coopers & Lybrand L.L.P. has served as the Company's
independent auditors since July 1995. On November 1, 1998, the Board of
Directors voted to appoint Coopers & Lybrand L.L.P. as the Company's independent
auditors for the current fiscal year. The Board of Directors recommends the
ratification of this selection. A representative of Coopers & Lybrand L.L.P.
will be present at the annual meeting. The representative will be given the
opportunity to make a statement, if he or she so desires, and will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL FOUR
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF PREFERRED SHARES AUTHORIZED FOR ISSUANCE
Subject to approval by the Common and Preferred Stockholders, the Board of
Directors has adopted an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of the Company's Preferred Stock
from 50,000 to 150,000.
As of February 28, 1998, there were 50,000 shares of the Company's Preferred
Stock issued and outstanding.
If Proposal Two is approved by the Common and Preferred Stockholders, the
increased number of authorized shares of Preferred Stock will be available for
issuance from time to time for such purposes and consideration as the Board of
Directors may approve. Such purposes may include additional public or private
sales of Preferred Stock in financing transactions, acquisitions or other
corporate purposes, as well as stock dividends, stock option plans and other
stock-based incentive or compensation programs. No further vote of stockholders
of the Company will be required, except as required by law or stock exchange
regulations. Accordingly, the availability of additional shares of Preferred
Stock for issuance, without the delay and expense of obtaining stockholder
approval, will afford the Company greater flexibility in acting upon
opportunities and transactions, if any, which may arise in the future. The
Company has no immediate agreements, commitments or understandings with respect
to the issuance of any of the additional shares of Preferred Stock which would
be authorized by the proposed amendment to the Company's Certificate of
Incorporation.
The Board of Directors, within the limitations and restrictions contained in the
Certificate of Incorporation and without further action by the Company's
stockholders, has the authority to issue the Preferred Stock from time to time
in one or more series and to fix the number of shares and the relative dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences and any other preferences, special rights and qualifications of any
such series.
At the present time, the Company is not aware of any pending or threatened
efforts by any third party to obtain control of the Company and the proposal is
not being made in response to any such efforts. However the availability for
issuance of additional shares of Preferred Stock could enable the Board of
Directors to make more difficult or discourage an attempt to obtain control of
the Company. For example, the issuance of shares of Preferred Stock in a public
or private sale, merger or similar transaction would increase the number of
outstanding shares, thereby diluting the interest of a party attempting to
obtain control of the Company.
Certain of the provisions of the Company's Certificate of Incorporation and
Bylaws, as presently in effect, may also make it more difficult for another
person or entity to effect certain business combinations with the Company or to
take control of the Board of Directors of the Company. These provisions include,
among other things, a provision that a vacancy in any directorship, including a
vacancy arising through an increase in the number of directors, may (unless the
Board of Directors determines otherwise) be filled only by the remaining
directors, even though less than a quorum, or by the sole remaining director.
Any amendment or repeal of the provision described in the preceding sentence
must be approved by a majority of the directors then in office or by the
affirmative vote of the holders of a majority of the shares of Common Stock and
Preferred Stock then outstanding.
As set forth above, such devices may adversely impact stockholders who desire a
change in management and/or the Board of Directors or to participate in a tender
offer or other sale transaction involving a change in control of the company
While it may be deemed to have potential anti-takeover effects, the proposed
amendment to increase the authorized Preferred Stock is not prompted by any
specific effort or takeover threat currently perceived by the Board of
Directors. Moreover, the Board of Directors does not currently intend to propose
additional anti-takeover measures in the foreseeable future.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
<PAGE>
OTHER MATTERS ARISING AT THE ANNUAL MEETING
The matters referred to in the Notice of Annual Meeting and described in this
Proxy Statement are, to the knowledge of the Board of Directors, the only
matters that will be presented for consideration at the Annual Meeting. If any
other matters should properly come before the Annual Meeting, the persons
appointed by the accompanying proxy will vote on such matters in accordance with
their best judgment, pursuant to the discretionary authority granted to them in
the proxy.
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, 1997 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)............................1,664,671 12.7%
Robert M. Budlow................................ 544,200 4.3%
Janet Sautkulis................................. 181,400 1.4%
Stephen Dunn(3)................................. 132,216 1.0%
Thomas Scheir(4)................................ 60,875 *
Krista Mooradian(5)............................. 25,375 *
Barry Peters(6)................................. 475,871 3.6%
E. William Savage(7)............................ 630,327 4.8%
Alan I. Annex(8)................................ 59,683 *
S. James Coppersmith(9)......................... 100,000 *
Seymour Jones(10)............................... 75,000 *
C. Anthony Wainwright(11)....................... 118,408 *
All Directors and Named Executive Officers
as a group (14 persons)(12)...................4,589,806 31.5%
5% Stockholders:
Naomi Bodner(13)................................2,040,893 16.1%
Laura Huberfeld(13).............................2,040,893 16.1%
- -------------
* 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 333,334 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, 1997, and 92,937 shares issuable upon conversion of notes.
(3) Includes 5,000 beneficially owned shares of Common Stock issuable upon the
exercise of warrants which are currently exercisable or are exercisable within
60 days of September 30, 1997.
(4) Includes 52,500 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, 1997.
(5) Includes 25,375 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, 1997.
(6) Includes 450,000 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, 1997 and 25,871 beneficially owned shares owned by family
members with respect to which Mr. Peters disclaims beneficial ownership.
(7) Includes 450,000 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, 1997 and 19,336 beneficially owned shares owned by family
members of which Mr. Savage disclaims beneficial ownership.
(8) Includes 50,000 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, 1997, 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.
(9) Includes 50,000 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, 1997 and 50,000 beneficially owned shares of Common Stock
issuable upon the exercise of currently exercisable warrants.
(10) Includes 50,000 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, 1997 and 25,000 beneficially owned shares of Common Stock
issuable upon the exercise of currently exercisable warrants.
(11) Includes 65,000 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, 1997 and 50,000 beneficially owned shares of Common Stock
issuable upon the exercise of a contractual right to purchase warrants currently
exercisable for such Common Stock.
(12) Of the total shares of Common Stock, convertible debt, stock options and
warrants beneficially held by the Company's directors and named executive
officers, 255,207 shares of Common Stock are owned by family members.
(13) 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 214,591 shares.
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 1997 and 1996 was approximately $141,600 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, is repayable in four equal quarterly installment starting
March 31, 1998. 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.
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.
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 recognized expenses aggregating
approximately $110,000 and $31,000 during fiscal 1997 and 1996, 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.
On April 15, 1996, the Company entered into an agreement with Mr. Seymour Jones
to retain his services as a financial consultant and advisor to the Company on a
non-exclusive basis for a period of one year. Effective July 1996, the agreement
was terminated. Notwithstanding such termination, pursuant to the terms of such
agreement, 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.
On April 17, 1996, the Company entered into an agreement with Mr. S. James
Coppersmith to retain his services as a financial consultant and advisor to the
Company on a non-exclusive basis for a period of one year. Effective July 1996,
the agreement was terminated. Notwithstanding such termination, pursuant to the
terms of such agreement, 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, 1,000,000 and 117,500 shares
of Common Stock, respectively, for a period until December 17, 1998.
STOCKHOLDER PROPOSALS
A stockholder of the Company who wishes to present a proposal for action at the
Company's 1998 Annual Meeting of Stockholders must submit such proposal to the
Company, and such proposal must be received by the Company, no later than
September 1, 1998.
COST OF SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is made by and on
behalf of the Company's Board of Directors. The cost of such solicitation will
be paid by the Company. Such cost includes the preparation, printing and mailing
of the Notice of Annual Meeting, Proxy Statement, Annual Report on Form 10-KSB/A
and form of proxy. The solicitation will be conducted principally by mail,
although directors, officers and employees of the Company (at not additional
compensation) may solicit proxies personally or by telephone or telegram.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries for the forwarding of proxy material to the beneficial owners of
shares held of record by such fiduciaries, and the Company may reimburse such
persons for their reasonable expenses in so doing.
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act requires the Company's directors
and executive officers and persons who beneficially own more than ten percent
(10%) of a registered class of the Company's equity securities, to file with the
United States Securities and Exchange Commission (hereinafter "SEC") reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company. Executive officers, directors and greater than ten percent (10%)
beneficial owners are required by SEC regulation to furnish the Company with
copies of all Section 16(a) reports that they file. Based solely upon a review
of the copies of such reports furnished to the Company or written representation
that no other reports were required, the Company believes that, during fiscal
year 1997, all filing requirements applicable to its executive officers,
directors and greater than ten percent (10%) beneficial owners were met, except
that Messrs. Barbera and Anderson 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 reporting stock options granted to Mr.
Anderson. Subsequent to July 1, 1997, a Form 3 for John T. Gerlach, a director
of the Company, was not filed on a timely basis with respect to his appointment
as a director of the Company.
ANNUAL REPORT ON FORM 10-KSB/A
The Company is providing the Form 10-KSB/A as part of the Company's Annual
Report to each person whose proxy is solicited. The Company does not undertake
to furnish without charge copies of all exhibits to its Form 10-KSB/A, but will
furnish any exhibit upon the payment of Twenty Cents ($0.20) per page, or a
minimum charge of Five Dollars ($5.00). Written requests should be directed to
Jamie Shaber, MARKETING SERVICES GROUP, INC., 333 Seventh Avenue, New York, New
York, 10001. Each such request must set forth a good-faith representation that,
as of February 23, 1998, the person making the request was a beneficial owner of
securities entitled to vote at the Annual Meeting. The Company incorporates
herein the Annual Report by reference.
By Order of the Board of Directors
/s/ Alan I. Annex
-----------------
Secretary
New York, New York
February 28, 1998
<PAGE>
PROXY CARD
Please date, sign and mail your proxy card back as soon as possible!
This proxy is solicited on behalf of the Board of Directors of MARKETING
SERVICES GROUP, INC., for the Annual Meeting of Stockholders to be held on April
3, 1998. The Board of Directors recommend a vote "FOR" the following proposals:
1. Election of directors: INSTRUCTION: To withhold authority to
Alan I. Annex vote for any nominee(s), write that
J. Jeremy Barbera nominee's name in the space provided:
S. James Coppersmith
John T. Gerlach ------------------------------------
Seymour Jones
C. Anthony Wainwright [ ] FOR all of the nominees [ ] ABSTAIN
2. Increase the number of authorized shares of Common Stock from
36,250,000 to 75,000,000 shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3 Ratification of selection of Independent Auditors:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Increase the number of authorized shares of Preferred Stock from 50,000
to 150,000 shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Votes MUST be indicated by placing an "X" in one of the above boxes using black
or blue ink. The undersigned hereby appoints J. Jeremy Barbera and Alan I.
Annex, and each of them, proxies, with full power of substitution, to vote all
shares of Common Stock of the undersigned in MARKETING SERVICES GROUP, INC. at
the Annual Meeting of Stockholders to be held on April 3, 1998, and at any
adjournment thereof, upon all subjects that may properly come before the meeting
including the increase of the number of authorized shares of Common Stock. IF
SPECIFIC DIRECTIONS ARE NOT GIVEN WITH RESPECT TO THE PROPOSALS OR ANY OTHER
MATTERS TO BE ACTED UPON AT THE ANNUAL MEETING AND THIS PROXY CARD IS SIGNED AND
RETURNED, THE PROXIES WILL VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATION
(I.E., FOR THE PROPOSALS) AND ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING.
Please date and sign exactly as your name or
names appear on this proxy card. If the
shares are held jointly, each Stockholder
should sign. If signing as an executor,
trustee, administrator, custodian, guardian,
corporate officer, or pursuant to a power of
attorney, please so indicate below.
Dated:
-------------------------------------
By:
----------------------------------------
-------------------------------------------
[ ] Check this box if you have either a change of address or comments, and
please note the same on this proxy card.
