MARKETING SERVICES GROUP INC
8-K, 1999-02-01
BUSINESS SERVICES, NEC
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                  -------------------------------------------

                                    FORM 8-K


                             Current Report Pursuant
                          to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934



                        Date of Report: February 1, 1999


                         MARKETING SERVICES GROUP, INC.
                        ------------------------------
              (Exact name of Registrant as specified in charter)


         Nevada                     0-16730               88-0085608
         ------                     -------               ----------
     (State or other              (Commission          (I.R.S. Employer
     jurisdiction of               File No.)          Identification No.)
     incorporation)



                               333 Seventh Avenue
                            New York, New York 10001
                           ------------------------
                   (Address of Principal Executive Offices)


                                 212/594-7688
                                 ------------
             (Registrant's telephone number, including area code)

<PAGE>


Item 2.  Acquisition or Disposition of Assets

On January 15, 1999,  Marketing  Services Group,  Inc.  ("MSGI")  entered into a
stock purchase  agreement  effective as of January 1, 1999 to acquire all of the
issued  and  outstanding  capital  stock  (the  "Shares")  of  Stevens-Knox  and
Associates,   Inc.,   Stevens-Knox   List  Brokerage,   Inc.  and   Stevens-Knox
International,  Inc. (collectively "SKA") from Ralph Stevens (the "Seller").  In
consideration of the purchase of the Shares and other transactions  contemplated
in the  agreement,  MSGI paid the  aggregate  sum of  $3,000,000.  The agreement
includes  payments of  additional  consideration  of up to $1,000,000 a year for
each year  beginning  July 1st and ending June 30th for the years of 2000,  2001
and 2002,  adjustable  forward to apply to the next fiscal year if no additional
consideration  is due  for  one  such  year.  The  additional  consideration  is
contingent upon SKA meeting (a) targeted  earnings before interest and taxes and
(b)  targeted  billings of MSGI  subsidiaries  and  affiliates  for services for
clients originally introduced by SKA. The additional consideration shall be paid
in shares of MSGI  Common  Stock,  provided,  however,  that Seller may elect to
receive up to twenty-five  (25) percent in cash, or, with the written consent of
the Chief  Executive  Officer  of MSGI,  Seller may elect to receive up to fifty
(50) percent in cash. In addition, the Seller is entitled to receive $500,000 in
stock as consideration for the Shares, in the event that actual billings of MSGI
Subsidiaries  and affiliates for services for clients  originally  introduced by
SKA exceeds  targeted  billings for the period  February 1, 1999 through January
31, 2000.

Concurrent  with the  acquisition,  on January 15,  1999,  MSGI  entered into an
employment  agreement  with the Seller to be  employed  as  President  and Chief
Executive  Officer of SKA continuing  until January 31, 2002,  renewable for one
additional year.

SKA is a  leading  list  management  and  brokerage  firm  based in New York and
London.  Its  clientele are segmented  into four main areas:  catalog  marketing
(40%), publishing (30%), business-to-business (12%) and general consumer (8%).


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits

      (a) Financial statements of businesses acquired. * (b) Pro forma financial
      information * (c) Exhibits included herein:

            2.1   Stock Purchase Agreement among Marketing Services Group,
                  Inc. and Ralph Stevens

            10.1  Form of Employment Agreement by and among Marketing
                  Services Group, Inc.
                  and Ralph Stevens

            20.1  Press Release dated January 22, 1999

            20.2  Press Release dated January 26, 1999

* It is impracticable for MSGI to provide the required financial  statements and
pro  forma  financial  information  as of the date  hereof.  MSGI  will file the
required financial statements and pro forma financial  information no later than
60 days after the date hereof.



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                    MARKETING SERVICES GROUP, INC.

Date: February 1, 1999              By: /s/ Cindy H. Hill
                                    ---------------------
                                    Title: Chief Financial Officer
<PAGE>




                                                                     Exhibit 2.1

                                                               Execution Version



                            STOCK PURCHASE AGREEMENT

                                     between

                         MARKETING SERVICES GROUP, INC.

                                       and

                                  RALPH STEVENS

                            RELATING TO THE PURCHASE

                                       of

                         STEVENS-KNOX & ASSOCIATES, INC.

                        STEVENS-KNOX LIST BROKERAGE, INC.

                                       and

                        STEVENS-KNOX INTERNATIONAL, INC.

<PAGE>


                                TABLE OF CONTENTS

                                                                            Page
                                                                           ----

 I.    PURCHASE AND SALE.....................................................4
       1.1 Terms of Purchase and Sale........................................4
       1.2 Terms of the Transaction..........................................4
       1.3 Closing Date.....................................................12
       1.4 Other Transactions at Closing....................................12

 II.   REPRESENTATIONS AND WARRANTIES OF THE SELLER.........................17
       2.1 Organization and Qualification...................................17
       2.2 Capitalization...................................................17
       2.3 Financial Condition..............................................19
       2.4 Tax and Other Liabilities........................................21
       2.5 Litigation and Claims............................................25
       2.6 Properties of the Companies......................................25
       2.7 Contracts and Other Instruments..................................27
       2.8 Employees........................................................27
       2.9 Patents, Trademarks, Et Cetera...................................28
       2.10Questionable Payments............................................29
       2.11Authority to Sell................................................29
       2.12Nondistributive Intent...........................................31

 III.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................31
       3.1 Organization and Qualification...................................31
       3.2 Authority........................................................32
       3.3 SEC Filings......................................................33
       3.4 Validity of Shares of MSGI Common Stock..........................33

 IV.   CERTAIN COVENANTS OF THE SELLER AND PURCHASER........................34
       4.1 Tax Returns......................................................34
       4.2 Employee Options.................................................34
       4.3 Line of Credit...................................................34

 V.    CONDITIONS TO OBLIGATIONS OF THE PURCHASER...........................35
       5.1 Opinion of Counsel...............................................35
       5.2 Other Closing Documents..........................................35
       5.4 No Governmental Action...........................................36
       5.5 Contractual Consents Needed......................................36
       5.6 Material Adverse Change..........................................37

 VI.   CONDITIONS TO OBLIGATIONS OF SELLER..................................37
       6.1 Legal Action.....................................................37
       6.2 Contractual Consents.............................................37
       6.3 Opinion of Counsel...............................................38
       6.4 Other Closing Documents..........................................38
       6.5 No Governmental Action...........................................38

 VII.  INDEMNIFICATION; SURVIVAL; LIMITATIONS ON LIABILITY..................39
       7.1 Indemnification of Purchaser.....................................39
       7.2 Indemnification of Seller........................................40
       7.3 Survival.........................................................41

 VIII. MISCELLANEOUS........................................................42
       8.1 Brokerage Fees...................................................42
       8.2 Further Actions..................................................42
       8.3 Submission to Jurisdiction.......................................42
       8.4 Merger; Modification.............................................42
       8.5 Notices..........................................................43
       8.6 Waiver...........................................................44
       8.7 Binding Effect...................................................44
       8.8 No Third-Party Beneficiaries.....................................45
       8.9 Separability.....................................................45
       8.10Headings.........................................................45
       8.11Counterparts; Governing Law......................................45

<PAGE>


                            STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE  AGREEMENT  (this  "Agreement"),  is being made on this
15th day of January,  1999,  between  MARKETING  SERVICES GROUP,  INC., a Nevada
corporation (the "Purchaser" or "MSGI"), with offices at 333 Seventh Avenue, New
York,  New York  10001 and RALPH  STEVENS,  an  individual  residing  at 14 Ketz
Street, New City, New York 10956 (the "Seller"),  relating to the sale of all of
the issued and outstanding  capital stock of Stevens-Knox & Associates,  Inc., a
New York corporation ("SK  Associates"),  with offices at 304 Park Avenue South,
New  York,  New  York  10010,  Stevens-Knox  List  Brokerage,  Inc.,  a New York
corporation ("SK  Brokerage"),  with offices at 304 Park Avenue South, New York,
New York 10010, and  Stevens-Knox  International,  Inc., a Delaware  corporation
("SK  International"  together  with  SK  Associates  and  SK  Brokerage  each a
"Company" and collectively, the "Companies"),  with offices at Manfield House, 1
South Hampton Street, London WCZROLR, United Kingdom.

                             W I T N E S S E T H :

     WHEREAS,  the Seller owns  beneficially and of record all of the issued and
outstanding  capital stock of SK  Associates,  which  outstanding  capital stock
consists of an  aggregate  of four  hundred  ninety-nine  (499) shares of common
shares, par value $1.00 per share (the "SK Associates Common Shares");


     WHEREAS,  the Seller owns  beneficially and of record all of the issued and
outstanding  capital  stock of SK  Brokerage,  which  outstanding  capital stock
consists of an aggregate of sixty (60) shares of common shares, no par value per
share (the "SK Brokerage Common Shares");

     WHEREAS,  the Seller owns  beneficially and of record all of the issued and
outstanding  capital stock of SK International,  which outstanding capital stock
consists of an  aggregate of sixty (60) shares of common  stock,  par value $.01
(the "SK  International  Common Stock,"  together with the SK Associates  Common
Shares and the SK Brokerage Common Shares, the "Shares");

     WHEREAS,  SK Associates has issued a promissory note, dated March 14, 1997,
in the aggregate amount of one hundred twenty-three thousand seven hundred fifty
dollars  ($123,750.00),  to the  Stevens-Knox & Associates,  Inc. Profit Sharing
Plan for the account of Ralph Stevens (the "Stevens 401(k) Note");

     WHEREAS,  SK Associates has issued a promissory note, dated March 14, 1997,
in  the  aggregate  amount  of  one  hundred  fifty-four  thousand  one  hundred
twenty-five dollars ($154,125.00), to the Stevens-Knox & Associates, Inc. Profit
Sharing Plan for the account of James H. Knox ("Knox") (the "Knox 401(k) Note");

     WHEREAS,  in connection  with MSGI's  acquisition  of all of the issued and
outstanding  capital  stock of the  Companies,  MSGI has agreed to  execute  and
deliver a guaranty  for the full amount due and  payable on the  Stevens  401(k)
Note (the "Stevens 401(k) Note  Guaranty"),  and the Knox 401(k) Note (the "Knox
401(k) Note Guaranty");


     WHEREAS,  Knox has sold  three  hundred  thirty-three  (333)  shares  of SK
Associates  Common  Shares to SK  Associates,  forty (40) shares of SK Brokerage
Common Shares to SK Brokerage,  and forty (40) shares of SK International Common
Stock to SK  International  (collectively,  the "Knox  Shares")  pursuant to the
terms of the Amended and Restated Shareholders' Agreement, dated May 7, 1996, by
and among Stevens, Knox, the Companies, Jordan Fishbane (the "Trustee"), and the
Stevens-Knox  &  Associates,  Inc.  401(k)  Profit  Sharing  Plan, as amended on
September  18, 1996 (the  "Shareholders'  Agreement")  and the  Agreement by and
among the  Companies,  Stevens,  and Knox,  dated as of  September  1, 1998 (the
"Closing  Agreement"  together with the Shareholders'  Agreement,  the "Purchase
Agreements") and such treasury shares remain issued but not outstanding;

     WHEREAS,  SK Associates has issued a one million forty thousand one hundred
seven dollar ($1,040,107) promissory note, dated September 1, 1998, to Knox, and
SK  Brokerage  has issued a three  hundred  thirty-two  thousand  eight  hundred
thirty-four dollar ($332,834) promissory note, dated September 1, 1998, to Knox,
and SK International  has issued a thirteen  thousand eight hundred  sixty-eight
dollar ($13,868) promissory note, dated September 1, 1998, to Knox, each payable
in one hundred and twenty (120) monthly  installments  of principal and interest
(collectively, the "Promissory Notes"), as consideration for the Knox Shares;

     WHEREAS,  pursuant to the terms of the Purchase Agreements,  Knox retains a
security interest in the Knox Shares as collateral for the Promissory Notes;

     WHEREAS,  contemporaneously with the signing of this Agreement,  Knox shall
cancel the  Promissory  Notes and each Company  shall issue to Knox an unsecured
promissory note in the principal amount equal to the remaining principal balance
of  each  Company's  outstanding  Promissory  Note  (the  "Unsecured  Promissory
Notes"), guaranteed by MSGI and payable in sixty (60) monthly installments; and

     WHEREAS,  the  Purchaser  desires to acquire the Shares from the Seller and
the Seller desires to sell the Shares to the Purchaser, subject to the terms and
conditions set forth below.

     NOW, THEREFORE,  in consideration of the mutual premises,  representations,
warranties,  and covenants  contained herein,  and intending to be legally bound
hereby, the parties hereto agree as follows:

I.    PURCHASE AND SALE
      1.1  Terms of Purchase and Sale

            Subject  to the  terms  and  conditions  of this  Agreement,  at the
Closing  (as  defined in Section 1.3  below),  the Seller  shall  sell,  assign,
transfer,  and convey to the  Purchaser,  effective  as of January 1, 1999,  the
Shares,  free  and  clear  of any  liens,  pledges,  encumbrances,  or  security
interests (collectively, "Liens") whatsoever.

      1.2  Terms of the Transaction

     (a) At the  Closing,  the  Seller  shall  deliver  to the  Purchaser  stock
certificates representing the Shares duly endorsed in blank or with stock powers
duly endorsed in blank.  Additionally,  at the Closing, the Seller shall deliver
to the Purchaser all minute books of the Companies,  the corporate  seals of the
Companies, if any, the stock ledgers of the Companies,  and such other corporate
documents and records as the Purchaser or its counsel shall  reasonably  request
prior to the Closing.

     (b)  In  consideration  of  the  purchase  of  the  Shares  and  the  other
transactions  contemplated  hereby, at the Closing the Seller shall receive from
the Purchaser the aggregate sum of three million dollars  ($3,000,000),  payable
by certified check or wire transfer.

     (c) In addition,  as  consideration  for the Shares as set forth in Section
1.2(a) hereof,  the Seller is entitled to certain  contingent  payments of up to
one million  dollars  ($1,000,000)  per year for each of three (3) fiscal  years
beginning  July 1, 1999 and ending  June 30,  2002 or, if  extended  pursuant to
Section  1.2(c)(iii)  hereof,  on July 1,  2003  (each  year a  "Fiscal  Year"),
determined  according  to the  following  formula and  subject to the  following
restrictions:

     (i) In the event that Actual SKA EBIT (as defined herein) for a Fiscal Year
equals or exceeds 85% of the targeted value of earnings for a Fiscal Year equals
or exceeds 85% of the targeted value of earnings  before  interest and taxes for
the  Companies  in such year (the "SKA EBIT  Target"),  Seller  shall be paid an
amount  (the  "Earnout  Payment")  equal  to one  million  dollars  ($1,000,000)
multiplied by the  Percentage of Achieved  Target.  The  "Percentage of Achieved
Target" in one Fiscal Year shall equal a percentage  (such  percentage shall not
be in excess of one  hundred  percent)  equal to the product of: (A) a fraction,
with the  numerator  consisting  of the  Actual  SKA  EBIT in such  year and the
denominator consisting of the SKA EBIT Target for such year, multiplied by (B) a
fraction,  the numerator  consisting of the Actual MSGI Net Billings (as defined
herein) in such year and the denominator  consisting of the target value of MSGI
Net Billings (the "MSGI Billing  Target") for such year. For example,  if Actual
SKA EBIT for the Fiscal Year ended June 30, 2000 is $765,000 and Actual MSGI Net
Billings are $780,000 in that year then the Seller's  Earnout Payment for Fiscal
Year 2000 will be equal to  $540,000,  as  computed by the  following  equation:
($1,000,000 (765,000/850,000 x 780,000/1,300,000)). In the event that Actual SKA
EBIT  exceeds  100% of the SKA EBIT Target and Actual MSGI Net Billings are less
than the MSGI Billing Target in any Fiscal Year,  then each dollar of Actual SKA
EBIT in  excess of the SKA EBIT  Target  shall be added to the  Actual  MSGI Net
Billings  until  such  number  is equal to the MSGI  Billing  Target;  provided,
however, that this provision shall not apply to the determination of Actual MSGI
Net Billings in Section 1.2(d).

     (ii) No Earnout  Payment shall be payable to Seller for any Fiscal Year for
which  Actual SKA EBIT is less than 85% of SKA EBIT Target;  provided,  however,
Seller shall  receive the full Earnout  Payment in any Fiscal Year for which one
hundred  percent (100%) of the MSGI Billing  Target is achieved,  as measured by
Actual MSGI Net  Billings,  and Actual SKA EBIT is equal to or greater  than the
goodwill  amortization  expense incurred by MSGI,  determined in accordance with
generally  accepted  accounting  principals  ("GAAP"),  in  connection  with the
transactions contemplated by this Agreement.

     (iii) If no Earnout  Payment is due Seller as provided in subclause (i) and
(ii) of this Section in any one Fiscal  Year,  Seller shall be entitled to a one
time election to extend the Earnout Payment to the next  succeeding  Fiscal Year
based on the same formula and values for MSGI Billing Target and SKA EBIT Target
as the Fiscal Year for which no earnout was payable, and the MSGI Billing Target
and  SKA  EBIT  Target  for  the  remaining  Fiscal  Year(s),  if  any,  will be
correspondingly adjusted forward to apply to the next Fiscal Year(s) thereafter.
For  example,  if Seller is not  entitled  to an Earnout  Payment in Fiscal Year
ended June 30,  2001,  the  Earnout  Payment for Fiscal Year ended June 30, 2002
will be based on the values for SKA EBIT Target and MSGI Billing Target for June
30, 2001. The Earnout  Payment for June 30, 2003 will be based on the values for
SKA EBIT Target and MSGI  Billing  Target for June 30,  2002.  The terms of this
subclause  (iii) shall not be construed to permit any  accumulation or carryover
of Actual SKA EBIT or Actual MSGI Net Billings from one Fiscal Year to another.

     (iv) The  Earnout  Payment  shall be paid not later than the earlier of one
hundred (100) days after the last day of each Fiscal Year or ten (10) days after
the filing of the Form 10K of MSGI (the "Payment  Date").  MSGI shall pay Seller
each Earnout  Payment in shares  ("Earnout  Shares") of MSGI common  stock,  par
value $.01 per share, (the "MSGI Common Stock"); provided,  however, that Seller
may elect to receive up to twenty-five  percent (25%) of each Earnout Payment in
a Fiscal  Year in cash or,  with the  written  consent  of the  Chief  Executive
Officer of MSGI,  the Seller may elect to receive up to fifty  percent  (50%) of
each Earnout  Payment in cash. The Earnout Shares shall be valued at the average
of the closing  prices for MSGI Common Stock as reported by the NASDAQ  SmallCap
Market for the last 30 trading days prior to the three (3) business  days before
each Payment Date.

     (v) Each year the Board of Directors of MSGI shall consider whether, and if
so to what  extent,  the Actual MSGI Net  Billings for that Fiscal Year shall be
deemed to include MSGI's billings for telemarketing, internet, or other services
to clients  originally  introduced to MSGI, for those services or others, by the
Companies.

    (vi) In no event,  shall  Seller be entitled to any Earnout  Payment for any
period  following  June 30,  2002;  provided,  however,  if the  Fiscal  Year is
extended  to June 30,  2003  pursuant to the  operation  of Section  1.2(c)(iii)
hereof,  the  Seller  shall not be  entitled  to any such  payout for any period
following such extended date.

     (vii) The parties hereto acknowledge that Actual MSGI Net Billings shall be
subject to the adjustments set forth in this Section 1.2(c)(vii).  The Companies
shall  introduce  to MSGI  certain  clients  (each a "Client  Company")  who may
subsequently  utilize  the  electronic  data  processing  services  set forth in
Schedule  1.2(c)(vii)  attached  hereto  ("EDP  Services").  In the event that a
Client  Company enters into an oral contract for EDP Services with Metro Direct,
Inc., or any other subsidiary of MSGI which provides EDP Services (collectively,
"Metro"),  Actual  MSGI Net  Billings  shall not be  reduced  by any  credits or
adjustments  to a Metro invoice to a Client Company which are granted for reason
of a Failure to Perform (as defined below);  provided,  however,  that Metro has
been notified in writing of any problem by the Seller, any Company or the Client
Company within seven (7) business days of the occurrence of such problem. In the
event that a Client Company  enters into a written  agreement with Metro for EDP
Services  under  which  a  Client  Company  guarantees  certain  minimum  yearly
processing  revenue ("Minimum  Revenue"),  Actual MSGI Net Billings shall not be
reduced by the Minimum  Revenue if Metro has been found to breach such  contract
by a court of competent  jurisdiction  or by an arbitrator,  as the case may be,
for reason of a Failure to Perform.  For the purposes of this Agreement "Failure
to Perform" shall mean the inability of Metro to adequately perform EDP Services
based upon the currently existing  standards of service for companies  providing
substantially similar EDP Services to customers engaged in direct marketing. Any
oral agreement or written contract  referred to in this Section must be approved
by an  officer  of Metro.  In the event  that a Client  Company  terminates  EDP
Services for reason of a Failure to Perform and no  adjustment is made to Actual
MSGI Net Billings,  the Chief Executive  Officer of MSGI shall decide if, in the
interest of fairness to the Seller,  an adjustment  shall be made to Actual MSGI
Net Billings;  provided,  that any such determination shall be final and binding
between MSGI and the Seller.

     (viii) For the  purposes  of this  Agreement  "SKA EBIT  Target"  and "MSGI
Billing Target" shall have the following values in each Fiscal Year:

          Fiscal Year Ended  SKA EBIT Target   MSGI Billing Target
          June 30, 2000      $850,000          $1,300,000
          June 30, 2001      $1,050,000        $1,600,000
          June 30, 2002      $1,250,000        $1,900,000

     (ix) For the purposes of this Agreement, "Actual SKA EBIT" shall be defined
as the aggregate  earnings for each Fiscal Year, based on GAAP of the Companies,
before charges for interest expense, taxes, one-time facility moving expenses of
the  Companies  (if MSGI  requests  the  Companies  to move),  and all costs and
expenses attendant to such a move including,  without  limitation,  any residual
lease payment on the old  facility,  cost of any new  construction,  replacement
costs for stationary  and forms and  allocations to the Companies of expenses of
MSGI  including,   without  limitation,   any  allocations  for  MSGI's  general
administrative and overhead expenses or goodwill.  All cost savings related to a
move of the  Companies  shall offset all costs and expenses  attendant to such a
move for the purpose of computing Actual SKA EBIT.

     (x) For the purposes of this Agreement, "Actual MSGI Net Billings" shall be
defined as all billings of MSGI,  its  subsidiaries,  and its affiliates for EDP
Services for a Client Company,  less external charges  including but not limited
to charges for  National  Change of  Address,  data/phone  appendage,  shipping,
tapes, computer storage media, and sales tax (collectively, "External Charges").

     (d) In  addition  to the  consideration  set forth in  Section  1.2(b)  and
Section  1.2(c)  hereof,  the Seller is also  entitled to receive  five  hundred
thousand dollars ($500,000),  as consideration for the Shares, in the event that
Actual MSGI Net Billings  equals or exceeds six hundred fifty  thousand  dollars
($650,000)  for the period of February 1, 1999 through  January 31, 2000. All of
the payment  referred to in this Section  1.2(d) shall be made in shares of MSGI
Common  Stock  which  shall be subject to the same  registration  and  valuation
provisions as the Earnout Shares in Section 1.2(g) of this Agreement.

     (e) Seller and his representatives, upon his request, shall be given access
to all reports,  documents,  books,  and ledgers  used to determine  the Earnout
Payment;  provided, that the Seller bears all costs, including,  but not limited
to, legal and accounting costs related to a review of such material. Any dispute
or controversy arising solely from the provisions of Section 1.2(c) or (d) shall
be  determined  by  arbitration  to be held in the City of New York  before  one
arbitrator in accordance with the rules of the American Arbitration Association,
and an award  thereon may be entered in any court having  jurisdiction  thereof.
Each party shall bear its own costs  relating to any  arbitration,  hearing,  or
judicial relief relating to a claim made pursuant to this Section 1.2(e).

     (f) The purchase price as set forth in Section 1.2(b), (c) and (d) shall be
allocated  between the  Companies  as  described  in Schedule  1.2(f),  attached
hereto.

     (g) The MSGI Common Stock delivered or to be delivered  pursuant to Section
1.2(c) and (g) shall not be  registered  under the  Securities  Act of 1933,  as
amended (the "1933 Act").  Seller acknowledges that he may not sell or otherwise
dispose of such shares in the absence of either a registration  statement  under
the 1933 Act or an exemption from the  registration  provisions of the 1933 Act.
The certificates representing such shares will contain a legend substantially to
the effect that such shares have not been registered under the 1933 Act, and may
not be sold or transferred without an effective registration statement under the
1933 Act or an exemption from the  registration  provisions  under the 1933 Act.
The Earnout Shares shall be unregistered  shares of MSGI Common Stock which MSGI
shall  cause to be  registered  under the 1933 Act  within 90 days of receipt by
Seller.

     (h) In the event the Employment  Agreement  between Seller,  the Companies,
and  MSGI,  dated the date  hereof  (the  "Stevens  Employment  Agreement"),  is
terminated other than by operation of Section 9(a), (b), or (c) therein,  Seller
shall be paid an Earnout Payment consisting of a single lump sum distribution in
MSGI  Common  Stock  (with no present  value  adjustment)  equal to one  million
dollars  ($1,000,000)  for each Fiscal Year, or any portion  thereof,  remaining
after the date of such  termination.  Such  payments  shall be made within sixty
(60) days from the date of such termination.  The value of the MSGI Common Stock
used for such payments shall be based on the average closing price of the Common
Stock  on  NASDAQ  Small  Cap  Market  for  the  thirty  (30)  days  after  such
termination.

     (i) In the event of a future  disposition of the properties and business of
MSGI,  substantially as an entirety, by merger,  consolidation,  sale of assets,
sale of stock, or otherwise where fifty-one percent (51%) or more of MSGI Common
Stock is  acquired  by a party  which is not an  affiliate  of MSGI  ("Change of
Control") and such person does not assume the  obligations of MSGI under Section
1.2(c) of this  Agreement,  then the Seller  shall  receive  an Earnout  Payment
consisting of a single lump sum distribution  (with no present value adjustment)
equal to one million dollars  ($1,000,000)  for each Fiscal Year, or any portion
thereof, remaining from the date of the Change of Control.

     1.3  Closing  Date

     The  closing  (the  "Closing")  of the  transactions  contemplated  by this
Agreement  shall take place at the offices of Camhy  Karlinsky & Stein LLP, 1740
Broadway,  16th  Floor,  New York,  New York 10019,  contemporaneously  with the
execution of this Agreement (the "Closing Date"), but in no event not later than
January 15, 1999.

      1.4  Other Transactions at Closing

     (a)  The  obligation  of  the  Purchaser  to  consummate  the  transactions
contemplated by this Agreement shall be subject to the fulfillment by the Seller
at the Closing of the following conditions:

     (i) Executed  confidentiality,  non-competition,  and release agreements by
and  among  the  persons  listed  on  Schedule   1.4(a)(i)  and  the  Companies,
substantially in the form of Exhibit A attached hereto;

     (ii) Certificates of Good Standing,  with "bring down" telegrams or similar
documentation  as of  the  Closing  Date,  as to SK  Associates,  issued  by the
appropriate  governmental authorities of the State of New York and each state in
which SK Associates is required to be qualified to do business;

     (iii) Certified copy of the Certificate of  Incorporation of SK Associates,
and all amendments thereto,  certified by the Secretary of State of the State of
New York;

     (iv) Copies of the by-laws of SK  Associates,  resolutions  of the Board of
Directors  of the Company  authorizing  the  transactions  contemplated  by this
Agreement,  and a statement of incumbency and authority of the signing officers,
certified  by the  secretary or  assistant  secretary  thereof as being true and
correct;

     (v)  Certificates of Good Standing,  with "bring down" telegrams or similar
documentation  as of  the  Closing  Date,  as  to SK  Brokerage  issued  by  the
appropriate  governmental authorities of the State of New York and each state in
which SK Brokerage is required to be qualified to do business;

     (vi) Certified copy of the  Certificate of  Incorporation  of SK Brokerage,
and all amendments thereto,  certified by the Secretary of State of the State of
New York;

     (vii) Copies of the by-laws of SK  Brokerage,  resolutions  of the Board of
Directors  of the Company  authorizing  the  transactions  contemplated  by this
Agreement,  and a statement of incumbency and authority of the signing officers,
certified  by the  secretary or  assistant  secretary  thereof as being true and
correct;

     (viii)  Certificates  of Good  Standing,  with "bring  down"  telegrams  or
similar  documentation,  as  to  SK  International  issued  by  the  appropriate
governmental  authorities  of the State of  Delaware  and each state in which SK
International is required to be qualified to do business;

     (ix)  Certified   copy  of  the   Certificate   of   Incorporation   of  SK
International,  and all amendments thereto,  certified by the Secretary of State
of the State of Delaware;

     (x) Copies of the by-laws of SK International,  resolutions of the Board of
Directors  of the Company  authorizing  the  transactions  contemplated  by this
Agreement,  and a statement of incumbency and authority of the signing officers,
certified  by the  secretary or  assistant  secretary  thereof as being true and
correct;

     (xi) Agreement by and among the Companies,  MSGI and Knox, substantially in
the form of Exhibit B attached  hereto,  which shall provide that: (i) MSGI will
guarantee the Unsecured Notes,  (ii) the Trustee will release the Knox Shares to
the Companies, (iii) Knox will release his security interest in the Knox Shares,
(iii) the Companies will cancel the Knox Shares, (iv) Knox acknowledges that the
Knox Payment and the Unsecured  Notes  represent all of the payment  obligations
due Knox by the  Companies,  MSGI,  or Stevens  under the terms of the  Purchase
Agreements,  (v) Knox will execute a general  release in favor of the  Companies
and MSGI,  and (vi) the Knox  Shares are free and clear of all liens and adverse
claims and are not  subject to any claim  pursuant  to Part B Section 236 of the
New York  Domestic  Relations  Law, or any similar  provision  of any  successor
statute;

     (xii) Canceled Promissory Notes;

     (xiii) Letter from Stevens and Knox, substantially in the form of Exhibit C
attached  hereto,   releasing  the  Trustee  from  his  obligations   under  the
Shareholder's Agreement;

     (xiv)  Letter  from Knox,  substantially  in the form of Exhibit D attached
hereto, authorizing the Trustee to release the Knox Shares;

     (xv) Delivery by the Trustee of the Knox Shares  together with stock powers
endorsed  in blank  by Knox and any  financing  statements  endorsed  by Knox or
Stevens;

     (xvi)  Letter from Seller to the  Internal  Revenue  Service  electing  tax
allocation under Section 1362(e)(3) and a physical closing of the books;


(xvii) Cross Receipt of MSGI and Stevens;

(xviii)     Cross Receipt of MSGI and Knox;

(xix)  Release  of SK  Associates  by the Seller of (A) all  obligations  to pay
interest or principal  under the Mortgage  Agreement (as defined  below) and (B)
the Security Agreement of October 14, 1992 relating to such Mortgage  Agreement;
and

(xx) Canceled Demand Note (as defined below).

     (b)  The   obligation  of  the  Seller  to  consummate   the   transactions
contemplated  by this  Agreement  shall be  subject  to the  fulfillment  by the
Purchaser at the Closing of the following conditions:

     (i) Executed  Stevens  Employment  Agreement,  substantially in the form of
Exhibit E attached hereto;

     (ii) Executed Unsecured Promissory Notes, guaranteed by MSGI, to Knox, each
in an amount  representing the remaining  principal  payments due on each of the
canceled  Promissory  Notes,  substantially  in the form set forth in  Exhibit F
attached hereto;

     (iii) Payment by MSGI to Seller of one hundred  fifty-nine  thousand  three
hundred  ninety-five  dollars  and five  cents  ($159,395.05)  representing  the
remaining  balance of the loan obligation of SK Associates to Seller pursuant to
an  agreement  between  Seller and SK  Associates,  dated  October 14, 1992 (the
"Mortgage Agreement");

     (iv) Payment by MSGI of the remaining  balance of twenty  thousand  dollars
($20,000) of the one hundred thousand dollars ($100,000) promissory note between
SK Associates (the "Demand Note"), as maker, and Seller, as payee, dated October
14, 1992 and the cancellation of such note by Seller;

     (v)  Evidence of payment by MSGI of two hundred  fifty-four  thousand  four
hundred seventeen dollars  ($254,417) to Knox (the "Knox Payment") made pursuant
to the terms of the Shareholders' Agreement; and

     (vi) The execution and delivery of the Stevens 401(k) Note Guaranty and the
Knox 401(k) Note Guaranty in the form of Exhibit G attached hereto.

II.   REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents and warrants to the Purchaser as follows:

2.1 Organization and Qualification

Except as set forth on Schedule  2.1, the Companies do not own any capital stock
of  any  corporation  or  any  interest  in  any  joint  venture,   partnership,
association,  trust,  or  other  entity.  The  business  and  operations  of the
Companies are conducted  solely by and through the Companies.  Each Company is a
corporation  duly organized,  validly  existing,  and in good standing under the
laws of the  state  under  which  they  are  incorporated,  with  all  requisite
corporate  power  and  authority  and all  necessary  consents,  authorizations,
approvals,  orders,  licenses,  certificates,  and  permits  of  and  from,  and
declarations and filings with, all federal, state, local, and other governmental
authorities,  and all courts and other tribunals to own, lease, license, and use
their  properties  and  assets and to carry on the  business  in which it is now
engaged.  Each Company is duly qualified to transact the business in which it is
now  engaged  and  is  in  good  standing  as a  foreign  corporation  in  every
jurisdiction in which their ownership, leasing, licensing, or use of property or
assets or the conduct of their business makes such qualification necessary.

2.2 Capitalization

The authorized  capital stock of SK Associates  consists of: (i) twenty thousand
(20,000)  shares of common  shares,  par value  $1.00 per  share,  of which four
hundred  ninety-nine (499) shares are outstanding and are owned beneficially and
of record by the Seller,  and three hundred  thirty-three (333) shares which are
treasury shares held in escrow by the Trustee,  and (ii) two hundred fifty (250)
shares of  preferred  shares par value  $.01 per  share,  of which no shares are
outstanding.  Each such  outstanding  share of SK  Associates  Common  Shares is
validly issued,  fully paid, and  nonassessable,  and has not been issued and is
not owned or held in  violation of any  preemptive  right of  stockholders.  The
authorized capital stock of SK Brokerage consists of two hundred (200) shares of
common  shares,  no par  value  per  share,  of  which  sixty  (60)  shares  are
outstanding  and are owned  beneficially  and of record by the  Seller and forty
(40) shares which are treasury  shares held in escrow by the Trustee.  Each such
outstanding  share of SK Brokerage Common Shares is validly issued,  fully paid,
and  nonassessable and has not been issued and is not owned or held in violation
of any preemptive  right of stockholders and is owned of record and beneficially
by the Seller. The authorized capital stock of SK International  consists of two
hundred (200) shares of common stock,  par value $.01 per share,  of which sixty
(60)  shares are  outstanding  and are owned  beneficially  and of record by the
Seller and forty (40)  shares  which are  treasury  shares held in escrow by the
Trustee. Each such outstanding share of SK International Common Stock is validly
issued,  fully paid, and  nonassessable and has not been issued and is not owned
or held in violation of any  preemptive  right of  stockholders  and is owned of
record and  beneficially by the Seller.  The Shares owned by the Seller are held
free and clear of all liens  whatsoever.  The Knox  Shares are  treasury  shares
owned by the Companies  and, to the Seller's  knowledge,  except for the lien by
Knox on the Knox Shares, are held free and clear of all liens whatsoever.  There
is no  commitment,  plan, or arrangement  to issue,  and no outstanding  option,
warrant,  or other right calling for the issuance of, any share of capital stock
of any of the Companies or any security or other  instrument  convertible  into,
exercisable  for, or  exchangeable  for capital  stock of any of the  Companies.
There  is no  outstanding  security  or  other  instrument  convertible  into or
exchangeable for capital stock of any of the Companies.

2.3 Financial Condition

The  Seller  has  delivered  to the  Purchaser  true and  correct  copies of the
following:  (i)  the  unaudited  combined  balance  sheet  of the  Companies  at
September 30, 1998,  December 31, 1997,  and December 31, 1996 and the unaudited
combined  statements  of  income,  statements  of  retained  earnings,  and (ii)
combined  statements of cash flows of the Companies  for the  nine-month  period
ended  September 30, 1998 and for each of the years ended December 31, 1997, and
December 31, 1996. Except as disclosed in this Agreement or any Schedule hereto,
each such  balance  sheet  presents  fairly the  financial  conditions,  assets,
liabilities, and stockholders' equity of the Company reported on as of its date;
each such statement of income and statement of retained earnings presents fairly
the results of  operations of the Company  reported on for the period  indicated
and its retained  earnings as of the date indicated;  and each such statement of
cash flows presents fairly the information purported to be shown therein. Except
for the absence of footnotes and vacation  accruals and, with the exception that
the balance sheet and other financial statements for the nine-month period ended
September  30, 1998 are subject to normal  year-end  adjustments,  the financial
statements referred to in this Section 2.3 have been prepared in accordance with
GAAP consistently  applied throughout the periods involved and are in accordance
with the books and records of the  Companies.  Except as  disclosed  on Schedule
2.3, since September 30, 1998:

(a) there has not been a material  adverse  change in the  financial  condition,
results of  operations,  business,  properties,  assets,  or  liabilities of the
Companies.

(b) the operations and business of the Companies have been conducted only in the
ordinary course;

(c) the  Companies  have not  suffered  an  extraordinary  loss  (whether or not
covered by insurance) or waived any right of substantial  value (for the purpose
of this Section 2.3(c) an "extraordinary  loss" or "substantial value" shall be,
in the case of an  extraordinary  loss, an event or, in the case of  substantial
value,  a waiver,  either  of which  result  in a  liability  in excess of fifty
thousand dollars ($50,000); and,

(d) The  Companies  have  not  paid to  date  any  expense  resulting  from  the
preparation of, or the  transactions  contemplated  by, this Agreement (it being
understood  that the  Seller  shall  pay all such  expenses,  including  without
limitation, their legal expenses resulting from this Agreement), except for work
performed by the employees of the Companies related to assembling and furnishing
reports, data, and information in connection with the transactions  contemplated
by this Agreement.

Except as disclosed in this  Agreement  or in any Schedule  hereto,  there is no
fact known to the Seller which  materially  and adversely  affects the financial
condition, results of operations,  business,  properties, assets, or liabilities
of the  Companies;  provided,  however,  that the Seller  does not  express  any
representation  or warrantee as to political,  business,  or economic matters of
general  applicability  or  as  to  business  or  economic  matters  of  general
applicability to the mailing list industry. There is no fact known to the Seller
today,  which if not remedied on the date hereof,  would have a material adverse
effect on any Company, alone or in the aggregate, with the passage of time.

2.4 Tax and Other Liabilities

(a) Except as set forth in Schedule  2.4(a),  the Companies have no liability in
excess of $5,000,  individually or in the aggregate,  of any nature,  accrued or
contingent,  including without  limitation  liabilities for Taxes (as defined in
Section 2.4(c)) and  liabilities to customers or suppliers,  required by GAAP to
be reflected on a balance sheet or in notes thereto, other than the following:

(i) Liabilities as set forth or reflected on each respective  Company's  balance
sheet (the "Last  Balance  Sheet") as of September  30, 1998 (the "Last  Balance
Sheet Date");

(ii) Other  liabilities  arising  since the Last Balance Sheet Date and prior to
the Closing in the ordinary course of business which are not  inconsistent  with
the  representations and warranties of the Seller or any other provision of this
Agreement; and

(iii)  Liabilities  disclosed in this Agreement or in any Schedule  hereto or in
any materials furnished to the Purchaser pursuant to this Agreement.

(b) Without limiting the generality of Section 2.4(a) and except as set forth on
Schedule 2.4(b):

(i) The Companies and any combined,  consolidated,  unitary, or affiliated group
of which the Companies are or have been a member prior to the Closing Date:  (i)
have paid all Taxes (as  defined in Section  2.4(c))  required  to be paid on or
prior to the Closing Date (including, without limitation,  payments of estimated
Taxes) for which the Companies could be held liable,  except for Taxes which are
being  contested in good faith and by  appropriate  proceedings  as set forth in
Schedule  2.4(b)(i);  and (ii) have  accurately  and  timely  filed (or filed an
extension for), all federal,  state,  local, and foreign Tax Returns (as defined
in Section 2.4(c)),  reports, and forms with respect to the Taxes required to be
filed by them on or before the Closing Date;

(ii) The amount set up as provisions  for Taxes on each  Company's  Last Balance
Sheet is sufficient in all material respects for all accrued and unpaid Taxes of
the respective  Companies,  whether or not due and payable and whether or not in
dispute,  under  applicable  laws  relating  to Taxes as in  effect  on the Last
Balance  Sheet Date or now in effect,  for the period ended on such date and for
all periods prior thereto;

(iii) Except as set forth in Schedule 2.4(b)(iii),  with respect to each taxable
period of each of the Companies,  either such taxable period has been audited by
the Internal Revenue Service or other  appropriate  taxing authority or the time
for assessing or collecting  Tax with respect to such taxable  period has closed
and such taxable period is no longer subject to review;

(iv) No  deficiency  or  proposed  adjustment  which  has not  been  settled  or
otherwise  resolved  for any  amount  of Tax has  been  proposed,  asserted,  or
assessed by any taxing authority  against,  or with respect to the activities of
each of the Companies;

(v) None of the  Companies has consented to extend the time in which any Tax may
be assessed or collected by a taxing authority;

(vi) None of the  Companies  has  requested or been granted an extension of time
for filing any Tax Return to a date later than the Closing Date;

(vii) There is no action,  suit,  taxing authority  proceeding,  or audit now in
progress, pending, or threatened against or with respect to any of the Companies
with respect to any Tax assessment or deficiency;

(viii) None of the Companies is or has been a member of an  affiliated  group as
defined in Section  1504 of the Internal  Revenue Code of 1986,  as amended (the
"Code"), or filed or been included in a combined,  consolidated,  or unitary Tax
Return;

(ix) No claim has ever been made by a taxing  authority in a jurisdiction  where
any of the  Companies  does  not pay Tax or file  Tax  Returns  that  any of the
Companies may be subject to the Taxes assessed by such jurisdiction;

(x) The  Companies  have  withheld  and paid all  Taxes  required  to have  been
withheld and paid in  connection  with  amounts  paid or owing to any  employee,
creditor,  independent  contractor,  or other party;  (xi)  Schedule  2.4(b)(xi)
contains a list setting forth all the states, territories, or jurisdictions,  if
any, in which any of the Companies is required to file a Tax Return  relating to
their operations;

(xii)  SK  Associates  (and any  predecessors)  has been a  validly  electing  S
corporation  within the meaning of Code  Sections 1361 and 1362 at all times and
for all periods  between (x) January 1, 1987  through  December 31, 1992 and (y)
January 1, 1997 through and including all taxable  periods  thereafter up to and
including the day of the Closing Date;

(xiii) The Companies  have  delivered to MSGI complete and correct copies of all
federal,  state, local, and foreign income tax returns filed with respect to the
Companies for taxable periods on or after January 1, 1992; and

(xiv) None of the Companies  have made any payments,  nor are they  obligated to
make any  payments,  nor are they a party to any  agreement  that under  certain
circumstances  could obligate it to make any payment that will not be deductible
under Section 280G of the Code.  The Companies will not have any liability on or
after the Closing Date pursuant to any tax sharing or tax allocation  agreement.
The Companies have no liability for the Taxes of any other person under Treasury
Regulation  1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.

(c) For  purposes of this  Agreement,  "Taxes"  shall mean all  federal,  state,
local,  or foreign taxes,  assessments or duties which are payable or remittable
by the  Companies or levied upon any property of the  Companies,  or levied with
respect to either of their  assets,  franchises,  income,  receipts,  including,
without limitation,  import duties, excise, franchise, gross receipts,  utility,
real property,  capital,  personal  property,  withholding,  FICA,  unemployment
compensation  sales or use tax,  governmental  charges (whether or not requiring
the filing of a return),  and all  additions  to tax,  penalties,  and  interest
relating thereto.  Tax Return means any return,  declaration,  report, claim for
refund,  information  return, or other statement relating to Taxes filed with or
sent  to  any  federal,   state,  local,  or  foreign   governmental  entity  or
subdivision.

(d) Schedule 2.4(d) sets forth the principal amount, due date, interest rate and
remaining  balance  for  all  loans,  lines  of  credit,  promissory  notes,  or
guaranties  of any of the  Companies.  The  Companies  have  paid all  currently
outstanding  principal and interest which are due on such  obligations as of the
Closing Date.

2.5 Litigation and Claims

Except as  disclosed  in Schedule  2.5, to the  Seller's  knowledge  there is no
litigation,  arbitration,  claim,  governmental,  or other proceeding (formal or
informal),  or investigation pending,  threatened,  or in prospect (or any basis
therefor  known  to  the  Seller)  with  respect  to  the  Companies,  or  their
businesses, properties, or assets. The Companies are not affected by any present
or  threatened  strike or other labor  disturbance  nor, to the knowledge of the
Seller,  is any union  attempting  to represent any employee of the Companies as
collective bargaining agent. To the Seller's knowledge, the Companies are not in
violation of, or in default with respect to, any material law, rule, regulation,
order,  judgment,  or decree where the violation or default will have a material
adverse effect on the Companies.

2.6 Properties of the Companies

(a) Set forth on Schedule  2.6(a) is a list of all real property owned or leased
by each Company.  With respect to real property that is owned by the  Companies,
the  Companies  have good and  marketable  title to all such  property  and such
property  is clear of all  Liens,  except as  otherwise  disclosed  on  Schedule
2.6(a).

(b) Set forth in Schedule  2.6(b) is a true and  complete  list of all  material
personal property and assets (other than real property),  owned by the Companies
or  leased or  licensed  by the  Companies  from or to a third  party.  All such
material  property and assets owned by any of the  Companies on the Last Balance
Sheet Date are reflected on such Company's respective Last Balance Sheet (except
for material  acquisitions  subsequent  to the Last Balance Sheet Date which are
noted on Schedule 2.6(b)).  All such material property and assets owned, leased,
or licensed by the Companies is in usable  condition  (reasonable  wear and tear
which  is not  such  as to  affect  adversely  the  operation  of  the  business
excepted).

(c) Except as set forth in Schedule  2.6(c),  all accounts and notes  receivable
reflected on the Last Balance  Sheet,  or arising  since the Last Balance  Sheet
Date have arisen in bona fide arms-length transactions in the ordinary course of
the Companies respective  businesses and, to the knowledge of the Seller are not
subject  to any right of  recourse,  defense,  deduction,  return  counterclaim,
offset, or set-off.

(d) To the knowledge of the Seller, no real property owned,  leased, or licensed
by the Companies lies in an area which is, or will be subject to zoning, use, or
building  code  restrictions   that  would  prohibit  the  continued   effective
ownership,  leasing,  licensing, or use of such real property in the business in
which the Companies are now engaged.

(e) No Company has caused or permitted their respective businesses,  properties,
or assets to be used to generate, manufacture,  refine, transport, treat, store,
handle,  dispose of, transfer,  produce,  or process any Hazardous Substance (as
such term is defined  in this  Section  2.6(e))  except in  compliance  with all
applicable laws, rules, regulations, orders, judgments, and decrees, and has not
caused or permitted the Release (as such term is defined in this Section 2.6(e))
of any Hazardous  Substance on or off the site of any property of the Companies.
The term "Hazardous  Substance" shall mean any hazardous waste, as defined by 42
U.S.C. 6903(5), any hazardous substance,  as defined by 42 U.S.C.  9601(14), any
pollutant  or  contaminant,  as  defined  by 42 U.S.C.  9601(33),  and all toxic
substances,  hazardous materials,  or other chemical substances regulated by any
other law,  rule,  or  regulation.  The term  "Release" for the purposes of this
paragraph shall have the meaning set forth in 42 U.S.C. 9601(22).

2.7 Contracts and Other Instruments

Schedule  2.7(a)  accurately  and  completely  sets forth a list of all material
contracts,   agreements,   loan  agreements,   instruments,   leases,  licenses,
arrangements,  or understandings  with respect to the business of the Companies.
Except as set forth in Schedule  2.7(b),  each such  contract,  agreement,  loan
agreement,  instrument,  lease,  or  license  is in full force and is the legal,
valid,  and binding  obligation  of the Company  which is a party  thereto,  and
(subject to  applicable  bankruptcy,  insolvency,  and other laws  affecting the
enforceability  of  creditors'  rights  generally)  is  enforceable  as to it in
accordance with its terms.  Except as set forth in Schedule 2.7(c),  none of the
Companies  are in  violation,  in breach of, or in default  with  respect to any
material  terms of any such contract,  agreement,  loan  agreement,  instrument,
lease, or license. Except for employment agreements and as disclosed in Schedule
2.7(d),  none of the  Companies  are a party to any  contract,  agreement,  loan
agreement,  instrument,  lease, license,  arrangement, or understanding with any
affiliated  company,  or to the Seller's  knowledge  any director,  officer,  or
employee of any of the  Companies,  or any  relative or  affiliate of any of the
Companies or of any such director, officer, or employee.

2.8 Employees

(a) Except as set forth in Schedule  2.8(a) or in any schedule  hereto or in the
employment agreements referred to in such schedules,  no Company has contributed
to, any pension, profit sharing, option, other incentive plan, or any other type
of Employee Benefit Plan (as defined in Section 3(3) of the Employee  Retirement
Income  Security  Act of  1974,  as  amended  ("ERISA")),  and does not have any
non-customary arrangement which are not within the standard policies, procedures
and  guidelines  of  the  Companies   with  employees  for  bonuses,   incentive
compensation, vacations, severance pay, insurance, or other benefits.

(b)  Schedule  2.8(b)  contains  a true  and  correct  statement  of the  names,
relationship  with each Company,  present rates of compensation  (whether in the
form of salary, bonuses,  commissions, or other supplemental compensation now or
hereafter payable),  and aggregate  compensation,  for the past calendar year or
expected in the current  calendar  year,  of each  director,  officer,  or other
employee of each Company  whose  aggregate  compensation  for such time exceeded
forty  thousand  dollars  ($40,000)  per annum or whose  aggregate  compensation
presently exceeds the rate of forty thousand dollars ($40,000) per annum. Except
as set forth in Schedule  2.8(b),  since  September 30, 1998, the Companies have
not  changed  the  rate of  compensation  of any of their  directors,  officers,
employees,  or  sales  representatives,  nor has any  Employee  Benefit  Plan or
program been instituted or amended to increase benefits thereunder.

2.9 Patents, Trademarks, Et Cetera

Except  as set  forth in  Schedule  2.9,  none of the  Companies  do own or have
pending,  nor are licensed under,  any patent,  patent  application,  trademark,
trademark application, trade name, service mark, copyright,  franchise, or other
intangible  property  or  asset  (all  of  the  foregoing  being  herein  called
"Intangibles").  Neither  Seller,  nor to the Sellers'  knowledge  any director,
officer,  or employee of any of the Companies,  nor any relative or affiliate of
any of the Companies or the Seller,  possesses any  Intangible  which relates to
the  business of any of the  Companies.  There is no right under any  Intangible
necessary to the business of any of the Companies as presently conducted, except
such as are so designated in Schedule 2.9. None of the Companies have infringed,
is infringing, nor has received notice of infringement with asserted Intangibles
of others. To the knowledge of the Seller, there is no infringement by others of
Intangibles of any of the Companies.

2.10 Questionable Payments

None of the  Companies,  the Seller,  nor, to the  knowledge of the Seller,  any
director, officer, agent, employee, or other person associated with or acting on
behalf of the  Companies  or  Seller  has,  directly,  or  indirectly:  used any
corporate  funds for  unlawful  contributions,  gifts,  entertainment,  or other
unlawful expenses relating to political  activity;  made any unlawful payment to
foreign or domestic government  officials or employees or to foreign or domestic
political  parties or campaigns from corporate funds;  established or maintained
any unlawful or unrecorded  fund of corporate  monies or other assets;  made any
false or fictitious  entry on the books or records of any of the  Companies;  or
made any bribe,  kickback,  or other payment of a similar or comparable  nature,
whether lawful or not, to any person or entity, private or public, regardless of
form, whether in money,  property, or services, to obtain favorable treatment in
securing  business or to obtain  special  concessions,  or to pay for  favorable
treatment for business secured or for special concessions already obtained.

2.11 Authority to Sell

(a) The Seller has the capacity to execute, deliver, and perform this Agreement.
This Agreement has been duly executed and delivered by the Seller, is the legal,
valid,  and binding  obligation  of the Seller and is  enforceable  as to him in
accordance with its terms.  Except as set forth in Schedule 2.11(a),  the Seller
is not under any  contractual  restriction or obligation  which is  inconsistent
with  the  execution  and  performance  of this  Agreement.  The  Seller  has no
knowledge of any consent, authorization,  approval, order, license, certificate,
or permit of or from, or declaration or filing with, any federal,  state, local,
or other governmental  authority or any court or other tribunal that is required
by the Companies or the Seller for the  execution,  delivery,  or performance of
this Agreement by the Seller.

(b) Except as set forth in Schedule  2.11(b)(i),  no consent of any party to any
material  lease,  license,   distribution,   agency,   consulting,   employment,
financing,  lending,  installment sale or conditional  sale,  security,  pledge,
guarantee,  or other  agreement,  arrangement,  or  understanding  to which  the
Companies or the Seller are a party,  or to which any of their or his properties
or assets are subject, is required for the execution,  delivery,  or performance
of this  Agreement.  None of the Companies nor the Seller has made any agreement
or  understanding  not approved in writing by the  Purchaser as a condition  for
obtaining any consent, authorization,  approval, order, license, certificate, or
permit required for the  consummation of the  transactions  contemplated by this
Agreement.  Except  as set  forth  in  Schedule  2.11  (b)(ii),  the  execution,
delivery,  and performance of this Agreement by the Seller does not and will not
(i)  violate,  result  in a  breach  of,  or  conflict  with  any  term  of  the
Certificates of Incorporation  (or other charter  document) or by-laws of any of
the  Companies;  (ii)  violate,  result  in a breach  of, or  conflict  with any
material law, rule, regulation,  order, judgment, or decree binding on Seller or
any of the Companies, or to which any of its operations,  business,  properties,
or assets are  subject;  or (iii)  violate,  result in a breach of, or  conflict
with,  or (with or without  the giving of notice or the passage of time or both)
entitle  any  party to  terminate  or call a  default  under,  or  result in the
creation of an  encumbrance  on any of the assets or properties of the Seller or
any of the Companies pursuant to, any note, bond, mortgage, indenture, contract,
agreement,  lease, sublease,  license, permit, franchise, or other instrument or
arrangement  to which  Purchaser  is a party or by which  any of its  assets  or
properties are bound or affected and which could have a material  adverse effect
on the abilities of the Seller or any of the Companies to perform this Agreement
or to consummate the transactions contemplated by this Agreement.

2.12 Nondistributive Intent

The Seller is acquiring the shares of MSGI Common Stock to be issued pursuant to
Section  1.2(b)  hereof for his own account  (and not for the account of others)
for investment and not with a view to the distribution  thereof. The Seller will
not sell or otherwise dispose of such shares without registration under the 1933
Act, or an exemption therefrom.


III.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

      The Purchaser represents and warrants to the Seller as follows:

3.1 Organization and Qualification

Purchaser  and each of its  subsidiaries  is a  corporation  duly  organized and
validly  existing under the laws of its  respective  state of  incorporation  as
listed on Schedule  3.1.  Purchaser has full  corporate  power and authority and
possesses   all   material   governmental   franchises,    licenses,    permits,
authorizations,  and approvals  necessary to enable it to use its corporate name
and to own,  lease,  or otherwise hold its properties and assets and to carry on
its business in all  material  respects as  presently  conducted.  Except as set
forth in Schedule 3.1,  Purchaser and each of its subsidiaries is duly qualified
and in good standing to do business in each  jurisdiction in which the nature of
its business or the ownership,  leasing, or holding of its properties makes such
qualification  necessary  to the  extent  material.  Purchaser  has caused to be
delivered  to  the  Seller  true  and   complete   copies  of  its  Articles  of
Incorporation,  as amended to date,  and the  By-laws,  as in effect on the date
hereof, of Purchaser.

3.2 Authority

The  Purchaser has all requisite  power and authority to execute,  deliver,  and
perform this  Agreement.  All necessary  corporate  proceedings of the Purchaser
have been duly taken to authorize the execution,  delivery,  and  performance of
this  Agreement  by the  Purchaser.  This  Agreement  has been duly  authorized,
executed,  and  delivered by the  Purchaser,  is the legal,  valid,  and binding
obligation of the Purchaser,  and is  enforceable as to them in accordance  with
its terms.  The execution,  delivery,  and  performance of this Agreement by the
Purchaser does not and will not (i) violate,  result in a breach of, or conflict
with any term of the Certificate of Incorporation (or other charter document) or
By-laws of Purchaser;  (ii) violate, result in a breach of, or conflict with any
material law, rule, regulation, order, judgment, or decree binding on Purchaser,
or to which any of its operations,  business, properties, or assets are subject;
or (iii)  violate,  result in a breach of, or conflict with, or (with or without
the  giving of  notice  or the  passage  of time or both)  entitle  any party to
terminate or call a default  under,  or result in the creation of an encumbrance
on any of the assets or  properties  of Purchaser  pursuant to, any note,  bond,
mortgage,  indenture,  contract,  agreement,  lease, sublease,  license, permit,
franchise,  or other  instrument or arrangement to which Purchaser is a party or
by which any of its assets or  properties  are bound or affected and which could
have a material  adverse  effect on the  abilities  of Purchaser to perform this
Agreement or to consummate the transactions contemplated by this Agreement.

3.3 SEC Filings

Since  January  1,  1995,  Purchaser  has  timely  filed all  required  reports,
statements,  schedules, and registration statements (collectively,  "Purchaser's
Filings") with the Securities  and Exchange  Commission  required to be filed by
Purchaser  pursuant to the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange  Act"),  all of  which  complied  in all  material  respects  with all
applicable  requirements of the Exchange Act. Purchaser has delivered to Seller:
(i) its annual  reports on Form 10-KSB for its fiscal  years ended June 30, 1997
and 1998, and (ii) its proxy or information  statements relating to meetings of,
or action taken without a meeting by, the  stockholders  of Purchaser held since
January  1,  1996 and prior to the date  hereof.  None of  Purchaser's  Filings,
including without  limitation,  any financial  statements or schedules  included
therein,  at the time filed,  contained any untrue statements of a material fact
or omitted to state a material fact  required to be stated  therein or necessary
in order to make the statements  therein,  in light of the  circumstances  under
which they were made, not misleading.

3.4 Validity of Shares of MSGI Common Stock

The shares of MSGI Common Stock to be issued and delivered to Seller pursuant to
this Agreement and the shares issuable upon the exercise of the Employee Options
(as  defined in  Section  4.2),  when  issued in  accordance  with the terms and
conditions of this Agreement,  will be duly  authorized,  validly issued,  fully
paid, and nonassessable.

IV.   CERTAIN COVENANTS OF THE SELLER AND PURCHASER

4.1 Tax Returns

The Seller covenants and agrees that with respect to the "S termination year" of
SK Associates  that includes the Closing  Date,  (i) all items of income,  gain,
loss,  deduction,  and credit of each such corporation shall be allocated by the
Purchaser  between  the "S  short  year"  and the "C  short  year"  in a  manner
consistent with Code Section 1362(e)(3) and the Treasury Regulations promulgated
thereunder,  and (ii) the Seller agrees to file his  individual Tax Returns in a
manner  consistent  with such  allocation.  Anything  set forth herein or in the
Schedules  notwithstanding,  Seller shall promptly pay all corporate level taxes
due under  section 1374 of the Code as a result of any income  recognized by the
Companies for the transactions that occur prior to the Closing.

4.2 Employee Options

The  Purchaser  covenants  and  agrees  that as soon as  practicable  after  the
Closing,  in  consideration  of the  future  services  of the  employees  of the
Companies,  MSGI  shall  issue  options  ("Employee  Options")  to  purchase  an
aggregate of two hundred  thousand  (200,000)  shares of MSGI Common Stock at an
exercise price equal to the greater of the then outstanding  conversion price of
the Series D Convertible  Preferred  Stock of MSGI or the fair market value of a
share of MSGI Common Stock at the time of the grant,  allocated in the names and
in such amounts as specified by the Seller.

4.3 Line of Credit

The Purchaser covenants and agrees to relieve Seller from any liability relating
to the  hundred  and  fifty  thousand  dollar  ($150,000)  line of credit to the
Companies from Chase Manhattan Bank within sixty (60) days of the Closing.

V.    CONDITIONS TO OBLIGATIONS OF THE PURCHASER

The obligations of the Purchaser under this Agreement are subject, at the option
of the Purchaser, to the following conditions:

5.1 Opinion of Counsel

The Seller  has  delivered  to MSGI on the date of the  Closing  the  opinion of
counsel to the  Seller,  dated as of the  Closing  Date,  in form and  substance
satisfactory to counsel for the Purchaser.

5.2 Other Closing Documents

The Seller shall have delivered to the Purchaser at or prior to the Closing such
other  documents as the  Purchaser may  reasonably  request prior to the Closing
Date in order to enable the Purchaser to determine whether the conditions to its
obligations  under this  Agreement  have been met and otherwise to carry out the
provisions of this Agreement.

5.3 Legal Action.

There shall not have been instituted or threatened any legal proceeding relating
to, or seeking to prohibit  or  otherwise  challenge  the  consummation  of, the
transactions  contemplated by this Agreement,  or to obtain substantial  damages
with respect thereto.

5.4 No Governmental Action

There shall not have been any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered, enforced, or deemed
applicable to the  transactions  contemplated  by this Agreement by any federal,
state, local, or other governmental authority or by any court or other tribunal,
including the entry of a preliminary or permanent injunction, which, in the sole
judgment of the Purchaser,  (a) makes any of the  transactions  contemplated  by
this Agreement  illegal,  (b) results in a delay in the ability of the Purchaser
to  consummate  any of the  transactions  contemplated  by this  Agreement,  (c)
requires the divestiture by the Purchaser of a material  portion of the business
of the Purchaser and its subsidiaries  taken as a whole, or of the Companies (d)
imposes  material  limitations  on the ability of the Purchaser  effectively  to
exercise  full rights of ownership of the shares to be acquired from the Seller,
or (e) otherwise prohibits or restricts  consummation of any of the transactions
contemplated  by this  Agreement  or impairs  the  contemplated  benefits to the
Purchaser of any of the transactions contemplated by this Agreement.

5.5 Contractual Consents Needed

Each  Company  shall  have  obtained  at or prior to the  Closing  all  consents
required for the consummation of the transactions contemplated by this Agreement
from  any  party  to  any  contract,  agreement,   instrument,  lease,  license,
arrangement,  or  understanding to which it is a party, or to which it or any of
its respective businesses, properties, or assets are subject.

5.6 Material Adverse Change

Except as disclosed in this Agreement or in any Schedule hereto, since September
30, 1998 there has been no event or  development or  combinations  of changes or
developments,  individually  or in  the  aggregate,  that  could  be  reasonably
expected  to have a material  adverse  effect on the  business,  operations,  or
future prospects of any of the Companies.

VI.   CONDITIONS TO OBLIGATIONS OF SELLER.

The obligations of the Seller under this Agreement are subject, at the option of
the Seller, to the following:


6.1 Legal Action

There shall not have been instituted or threatened any legal proceeding relating
to, or seeking to prohibit  or  otherwise  challenge  the  consummation  of, the
transactions  contemplated by this Agreement,  or to obtain substantial  damages
with respect thereto.

6.2 Contractual Consents

The  Purchasers  shall have  obtained at or prior to the  Closing  all  consents
required for the consummation of the transactions contemplated by this Agreement
from  any  party  to  any  contract,  agreement,   instrument,  lease,  license,
arrangement,  or  understanding  to which it is a party,  or to which any of its
respective businesses, properties, or assets are subject.

6.3 Opinion of Counsel

The Purchaser has delivered to the Seller on the date of the Closing the opinion
of counsel to the Purchaser, dated as of the Closing Date, in form and substance
satisfactory to counsel for the Seller.

6.4 Other Closing Documents

The Purchaser shall have delivered to the Seller at or prior to the Closing such
other  documents as the Seller may reasonably  request prior to the Closing Date
in order to enable  the  Seller  to  determine  whether  the  conditions  to its
obligations  under this  Agreement  have been met and otherwise to carry out the
provisions of this Agreement.

6.5 No Governmental Action

There shall not have been any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered, enforced, or deemed
applicable to the  transactions  contemplated  by this Agreement by any federal,
state, local, or other governmental authority or by any court or other tribunal,
including the entry of a preliminary or permanent injunction, which, in the sole
judgment of the Seller,  (a) makes any of the transactions  contemplated by this
Agreement  illegal,  (b)  results  in a delay in the  ability  of the  Seller to
consummate  any of the  transactions  contemplated  by  this  Agreement,  or (c)
otherwise  prohibits  or  restricts  consummation  of any  of  the  transactions
contemplated  by this  Agreement  or impairs  the  contemplated  benefits to the
Seller of any of the transactions contemplated by this Agreement.

VII.  INDEMNIFICATION; SURVIVAL; LIMITATIONS ON LIABILITY

7.1 Indemnification of Purchaser

(a) Subject to the terms and  conditions  set forth in Section  7.3,  the Seller
agrees to indemnify and hold harmless the  Purchaser,  its officers,  directors,
employees, counsel, and agents, (collectively,  the "Purchaser Indemnitees"), on
an after-tax basis against and in respect of any and all claims, suits, actions,
proceedings  (formal  or  informal),  investigations,  judgments,  deficiencies,
damages,  settlements,  liabilities,  and  reasonable  legal and other  expenses
related thereto (collectively,  "Claims"), as and when incurred,  arising out of
or based upon any breach of any representation, warranty, covenant, or agreement
of the  Seller  contained  in  this  Agreement  or any  document  or  instrument
delivered in connection with this Agreement.

(b) Each of the Purchaser Indemnitees shall give the Seller prompt notice of any
Claim on the  basis of which  any such  Purchaser  Indemnitees  intends  to seek
indemnification  (but the obligations of the Seller shall not be conditions upon
receipt of such  notice,  except to the extent  that the  indemnifying  party is
actually  prejudiced by such failure to give notice).  The Seller shall promptly
assume the defense of any of the Purchaser Indemnitees,  with counsel reasonably
satisfactory  to such Purchaser  Indemnitees,  and the fees and expenses of such
counsel shall be at the sole cost and expense of the Seller. Notwithstanding the
foregoing,  any of the Purchaser  Indemnitees  shall be entitled,  at his or its
expense,  to employ  counsel  separate  from counsel for the Seller and from any
other party in such action, proceeding, or investigation.  None of the Purchaser
Indemnitees  may agree to a  settlement  of a Claim  without  the prior  written
approval of the Seller, which approval shall not be unreasonably withheld.

7.2 Indemnification of Seller

(a) Subject to the terms and  conditions set forth in Section 7.3, the Purchaser
agrees to indemnify and hold  harmless the Seller,  the  Companies,  and each of
their  respective   officers,   directors,   employees,   counsel,  and  agents,
(collectively,  the "Seller Indemnitees"),  on an after-tax basis against and in
respect of any and all Claims as and when incurred, arising out of or based upon
any  breach of any  representation,  warranty,  covenant,  or  agreement  of the
Purchaser contained in this Agreement or any document or instrument delivered in
connection with this Agreement.

(b) Each of the Seller Indemnitees shall give the Purchaser prompt notice of any
Claim  on the  basis  of  which  any such  Seller  Indemnitees  intends  to seek
indemnification  (but the  obligations of the Purchaser  shall not be conditions
upon receipt of such notice, except to the extent that the indemnifying party is
actually  prejudiced  by such  failure  to give  notice).  The  Purchaser  shall
promptly  assume  the  defense of any of the Seller  Indemnitees,  with  counsel
reasonably  satisfactory  to any  such  Seller  Indemnitees,  and the  fees  and
expenses of such counsel shall be at the sole cost and expense of the Purchaser.
Notwithstanding the foregoing,  any of the Seller Indemnitees shall be entitled,
at his or its expense, to employ counsel separate from counsel for the Purchaser
and from any other party in such action,  proceeding, or investigation.  None of
the Seller  Indemnitees  may agree to a settlement  of a Claim without the prior
written  approval of the Purchaser,  which  approval  shall not be  unreasonably
withheld.

7.3 Survival

(a)  Subject to the  provisions  of Section  7.3(b) the  covenants,  agreements,
representations,  and warranties contained in or made pursuant to this Agreement
shall  survive  the  Closing  and the  delivery  of the  purchase  price  by the
Purchaser, irrespective of any investigation made by or on behalf of any party.

(b) The  liabilities  and obligations of the Seller and the Purchaser under this
Agreement  shall be subject  to the  following  limitations.  The Seller and the
Purchaser  shall have no liability or obligation with respect to any Claim for a
breach of a  representation  or warranty under this Agreement made after one (1)
year from the  Closing  Date  except for claims  arising  out of a breach of the
representations  as to (i) Taxes under  Section 2.4 or Section 4.1, with respect
to which the  Seller  shall  remain  liable  until  ninety  (90) days  after the
expiration  of the  applicable  statute  of  limitations  relating  to such  tax
liabilities  and (ii)  capitalization  under Section 2.2,  which shall  continue
indefinitely.  In addition,  the Seller shall not be responsible  for any Claims
until the  cumulative  aggregate  amount  thereof shall exceed one hundred fifty
thousand  dollars  ($150,000)  (the "Minimum  Amount"),  or after the cumulative
aggregate amount thereof exceeds one million dollars  ($1,000,000) (the "Maximum
Amount")  excluding any liabilities for a breach of a representation or warranty
relating to  Capitalization  under Section 2.2 which shall not be subject to the
Minimum Amount or Maximum Amount.

VIII. MISCELLANEOUS

8.1 Brokerage Fees

Each party hereto will  indemnify  and hold  harmless the others  against and in
respect of any and all Claims for  brokerage  or other  commissions  relative to
this Agreement or to the transactions  contemplated  hereby, based in any way on
agreements,  arrangements,  or understandings  made by such party with any third
party.

8.2 Further Actions

At any time and from time to time, each party agrees, as its or his expense,  to
take such actions and to execute and deliver such documents as may be reasonably
necessary to effectuate the purposes of this Agreement.

8.3 Submission to Jurisdiction

Each of the parties hereto irrevocably submits to the jurisdiction of the courts
of the State of New York,  and of any federal  court located in the State of New
York, in connection with any action or proceeding arising out of or relating to,
or a breach of,  this  Agreement,  or of any  document or  instrument  delivered
pursuant to, in connection with, or simultaneously with this Agreement.

8.4 Merger; Modification

This  Agreement  and  the  Schedules   attached  hereto  set  forth  the  entire
understanding  of the  parties  with  respect  to  the  subject  matter  hereof,
supersede all existing agreements among them concerning such subject matter, and
may be modified only by a written  instrument  duly executed by each party to be
charged.

8.5 Notices

Any notice or other  communication  required or permitted to be given  hereunder
shall be in  writing  and shall be  mailed by  certified  mail,  return  receipt
requested  (or by the most  nearly  comparable  method  if  mailed  from or to a
location outside of the United States) or by Federal  Express,  express mail, or
similar  overnight  delivery or courier  service or  delivered  (in person or by
telecopy or similar  telecommunications  equipment) against receipt to the party
to whom it is to be given at the address of such party set forth in the preamble
to this Agreement (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 8.5). Any notice given
to the  Purchaser  shall be addressed to the  attention of Jeremy  Barbera,  333
Seventh Avenue,  New York, New York 10001, and a copy of such notice (which copy
shall not constitute  notice) shall also be sent to Camhy Karlinsky & Stein LLP,
1740 Broadway,  16th Floor,  New York, New York  10019-4315  Attention:  Alan I.
Annex,  Esq. Any notice given to the Seller shall be addressed to the  attention
of Ralph Stevens, 14 Ketz Street, New City, New York 10956. A copy of any notice
to the Seller  (which copy shall not  constitute  notice)  shall also be sent to
Rand Rosenzweig Smith Radley Gorden & Burstein LLP, 605 Third Avenue,  New York,
New York 10158, Attention: E. Cooke Rand, Esq. Notice to the estate of any party
shall be  sufficient  if addressed to the party as provided in this Section 8.5.
Any notice or other communication given by certified or express mail (or by such
comparable  method) shall be deemed given three (3) business days after the time
of  certification  or mailing  thereof (or  comparable  act) except for a notice
changing a party's  address  which  will be deemed  given at the time of receipt
thereof.  Any notice given by other means permitted by this Section 8.5 shall be
deemed given at the time of receipt thereof.

8.6 Waiver

Any  waiver by any party of a breach  of any terms of this  Agreement  shall not
operate as or be construed to be a waiver of any other breach of that term or of
any breach of any other term of this Agreement. The failure of a party to insist
upon strict  adherence to any term of this  Agreement  on one or more  occasions
will not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any waiver must be in writing.

8.7 Binding Effect

The provisions of this Agreement  shall be binding upon and inure to the benefit
of the  Purchaser,  and its  successors  and  assigns  and the  Seller and their
respective assigns, heirs, and personal representatives,  and shall inure to the
benefit of each  Indemnitee  and its  successors  and  assigns (if not a natural
person) and his  assigns,  heirs,  and  personal  representatives  (if a natural
person).  Neither the Purchaser or the Seller may assign this Agreement  without
obtaining the other party's prior written  consent.  Nothing in this Section 8.7
shall be construed to preclude Seller from transferring and assigning all or any
portion of his right and  entitlement  under this  Agreement to receive  Earnout
Payments  pursuant  to  Section  1.2(c) or the  payment  referred  to in Section
1.2(d).  If  Seller  makes  such a  transfer  and  assignment,  he shall  notify
Purchaser in writing and thereafter  Purchaser shall pay the assigned portion of
such payments to such designated assignee(s) at such time and in the same manner
Seller would be entitled to receive such payments.

8.8 No Third-Party Beneficiaries

This  Agreement  does not create,  and shall not be construed  as creating,  any
rights  enforceable  by any  person  not a party to this  Agreement  (except  as
provided in 8.7).

8.9 Separability

If any provision of this Agreement is invalid,  illegal,  or unenforceable,  the
balance of this  Agreement  shall  remain in  effect,  and if any  provision  is
inapplicable  to any  person  or  circumstance,  it  shall  nevertheless  remain
applicable to all other persons and circumstances.

8.10 Headings

The headings in this Agreement are solely for convenience of reference and shall
be given no effect in the construction or interpretation of this Agreement.

8.11 Counterparts; Governing Law

This  Agreement  may be  executed in any number of  counterparts,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same instrument.  It shall be governed by, and construed in accordance with,
the laws of the State of New York,  without giving effect to the rules governing
the conflict of laws.

     IN WITNESS  WHEREOF,  the parties have duly executed this  Agreement on the
     date set forth above.

                              MARKETING SERVICES GROUP, INC.



                           By:   /s/ J.Jeremy Barbera
                                 --------------------
                                 Name:     J. Jeremy Barbera
                                 Title:    Chairman and Chief Executive Officer






                           By:   /s/ Ralph Stevens
                                 -----------------
                                 Name:     Ralph Stevens







                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

THIS AGREEMENT  (this  "Agreement") is being made as of the 15th day of January,
1999 between MARKETING SERVICES GROUP,  INC.,  ("MSGI"),  a Nevada  corporation,
having its principal office at 333 Seventh Avenue, New York, New York 10001, and
RALPH STEVENS ("Employee"),  an individual residing at 14 Ketz Street, New City,
New York 10956.

                             W I T N E S S E T H:

WHEREAS,   Stevens-Knox  &  Associates,   Inc.,  a  New  York  corporation  ("SK
Associates"),  Stevens-Knox  List Brokerage,  Inc., a New York  corporation ("SK
Brokerage"),  and Stevens-Knox International,  Inc., a Delaware corporation ("SK
International",   together  with  SK  Associates  and  SK   International,   the
"Companies") contemporaneously herewith will become wholly-owned subsidiaries of
MSGI,  and MSGI  desires  to have  Employee  continue  as  President  and  Chief
Executive  Officer of SK Associates  and SK  International  and Chief  Executive
Officer of SK Brokerage and Employee  desires to be so employed,  upon the terms
and conditions contained herein; and

WHEREAS, MSGI and the Employee have simultaneously entered into a Stock Purchase
Agreement dated as of January 15, 1999 (the "Stock Purchase  Agreement") for the
purchase of all of the  Employee's  shares of common stock of the Companies (the
"Shares") by MSGI.



NOW, THEREFORE, in consideration of the mutual premises and agreements contained
herein,  and intending to be legally bound hereby,  the parties  hereto agree as
follows:

1.  Nature of  Employment;  Term of  Employment.  MSGI and each  Company  hereby
employs Employee and Employee agrees to serve SK Associates and SK International
as their  President  and Chief  Executive  Officer and SK Brokerage as its Chief
Executive  Officer,  upon the terms and conditions  contained herein, for a term
commencing  as of the date hereof and  continuing  until January 31, 2002 unless
such dated is extended  at the option of MSGI for one year if Employee  makes an
election to extend the term of the earnout  pursuant to Section  1.2(c)(iii)  of
the  Stock  Purchase  Agreement  (the  "Initial  Term").  This  Agreement  shall
automatically  be renewed for one (1)  additional  year period after the Initial
Term (the  "Renewal  Term" and the Initial Term  collectively,  the  "Employment
Term") upon terms no less  favorable  than the terms existing in the latest year
of the  Employment  Term,  unless MSGI or Employee  gives written  notice to the
other party of its  intention  not to renew this  Agreement  at least sixty (60)
days prior to the expiration of the Initial Term or the Renewal Term.

2. Duties and Powers as Employee. During the Employment Term, Employee agrees to
devote all of his full working time,  energy, and efforts to the business of the
Companies.  Employee understands that the principal offices of the Companies are
currently held at 304 Park Avenue South, New York, New York 10010, and agrees to
perform his duties at such location or at such other location as the offices may
be  located.  In  performance  of his duties,  Employee  shall be subject to the
reasonable  direction of the Chief  Executive  Officer of MSGI or his  designee.
Subject to the  foregoing,  Employee shall have sole authority over the business
and  operations of the  Companies.  Employee shall be available to travel as the
needs of the Companies' business reasonably  requires.  Employee agrees that the
Companies  or MSGI may obtain a life  insurance  policy on the life of  Employee
naming the Companies or MSGI as the beneficiary thereof.  Employee shall consult
with and obtain the  approval  from the Chief  Executive  Officer of MSGI on any
single  expenditure by the Companies other than a payment made to a list manager
or list broker in the ordinary course of business, either individually or in the
aggregate,  in excess of ten thousand dollars ($10,000) or compensation payments
by any of the  Companies  to an  employee or a  consultant  that alone or in the
aggregate exceeds seventy-five thousand dollars ($75,000) per annum.

3.  Compensation.  As  compensation  for his  services  hereunder,  MSGI and the
Companies  shall pay  Employee a salary  (the "Base  Salary"),  payable in equal
semi-monthly  installments,  in the  aggregate at the annual rate of two hundred
fifty  thousand  dollars  ($250,000)  for  each  year  of the  Employment  Term.
Additionally,  Employee  shall  participate  in all  present or future  employee
benefit plans offered to senior  executives of the Companies or  subsidiaries of
MSGI;  provided,  that he meets the eligibility  requirements of any such plans.
During the Employment  Term,  Employee shall be eligible for  consideration  for
stock options and bonuses to the same extent as are other heads of  subsidiaries
of MSGI.

4.  Expenses;  Vacations.  Employee  shall  be  entitled  to  reimbursement  for
reasonable travel and other out-of-pocket  expenses  necessarily incurred in the
performance  of his duties  hereunder,  upon  submission and approval of written
statements  and bills in  accordance  with the then regular  procedures of MSGI.
Employee  shall be entitled to four (4) weeks paid  vacation  time in accordance
with the then regular procedures of MSGI governing executives as determined from
time to time by the MSGI's Board of Directors  and  communicated,  in writing to
Employee.  Employee  shall be entitled to sick and personal  days as provided by
the Companies' employee handbook.

5. Representations and Warranties of Employee.  Employee represents and warrants
to MSGI and the Companies  that:  (i) Employee is under no  contractual or other
restriction  or  obligation  which is  inconsistent  with the  execution of this
Agreement,  the performance of his duties hereunder,  or the other rights of the
Companies and MSGI  hereunder;  and (ii) Employee is under no physical or mental
disability that would hinder the performance of his duties under this Agreement.

6. Non-Competition.  (a) Employee agrees that during the Employment Term he will
not engage in, or otherwise  directly or  indirectly be employed by, or act as a
consultant,  or be a director,  officer,  employee,  owner,  agent,  member,  or
partner  of,  any  other  business  or  organization  that is or  shall  then be
competing with the Companies or MSGI, except that in each case the provisions of
this Section 6 will not be deemed breached merely because Employee owns not more
than five percent (5.0%) of the outstanding  common stock of a corporation,  if,
at the time of its  acquisition by Employee,  such stock is listed on a national
securities  exchange,  is  reported  on NASDAQ,  or is  regularly  traded in the
over-the-counter market by a member of a national securities exchange.

(b) If this Agreement is terminated "For Cause" (as defined in Section 9 hereof,
Employee,  for a period of three (3) years from the date of  termination,  shall
not, directly or indirectly,  solicit or encourage any person who was a customer
of the  Companies  or MSGI  during the three (3) years prior to the date of such
termination to cease doing business with the Companies or MSGI or to do business
with any other  enterprise  that is engaged in the same or similar  business  to
that of the  Companies  or MSGI.  If this  Agreement  is  terminated  other than
pursuant to Section  9(a) or (b) hereof,  and if MSGI pays  Employee the Earnout
Payment  pursuant  to  Section  1.2(h)  of the  Stock  Purchase  Agreement,  the
restrictions  in the  preceding  sentence  shall be applicable to Employee for a
period of one (1) year from the date of termination.

(c) Employee  acknowledges that: (i) the consideration for this Agreement not to
compete includes the  consideration he received in the sale of his Shares;  (ii)
monetary  damages are not sufficient to compensate  MSGI and the Companies for a
breach of this  Agreement;  (iii) MSGI and the  Companies  shall be  irreparably
harmed if Employee breaches this covenant not to compete;  and (iv) the issuance
of  injunctive  relief on behalf of MSGI and the  Companies  is  appropriate  to
remedy any such breach.

7.   Inventions;   Patents;   Copyrights.   Any  interest  in  patents,   patent
applications, inventions, copyrights, developments, and processes ("Inventions")
which  Employee  now or  hereafter  during  the  period  he is  employed  by the
Companies  under this  Agreement  may,  directly or  indirectly,  own or develop
relating to the fields in which the  Companies or MSGI may then be engaged shall
belong to the Companies or MSGI;  and forthwith upon request of the Companies or
MSGI,  Employee shall execute all such  assignments and other documents and take
all such other action as the Companies or MSGI may  reasonably  request in order
to vest in the Companies or MSGI all of his right, title, and interest in and to
such Inventions, free and clear of all liens, charges, and encumbrances.

8.  Confidential  Information.  Except in the  course of  performing  his duties
hereunder,  all  confidential  information  which Employee may now possess,  may
obtain during the Employment  Term, or may create prior to the end of the period
he is employed by the Companies under this  Agreement,  relating to the business
of the  Companies  or MSGI or of any  customer or supplier of the  Companies  or
MSGI, shall not be published,  disclosed, or made accessible by him to any other
person,  firm, or corporation  during the Employment Term or any time thereafter
without the prior  written  consent of the Companies  and MSGI.  Employee  shall
return all tangible evidence of such  confidential  information to the Companies
or MSGI prior to or at the termination of his employment.

9. Termination.  (a) Notwithstanding  anything herein contained,  if on or after
the  date  hereof  and  prior to the end of the  Employment  Term,  Employee  is
terminated "For Cause" then the Companies shall have the right to give notice of
termination  of  Employee's  services  hereunder as of a date to be specified in
such  notice,  and this  Agreement  shall  terminate  on the date so  specified.
Termination  "For Cause" shall mean Employee shall: (i) be charged with a felony
crime,  (ii)  commit  any act or omit to take any action in bad faith and to the
material  detriment  of the  Companies  or MSGI,  (iii)  commit  an act of moral
turpitude,  (iv) commit an act of fraud  against the  Companies or MSGI,  or (v)
materially breach any term of this Agreement or the Stock Purchase Agreement and
fail to correct such breach within ten (10) days after written  notice  thereof.
In the event this Agreement is terminated  "For Cause" pursuant to Section 9(a),
then  Employee  shall be  entitled  to receive  only the Base Salary at the rate
provided  in Section 3 to the date on which  termination  shall take effect plus
any compensation which is accrued but unpaid on the date of termination.

(b) In the event that Employee shall be physically or mentally  incapacitated or
disabled such that he is unable to fully  discharge  his duties  hereunder for a
period of six (6) months,  then this Agreement  shall terminate upon ninety (90)
days written notice to Employee, and no further compensation (other than accrued
but  unpaid  Base  Salary or bonus  through  the date of  termination)  shall be
payable to Employee,  except as may otherwise be provided  under any  disability
insurance policy.

(c) In the event that Employee shall die, then this Agreement shall terminate on
the date of Employee's  death, and no further  compensation  (other than accrued
but unpaid Base Salary or bonus  through the date of death)  shall be payable to
Employee,  except as may  otherwise be provided  under any  insurance  policy or
similar instrument.

(d) Nothing contained in this Section 9 shall be deemed to limit any other right
MSGI may have to  terminate  Employee's  employment  hereunder  upon any  ground
permitted by law.

10. Merger. In the event of a future  disposition of the properties and business
of MSGI, substantially as an entirety, by merger, consolidation, sale of assets,
sale of stock, or otherwise where fifty-one percent (51%) or more of MSGI Common
Stock is  acquired  by a party  which is not an  affiliate  of MSGI  ("Change of
Control"),  then the Company may elect to assign this  Agreement  and all of its
rights and obligations hereunder to the acquiring or surviving corporation.

11.  Survival.  The  covenants,  agreements,   representations,  and  warranties
contained  in or  made  pursuant  to this  Agreement  shall  survive  Employee's
termination  of  employment,  irrespective  of any  investigation  made by or on
behalf of any party.

12.  Modification.  This  Agreement sets forth the entire  understanding  of the
parties  with  respect to the subject  matter  hereof,  supersedes  all existing
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.

13. Notices. Any notice or other communication required or permitted to be given
hereunder  shall be in writing  and shall be sent by  telecopier,  by  overnight
courier,  certified mail, return receipt requested, or delivered against receipt
to the party to whom it is to be given at the address of such party set forth in
the preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance  with the  provisions of this Section 13). In
the case of a notice to the Companies or MSGI, a copy of such notice (which copy
shall not constitute  notice) shall be delivered to Camhy Karlinsky & Stein LLP,
1740 Broadway,  16th Floor, New York, New York 10019,  Attn: Alan I. Annex, Esq.
In the case of a notice to Employee, a copy of such notice (which copy shall not
constitute  notice) shall be delivered to Rand Rozenzweig  Smith Radley Gordon &
Burnstein LLP, 605 Third Avenue, New York, NY 10158,  Attention:  E. Cooke Rand,
Esq.  Notice to the estate of  Employee  shall be  sufficient  if  addressed  to
Employee as provided in this Section 13. Any notice or other communication given
by  certified  mail  shall  be  deemed  given  three  (3)  business  days  after
certification  thereof (or  comparable  act),  all other notices shall be deemed
given three (3)  business  days after the time of  mailing,  except for a notice
changing a party's  address  which shall be deemed  given at the time of receipt
thereof.

14a  Waiver.  Any waiver by either  party of a breach of any  provision  of this
Agreement  shall  not  operate  as or be  construed  to be a waiver of any other
breach  of such  provision  or of any  breach  of any  other  provision  of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this  Agreement  on one or more  occasions  shall not be  considered a waiver or
deprive that party of the right  thereafter  to insist upon strict  adherence to
that term or any other term of this Agreement. Any waiver must be in writing and
signed by the party against who the waiver is asserted.

15a Binding Effect. Employee's rights and obligations under this Agreement shall
not be transferable by assignment or otherwise, such rights shall not be subject
to encumbrance or the claims of Employee's creditors,  and any attempt to do any
of the  foregoing  shall be void.  The  provisions  of this  Agreement  shall be
binding  upon and inure to the  benefit of Employee  and his heirs and  personal
representatives,  and  shall be  binding  upon and inure to the  benefit  of the
Companies and its successors and those who are its assigns.

16a Headings.  The headings in this Agreement are solely for the  convenience of
reference and shall be given no effect in the construction or  interpretation of
this Agreement.

17a Counterparts; Governing Law. This Agreement may be executed in any number of
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.  It shall be governed by,
and construed in  accordance  with,  the laws of the State of New York,  without
given effect to the rules  governing the conflicts of laws.  Each of the parties
hereto  agrees that such court may award  reasonable  legal fees and expenses to
the prevailing party.

           IN WITNESS WHEREOF,  the parties have duly executed this Agreement as
of the date first written above.

                                     MARKETING SERVICES GROUP, INC.



                                     By: /s/ J. Jeremy Barbera
                                         ---------------------
                                         Name: J. Jeremy Barbara
                                         Title:Chairman and Chief Executive
                                               Officer



                                     RALPH STEVENS



                                     By: /s/ Ralph Stevens
                                         -----------------
                                         Ralph Stevens


                                                                    Exhibit 20.1

            MSGI COMPLETES ACQUISITION OF STEVENS-KNOX & ASSOCIATES

NEW YORK  (Jan.  22) --  Marketing  Services  Group,  Inc.  (Nasdaq:  MSGI),  an
integrated marketing services industry leader, today announced the completion of
its acquisition of Stevens-Knox & Associates,  Inc., a leading direct  marketing
firm located in New York and London.  Details will be made available  early next
week.

Marketing  Services Group,  Inc.(www.msginet.com)  provides direct marketing and
database  marketing,  telemarketing  and  telefundraising,  media  planning  and
buying,  interactive  fulfillment,   Web  development,   online  consulting  and
e-commerce to nearly 1,000 clients worldwide.


                                                                    Exhibit 20.2

For Immediate Release                     Contact:    Jamie Shaber
                                                      MSGI 212/594-7688
                                                      Robbie Tarpley Raffish
                                                      MSGI 610/918-1675

              MSGI REACHS $100 MILLION REVENUE WITH PURCHASE OF
                            STEVENS-KNOX & ASSOCIATES

         Acquisition Gives MSGI A Foothold in Europe and New Markets

NEW  YORK  (Jan  26) --  Marketing  Services  Group,  Inc.  (Nasdaq:  MSGI),  an
integrated  marketing services industry leader, today announced it has completed
the  acquisition  of  Stevens-Knox & Associates,  a leading list  management and
brokerage  firm based in New York and London.  The  transaction  represents  the
completion of the deal that had been  announced by MSGI last week.  Terms of the
cash deal were not disclosed.

The addition of Stevens-Knox,  with annual revenues of approximately $30 million
(for the year ended  December 31, 1998),  boosts MSGI's annual  revenues to $100
million  (proforma  for the fiscal year ending June 30,  1998.)  Stevens-Knox  &
Associates estimated sales for calendar 1999 are $35 million.

Stevens-Knox was founded in 1972 as Woodruff-Stevens  Associates. In 1992, Ralph
Stevens and partner Jim Knox reorganized the firm as  Stevens-Knox.  The company
has  enjoyed   tremendous   growth  under  their   leadership,   posting  annual
double-digit  increases in revenue since the  reorganization.  Mr.  Stevens will
continue  to run  the  company  after  the  acquisition  by  MSGI,  with  no job
attrition.

"Acquiring  Stevens-Knox  was a logical next step in our  long-term  plan," said
Jeremy Barbera,  Chairman and Chief Executive Officer of MSGI. "Our objective is
to  bring  our  clients,  and  those of the  companies  we  acquire,  integrated
marketing services that enhance their own strategic marketing goals.

MSGI & Stevens-Knox/2-2-2-2

"This deal's  greatest  impact,  beyond moving us into ethnic and  international
markets,  is that the  acquisition of just one more division fuels the growth of
the other five," continued Jeremy Barbera.  "Stevens-Knox will bring business to
our direct marketing and database marketing,  telemarketing,  fulfillment, media
planning and buying, and online consulting and e-commerce  divisions,  so we add
not only their current  revenue but the revenue that will  inevitably  come from
cross-selling our integrated approach."

"In addition,  the acquisition  provides us with an office in the Covent Gardens
section  of London  from which we will build an  entertainment  practice  in the
United  Kingdom,"  he added.  "As the  dominant  arts and  entertainment  direct
marketer in North America,  we can apply our highly  successful  models to major
shows that are  debuted in London  before  they reach  America;  a very  natural
expansion of our current business model."

Stevens-Knox is organized  under four distinct  service  headings:  Stevens-Knox
List  Management,   Database  Management  (specializing  in  ethnic  marketing),
Steven-Knox  List Brokerage and  Stevens-Knox  International.  Its clientele are
segmented  in four  main  areas:  catalog  marketing  (40%),  publishing  (30%),
business-to-business (12%) and general consumer (8%).

"In an industry where success is built on the strength of  relationships,  there
is  some  added  synergy  to  this  deal,"  said  Mr.  Barbera.  "Ralph  and  my
relationship  dates back more than 20 years, when I worked at Lincoln Center for
the  Performing  Arts.  Ralph  introduced me to the concept of strategic  direct
marketing  when I hired his company (then  Woodruff-Stevens)  to manage  Lincoln
Center's database.  It gives me personal pride and satisfaction to announce that
Stevens-Knox has agreed to become an MSGI company,  and I am thrilled to be able
to work with Ralph and his team once again."

MSGI & Stevens-Knox/3-3-3-3

Matters  discussed  in this  release  include  forward-looking  statements  that
involve risks and uncertainties, and actual results may be materially different.
Factors  that could cause actual  results to differ are stated in the  company's
reports to the  Securities and Exchange  Commission  including it's 10-Q for the
period  ended  September  30, 1998 and the annual  report on Form 10-KSB for the
year ended June 30, 1998.

Marketing Services Group, Inc.  (www.msginet.com)  provides direct marketing and
database  marketing,  telemarketing  and  telefundraising,  media  planning  and
buying,  interactive  fulfillment,   Web  development,   online  consulting  and
e-commerce to more than 1,000 clients worldwide.




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