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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MARKETING SERVICES GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MARKETING SERVICES GROUP, INC.
333 SEVENTH AVENUE
NEW YORK, NEW YORK 10001
(917) 339-7100
------------------------
January 18, 2000
Dear Stockholders:
On behalf of the Board of Directors and management of Marketing Services
Group, Inc. (the "Company"), I cordially invite you to attend the 1999 Annual
Meeting of Stockholders to be held on Friday, February 25, 2000, at 10:00 a.m.,
at the Joyce Theater, 175 Eighth Avenue, New York, New York 10011.
The matters to be acted upon at the meeting are fully described in the
attached Notice of Annual Meeting of Stockholders and Proxy Statement. In
addition, several of the directors and executive officers of the Company will be
present to respond to any questions that you may have. Accompanying the attached
Proxy Statement is the Company's Annual Report for the fiscal year ended
June 30, 1999. This report describes the financial and operational activities of
the Company.
Whether or not you plan to attend the Annual Meeting, please sign and date
the enclosed proxy card and return it in the accompanying envelope as promptly
as possible. If you attend the Annual Meeting, and I hope you will, you may vote
your shares in person, even if you have previously mailed in a proxy card.
We look forward to greeting you at the meeting.
Sincerely,
/s/ Jeremy Barbera
--------------------------------------
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
MARKETING SERVICES GROUP, INC.
333 SEVENTH AVENUE
NEW YORK, NEW YORK 10001
(917) 339-7100
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 25, 2000
------------------------
TO THE STOCKHOLDERS OF
MARKETING SERVICES GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of MARKETING SERVICES GROUP, INC., a Nevada corporation (hereinafter
"MSGI" or the "Company"), will be held at the Joyce Theater, 175 Eighth Avenue,
New York, New York 10011, on Friday, February 25, 2000, at 10:00 a.m., for the
following purposes:
(1) To elect three Class II directors for a three-year term or until their
respective successors are duly elected and qualified;
(2) To consider a proposal to ratify and approve an amendment to the
Company's 1999 Stock Option Plan to increase the number of shares
authorized to be issued from 1,000,000 shares up to 3,000,000 shares;
(3) To vote upon a proposal to ratify the Board of Directors selection of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
current fiscal year; and
(4) To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on January 14, 2000
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournments thereof. Representation
of at least a majority of all outstanding shares of MSGI's common stock, par
value $.01 per share, is required to constitute a quorum. Accordingly, it is
important that your stock be represented at the meeting. The list of
stockholders entitled to vote at the meeting will be available for examination
by any stockholder at the Company's offices at 333 Seventh Avenue, New York, New
York 10001, during business hours for ten (10) days prior to February 25, 2000.
Whether or not you plan to attend the Annual Meeting, please complete, date
and sign the enclosed proxy card and mail it promptly in the self-addressed
envelope enclosed for your convenience. You may revoke your proxy at any time
before it is voted.
By Order of the Board of Directors
/s/ Alan Annex
--------------------------------------
SECRETARY
New York, New York
January 18, 2000
YOUR VOTE IS IMPORTANT. ACCORDINGLY, WE URGE YOU TO DATE,
SIGN AND RETURN THE ENCLOSED PROXY CARD REGARDLESS OF
WHETHER YOU PLAN TO ATTEND THE MEETING.
<PAGE>
MARKETING SERVICES GROUP, INC.
333 SEVENTH AVENUE
NEW YORK, NEW YORK 10001
(917) 339-7100
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 25, 2000
------------------------
APPROXIMATE MAILING DATE OF PROXY STATEMENT AND FORM OF PROXY--JANUARY 26, 2000.
INFORMATION CONCERNING VOTE
GENERAL
This Proxy Statement and the enclosed form of proxy is furnished in
connection with the solicitation of proxies by the Board of Directors of
MARKETING SERVICES GROUP, INC., a Nevada corporation, (hereinafter "MSGI" or the
"Company") for use at the Annual Meeting of Stockholders to be held on Friday,
February 25, 2000, at 10:00 a.m. and at any and all adjournments thereof (the
"Annual Meeting"), with respect to the matters referred to in the accompanying
notice. The Annual Meeting will be held at the Joyce Theater, 175 Eighth Avenue,
New York, New York 10011.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record of the Company's common stock, $.01 par value
per share ("Common Stock"), at the close of business on January 14, 2000 (the
"Record Date"), will be entitled to notice of and to vote at the Annual Meeting.
Holders of Common Stock (the "Common Stockholders") entitled to vote will be
entitled to one vote for each share of Common Stock that they hold. As of the
Record Date, the total number of Common Stock eligible to vote at the Annual
Meeting was 27,121,044 shares.
REVOCABILITY OF PROXIES
A stockholder who executes and mails a proxy in the enclosed return envelope
may revoke such proxy at any time prior to its use, by notice in writing to the
Chief Executive Officer of the Company, at the above address, or by revocation
in person at the Annual Meeting. Unless so revoked, the shares represented by
duly executed proxies received by the Company prior to the Annual Meeting will
be presented at the Annual Meeting and voted in accordance with the
stockholder's instructions marked thereon. If no instructions are marked
thereon, proxies will be voted (1) FOR the election as directors of the nominees
named below under the caption "ELECTION OF DIRECTORS; and (2) FOR the proposal
to increase the number of shares authorized to be issued under the Company's
1999 Employee Incentive Stock Option Plan, as discussed below under the caption
"AMENDMENT TO THE COMPANY'S 1999 STOCK OPTION PLAN" and (3) FOR the ratification
of the Board of Directors' selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for the current fiscal year, as discussed below
under the caption "RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS."
VOTING PROCEDURES
All votes shall be tabulated by the inspector of elections appointed for the
Annual Meeting, who shall separately tabulate affirmative and negative votes,
abstentions and broker non-votes. The presence of a quorum for the Annual
Meeting, defined here as a majority of the Common Stock issued and outstanding
<PAGE>
entitled to vote at the Annual Meeting, in person or by proxy, is required.
Votes withheld from the director nominees and abstentions will be counted in
determining whether a quorum has been reached. Broker-dealer non-votes are not
counted for quorum purposes.
Assuming a quorum has been reached, a determination must be made as to the
results of the vote on each matter submitted for stockholder approval. Director
nominees must receive a majority of the votes cast at the meeting. The proposal
to vote to ratify and approve the amendment of the Company's 1999 Stock Option
Plan (the "1999 Plan") must be approved by a majority of the stockholders, in
person or by proxy, at a meeting at which a quorum is present. The ratification
of the selection of independent auditors must be approved by a majority of the
votes cast at the meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors presently consists of eight directors and is divided
into three classes. One class of directors is elected annually, and each
director in the class generally serves a three-year term. The term of the
Company's Class II Directors will expire at the Annual Meeting.
The nominees for the Class II directors are J. Jeremy Barbera, Seymour Jones
and Michael E. Pralle. All nominees are members of the present Board of
Directors. It is intended that each proxy received by the Company from Common
Stockholders will be voted FOR the election, as directors of the Company, of the
nominees, unless authority is withheld by the stockholder executing the proxy.
Shares may not be voted cumulatively. Each of such nominees has consented to
being nominated and to serve as a director of the Company if elected. If any
nominee should become unavailable for election or unable to serve, it is
intended that the proxies will be voted for a substitute nominee designated by
the Board of Directors. At the present time, the Board of Directors knows of no
reason why any nominee might be unavailable for election or unable to serve. The
proxies cannot be voted for a greater number of persons than the number of
nominees named herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
PROPOSAL TWO
AMENDMENT TO THE COMPANY'S 1999 STOCK OPTION PLAN
On December 15, 1999, the board of Directors of the Company amended the 1999
Plan, to increase the number of shares available for grant of options under the
1999 Plan from 1,000,000 up to 3,000,000 shares. A copy of the 1999 Plan, as
amended, is set forth in Annex A to this Proxy Statement. The amendment to the
1999 Plan will not become effective unless it is approved by the holders of
record of a majority of the shares of the Company's Common Stock. The 1999 Plan
provides for the granting of stock options to the employees, officers, and
consultants of the Company. Approximately 440 employees, officers and directors
were eligible to participate in the 1999 Plan as of December 31, 1999. Except
for the increase in the number of shares available for issuance thereunder, the
1999 Plan remains unchanged. The 1999 Plan is intended to assist the Company in
securing and retaining key employees and directors by allowing them to
participate in the ownership and growth of the Company through the grant of
incentive stock options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or non-qualified stock options to which
Section 422 of the Code does not apply (collectively, the "Options"). The
granting of Options will serve as partial consideration for and give key
employees, directors and consultants an additional inducement to remain in the
service of the Company and will provide them with an increased incentive to work
for the Company's success. The Company currently maintains a 1991 Stock Option
Plan (the "1991 Plan"). As of December 31, 1999, no additional shares are
available for issuance under the 1991 Plan. The Board of Directors believes that
it would be in the best interests of the Company for the stockholders to ratify
the amendment to the 1999 Plan to increase the number of shares available for
the grant of Options under the 1999 Plan from 1,000,000 up to 3,000,000 shares.
As of December 31, 1999, Options to purchase 317,500 shares of Common Stock had
been reserved for exercise of options
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granted under the 1999 Plan, leaving 682,500 shares remaining available for the
grant of Options under the 1999 Plan. As of December 31, 1999, no Options
granted under the 1999 Plan had been exercised. Stockholder approval of the
Board's amendment to the 1999 Plan is required within twelve months of the
Board's approval of the amendment; however, the Company desires to obtain
stockholder approval prior to granting any options over the current amount
authorized and the amendment to the 1999 Plan will not become effective until
approved by the requisite stockholder vote. The following discussion of the
principle features and effects of the 1999 Plan, as amended, is qualified in its
entirety by reference to the text of the 1999 Plan, as amended, set forth in
Annex A attached hereto.
The 1999 Plan currently provides for the issuance of options to purchase a
maximum aggregate of 1,000,000 shares of the Common Stock (subject to adjustment
for stock splits and other capital adjustments) and, as amended, will provide
for the issuance of up to 3,000,000 shares. Options under the 1999 Plan may be
issued to officers and key employees of the Company or directors, consultants,
advisors, and other persons or entities providing goods or services to the
Company (collectively, "Grantees"). Directors who are not officers of the
Company shall receive, on an annual basis on the last trading day of each
June starting June 1999, stock options for 10,000 shares of Common Stock, at an
exercise price equal to the fair market value of the stock on the date of grant,
and such options vest immediately upon grant. The Committee has currently set
aside 600,000 options under the 1999 Plan for grants to employees in connection
with the pending acquisition of Grizzard Communications Inc. The individual
grantees have not yet been determined and will be decided subsequent to the
closing of the acquisition at an exercise price equal to the fair market value
of the Company's stock on the date of grant.
DURATION AND ADMINISTRATION OF THE PLAN
The 1999 Plan will terminate on January 11, 2009, unless earlier terminated
by resolution of the Board. The 1999 Plan may be amended from time to time by
the Board, except that no amendment affecting the aggregate number of shares
which may be issued under the 1999 Plan will be effective unless approved by a
majority of stockholders in person or by proxy at a meeting of the stockholders
at which a quorum is present. Neither termination nor any amendment of the 1999
Plan may alter or impair the rights or obligations of any person, without his or
her consent, under any option theretofore granted pursuant to the 1999 Plan.
The 1999 Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"), which consists of not less than two directors of
the Company who are (i) "non-employee directors" as defined in Rule l6b-3 under
the Securities Exchange Act of 1934 and (ii) "outside directors" as defined in
the regulations of the Internal Revenue Service under Section 162(m) of the
Internal Revenue Code. The duties of the Committee include (i) the selection of
grantees for grants of options, (ii) to interpret and construe the 1999 Plan to
determine the number of shares covered by each option, the number of options
which shall be treated as incentive stock options (in the case of options
granted to employees) as described in section 422 of the Code ("ISOs"), the
number of options which do not qualify as incentive stock options ("nonqualified
options"), and the terms and conditions thereof; (iii) to adopt rules and
regulations and to prescribe forms for the operation and administration of the
1999 Plan; and (iv) to take any other action not inconsistent with the
provisions of the 1999 Plan that it may deem necessary or appropriate.
SECURITIES SUBJECT TO THE PLAN
The stock to be offered and delivered under the 1999 Plan, pursuant to the
exercise of an option, shall be shares of the Corporation's authorized common
stock and may be unissued shares or reacquired shares, as the Committee may
determine from time to time. The aggregate number of shares to be delivered
currently under the 1999 Plan shall not exceed 1,000,000 shares and, if the
proposed amendment is approved, shall not exceed 3,000,000 shares; except that
in the event of stock splits, stock dividends,
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<PAGE>
combinations, exchanges of shares or similar capital adjustments, the Committee
must make an appropriate adjustment in the number and kind of shares subject to
the 1999 Plan and each outstanding option thereunder, and the option price per
share under each outstanding option. If any option expires without having been
fully exercised, the shares with respect to which such option has not been
exercised will be available for further options.
OPTION PRICE
The exercise price of the options shall be determined by the Committee. The
exercise price for ISOs cannot be less than the fair market value of the stock
subject to the option on the grant date (110% of such fair market value in the
case of ISOs granted to a stockholder who owns more than 10% of the Company's
Common Stock). The exercise price of a non-qualified option shall be fixed by
the Committee at whatever price the Committee may determine in good faith.
Unless the Committee determines otherwise, options generally have a 10-year term
(or five years in the case of ISOs granted to a participant owning more than 10%
of the total voting power of the Company's Common Stock).
EXERCISE OF OPTIONS
Under the 1999 Plan, the Committee may grant options which are exercisable
at any time before the expiration of ten years from the date such option is
granted. All ISOs granted by the Company to any one person (under the 1999 Plan
or otherwise) may not become exercisable in any calendar year for shares having
an aggregate fair market value (determined as of the dates such incentive stock
options were granted) exceeding $100,000.
Upon termination of the Grantee's employment or association with the Company
for any reason before the option has vested in full, then the unvested portion
of the options will automatically terminate. After the date on which an option
vests, if the Grantee's employment by or association with the Company is
terminated for any reason, the option shall be exercisable for the lesser of
(i) three (3) months from the date of such termination or (ii) the balance of
such options' term; except that if the Grantee dies or becomes disabled, the
option must be exercised by the Grantee or, in the case of the death of a
Grantee, by his heirs, legatees, or personal representatives, within a period
equal to the lesser of twelve (12) months after the date of such termination or
the termination date of the option. The Committee may, in specific cases, amend
the termination provisions of options granted to employees if they determine it
is in the best interest of the Company.
PAYMENT OF EXERCISE PRICE WITH COMPANY STOCK
In addition to the methods of payment of the option exercise price in cash
the Grantee may, at the discretion of the Committee, have the right to make
payment by delivering to the Company shares of Common Stock having a total fair
market value equal to the option exercise price, or a combination of cash and
such shares having a total fair market value equal to the option exercise price.
For this purpose, the fair market value of a share of Common Stock will be the
closing bid price of the Common Stock on the trading date preceding the option
exercise date, as such prices are reported on the Nasdaq National Market.
TRANSFERABILITY OF OPTIONS
No option is transferable by the Grantee except by will or by the laws of
descent and no option may be exercised during the Grantee's lifetime by any one
other than the Grantee or by such Grantee's guardian or legal representative.
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CHANGE IN CONTROL
Unless otherwise provided in any option agreement, each outstanding option
will vest and become immediately exercisable if there occurs any transaction or
series of transactions which results in: (i) any person becoming a beneficial
owner (as defined in Rule 13d-3 of the 1934 Act) of 51 percent or more of the
combined voting power of the Common Stock, (ii) the commencement of a tender
offer or exchange for the Common Stock unless such offer or exchange has been
approved by the Board, (iii) the approval by the stockholders of a plan of
merger, consolidation, reorganization, liquidation or dissolution in which the
Company does not survive, or a plan for the sale, lease, exchange or other
disposition of all or substantially all of the property or assets of the
Company, or (iv) changes in the majority of the directors without the approval
of the Board. The Committee, in its sole discretion, by giving written notice to
all Grantees, may cancel, effective upon the date of the consummation of any
such transaction, any option that remains unexercised on the effective date of
such transaction. Such cancellation notice shall be given a reasonable period of
time prior to the proposed date of such cancellation and may be given either
before or after stockholder approval of such transaction. In addition, the
Committee may, for any reason, accelerate the date on which any option may be
exercised and may accelerate the vesting of any shares subject to any option or
previously acquired by the exercise of any option.
ADJUSTMENTS RELATING TO SECURITIES
The number and price of shares of Common Stock subject to options will be
adjusted for certain stock splits, mergers, recapitalizations, consolidations,
exchange of shares or for other capital adjustments or payment of stock
dividends affecting the Company's capital structure. Any adjustment shall be
conclusively determined by the Committee.
FEDERAL INCOME TAX CONSEQUENCES
BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE APPLICATION
OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX CONSEQUENCES
IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX MATTERS. OPTIONEES
AND RECIPIENTS OF OTHER AWARDS GRANTED UNDER THE PLAN DESCRIBED HEREIN ARE
ADVISED TO CONSULT THEIR PERSONAL TAX ADVISORS BEFORE EXERCISING AN OPTION OR
DISPOSING OF ANY STOCK RECEIVED PURSUANT TO THE EXERCISE OF ANY SUCH OPTION. IN
ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS OF THE INTERNAL
REVENUE CODE AS CURRENTLY IN EFFECT, EXISTING LAWS, JUDICIAL DECISIONS,
ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED REGULATIONS, ALL OF WHICH ARE
SUBJECT TO CHANGE.
Options granted under the 1999 Plan will be either ISOs or nonqualified
options. For federal income tax purposes, assuming that the shares acquired by
the holder of an ISO are not disposed of within two years from the date the
option was granted or one year from the date the option was exercised, (i) the
Company receives no deduction either upon the grant or the exercise of an ISO or
upon a subsequent sale of the shares by the Grantee and (ii) the Grantee
realizes no income for tax purposes either at the time of the grant or exercise
of the ISO. Instead, the Grantee will realize income or loss only upon his or
her subsequent sale of the option shares, and the Grantee's income, in the
amount of any excess of the sale price over the option exercise price, will be
taxed as long-term capital gain. If, however, the shares are disposed of within
either of the two periods mentioned above, the tax consequences for the Company
and the Grantee will be essentially as described below for nonqualified options.
The recipient of a nonqualified option will not realize any taxable income
upon the grant of the option. Upon exercise of such option, the Grantee will
realize ordinary income in an amount generally measured by the excess, if any,
of the fair market value of the shares on the date of exercise over the option
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exercise price. The Company will be entitled to a deduction in the same amount
as the ordinary income realized by the Grantee. Upon the sale of such shares,
the Grantee will realize short-term or long-term capital gain or loss, depending
upon the length of time the shares are held. Such gain or loss will be measured
by the difference between the sale price of the shares and the market price of
the shares on the date of exercise.
The payment of the option exercise price by delivery of Common Stock of the
Company would constitute a non-taxable exchange by the Grantee and would not
affect the ISO status of the Common Stock issued upon the exercise of the
option. However, if the Common Stock delivered in payment was previously
acquired pursuant to the exercise of an ISO and had not been held for the
requisite period (two years from the date of option grant and one year from the
date of exercise), the exchange would constitute a premature disposition for
purposes of the ISO holding period requirements. The tax consequences to the
Company resulting from the payment of the option exercise price by the delivery
of Common Stock will not be different from such consequences when payment is
made in cash as described above.
The affirmative vote of a majority of stockholders at a meeting at which a
quorum is present, in person or by proxy, is required for the adoption of the
amendment to the 1999 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE MARKETING
SERVICES GROUP, INC. 1999 EMPLOYEE STOCK OPTION PLAN.
PROPOSAL THREE
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of PricewaterhouseCoopers LLP has served as the
Company's independent auditors since July 1995. On December 15, 1999, the Board
of Directors voted to appoint PricewaterhouseCoopers LLP as the Company's
independent auditors for the current fiscal year. The Board of Directors
recommends the ratification of this selection. A representative of
PricewaterhouseCoopers LLP will be present at the annual meeting. The
representative will be given the opportunity to make a statement, if he or she
so desires, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
BOARD OF DIRECTORS
The following table sets forth-certain information with respect to the
nominees and other directors of the company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ---------------------------------------------------
<S> <C> <C>
Alan I. Annex............................. 38 Director (Class I) and Secretary
J. Jeremy Barbera......................... 43 Chairman of the Board of Directors (Class II), And
Chief Executive Officer
S. James Coppersmith...................... 67 Director (Class III)
John T. Gerlach........................... 67 Director (Class I)
Seymour Jones............................. 68 Director (Class II)
Michael E. Pralle......................... 43 Director (Class II)
Edward E. Mullen.......................... 46 President, Director (Class III)
C. Anthony Wainwright..................... 66 Director (Class III)
</TABLE>
Class II directors are to be elected at the Annual Meeting. The terms of the
Class III directors expire at the 2000 Annual Meeting and the term of the
Class I directors expire at the 2001 Annual Meeting of Stockholders.
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Mr. Annex has been a Director and Secretary of the Company since May 1997.
He has been a partner in the law firm of Camhy Karlinsky & Stein LLP since
July 1995, where he practices corporate and securities law. Camhy Karlinsky &
Stein LLP is the Company's legal counsel. From July 1994 to June 1995,
Mr. Annex was Counsel to said firm. Prior thereto he was associated with
Proskauer Rose, LLP.
Mr. Barbera has been Chairman and Chief Executive Officer of the Company
since April 1997 and was President of the Company from April 1997 to May 1999
and was a Director and Vice President of the Company from October 1996 to
April 1997. He has been Chief Executive Officer of Metro Direct since its
formation in 1987. Mr. Barbera has twenty years of experience in data management
services and in the entertainment marketing industries. Mr. Barbera is a
director of Greatergood.com.
Mr. Coppersmith has been a Director of the Company since June 1996.
Mr. Coppersmith is the chairman of the Compensation Committee and a member of
the Audit Committee of the Board of Directors. He is presently Vice Chairman of
the Rasky/Baerlein Company. He was Chairman of the Board of Trustees of Boston's
Emerson College from 1994 until his term expired in December 1997. Until his
retirement in 1994, Mr. Coppersmith held various senior executive positions with
Metromedia Broadcasting where he managed its television operations in Los
Angeles, New York, and Boston and served as President and General Manager of
Boston's WCVB-TV, an ABC affiliate owned by The Hearst Corporation.
Mr. Coppersmith also serves as a director for B.J.'s Wholesale Club, Sun America
Asset Management Corporation and The Boston Stock Exchange.
Mr. Gerlach has been a Director of the Company since December 1997.
Mr. Gerlach a member of the Audit Committee and the Compensation Committee of
the Board of Directors. He is presently Senior Executive Professor of the
graduate business program and an associate professor of finance at Sacred Heart
University in Fairfield, CT. Previously, Mr. Gerlach was a Director in Bear
Stearns' corporate finance department, with responsibility for mergers and
financial restructuring projects; he was President and Chief Operating Officer
of Horn & Hardart, supervising restaurant and mail order subsidiaries, including
Hanover Direct; and he was the Founder and President of Consumer Growth Capital,
a venture capital firm. Mr. Gerlach also serves as a director for Uno Restaurant
Co.; SAFE Inc.; Cycergie (a French company); Akona Corp.; the Board of Regents
at St. John's University in Collegeville, MN; and is a member of an advisory
board for the College of Business & Administration at Drexel University.
Mr. Jones has been a Director of the Company since June 1996. Mr. Jones is
the chairman of the Audit Committee. Since September 1995, Mr. Jones has been a
Clinical Professor of accounting at New York University. Prior thereto, from
April 1974 to September 1995, Mr. Jones was a senior partner of the accounting
firm of Coopers & Lybrand LLP (now known as PricewaterhouseCoopers L.L.P.).
Mr. Jones has over 35 years of accounting experience and over ten years of
experience as an arbitrator and as an expert witness, particularly in the area
of mergers and acquisitions. Mr. Jones also functions as a consultant to Milberg
Factors, CHF Industries and Dubilier & Co. and acts as an expert witness in
accounting matters. Mr. Jones also serves as a director for Reliance Bank.
Mr. Pralle has been a Director of the Company since September 1999.
Mr. Pralle was also a director of the Company from May 1998 to April 1999.
Mr. Pralle is currently the President of GE Equity, with responsibility for
making common equity, convertible preferred stock and debt investments in
private and public companies in the US, Europe and Asia. He joined GE Capital in
1989 and, prior to his current appointment in 1996, was most recently President,
GE Capital Asia Pacific. Before joining GE Capital, Mr. Pralle spent six years
with management consultants, McKinsey & Co. in their London and Hong Kong
offices.
Mr. Mullen has been President of the Company since May 15, 1999. Previously,
Mr. Mullen served as President and Chief Executive Officer of CMG Direct. Prior
to CMG Direct, Mr. Mullen was the founding President of the Massachusetts
Interactive Media Council, MIMC, and is credited for the accelerating growth of
the Internet industry in Massachusetts. He has held several board of directors
positions and has
7
<PAGE>
worked with non-profit organizations, including WGBH-TV's Business Executive
Council and Business & Education for Schools & Technology (BEST).
Mr. Wainwright has been a Director of the Company since August 1996 and was
also a Director of the Company from the acquisition of SD&A until May 1996.
Mr. Wainwright is currently Vice Chairman of the advertising agency McKinney &
Silver and was Chairman of the advertising firm Harris Drury Cohen, Inc., from
1995 to 1997. From 1994 to 1995, he served as a senior executive with Cordient
PLC's Compton Partners, a unit of the advertising firm Saatchi & Saatchi World
Advertising, and, from 1989 to 1994, as Chairman and Chief Executive Officer of
Campbell Mithun Esty, a unit of Saatchi & Saatchi in New York. Mr. Wainwright
also serves as a director of Caribiner International, Gibson Greetings, Inc.,
Del Webb Corporation, American Woodmark Corporation, Danka P.L.C. and Advanced
Polymer Systems.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
fee of $10,000, $1,000 for each Board Meeting attended, $500 for each standing
committee meeting attended and $500 for each standing committee meeting for the
Chairman of such Committee. Such Directors will also be reimbursed for their
reasonable expenses for attending board and committee meetings, and will receive
an annual grant of options to acquire 10,000 shares of common stock for each
fiscal year of service, at an exercise price equal to the fair market value on
the date of grant. Any Director who is also an employee of the Company is not
entitled to any compensation or reimbursement of expenses for serving as a
Director of the Company or a member of any committee thereof. Mr. Annex has
agreed to waive the above described cash retainer since his firm acts as legal
counsel to the Company. Mr. Pralle has indicated that since his Company is a
large shareholder of the Company he would waive that described cash and stock
retainer.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDEES
The Board of Directors held nine meetings during fiscal year 1999. The Board
of Directors has a Compensation Committee and an Audit Committee. No member of
the Board of Directors attended fewer than 75% of the meetings of the Board and
of the committee of which he was a member. The Compensation Committee formulates
the Company's policy on compensation of executive officers, reviews, approves
and recommends to the Board of Directors the terms and conditions of all
employee benefit plans or changes thereto, and administers the Company's stock
option plan. During fiscal year 1999, the members of the Compensation Committee
were Messrs. Coppersmith, Gerlach and Wainwright. The Compensation Committee
held two meetings during fiscal 1999. The Audit Committee appoints the
independent public accountants of the Company, reviews the scope and fees of the
prospective annual audit, reviews the results thereof with the Company's
independent public accountants, reviews compliance with existing major
accounting and financial policies of the Company, reviews the adequacy of the
financial organization of the Company, reviews management's procedures and
policies relative to the adequacy of the Company's internal accounting controls
and compliance with federal and state laws relating to accounting practices and
reviews and approves (with the concurrence of a majority of the independent
directors of the Company) transactions, if any, with affiliated parties. For
fiscal 1999, the members of the Audit Committee were Messrs. Coppersmith,
Gerlach and Jones. The audit committee held three meetings during fiscal 1999.
EXECUTIVE OFFICERS
In addition to Mr. Barbera, the executive officers of the Company are the
following:
Ms. Hill has been Chief Financial Officer of the Company since June 1, 1998,
and was Corporate Controller of the Company from January to May 1998. Prior
thereto, she was a manager in the Business Assurance Division of
PricewaterhouseCoopers LLP where she was employed for the previous six years.
Ms. Hill is a Certified Public Accountant.
8
<PAGE>
Mr. Budlow has been Vice President of the Company since October 1996 and
President of Metro Direct since April 1997. Prior thereto, he was Executive Vice
President and Chief Operating Officer of Metro since 1990. He has thirteen years
of experience in database management services and subscription, membership and
donor renewal programs.
EXECUTIVE COMPENSATION AND OTHER INFORMATION SUMMARY COMPENSATION
The following table provides certain information concerning compensation of
the Company's Chief Executive Officer and any other executive officer of the
Company who received compensation in excess of $100,000 during the fiscal year
ended June 30, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
FISCAL YEAR ANNUAL ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION ENDED JUNE 30, SALARY ($) BONUS ($) OPTIONS/SARS (#)
- --------------------------- --------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
J. Jeremy Barbera(1)(2) .................... 1999 298,077
Chairman of the Board, & CEO 1998 198,077 50,000
1997 120,883 1,000,000
Robert Budlow(3) ........................... 1999 178,654 55,000
VP, MSGI and President, Metro Direct 1998 144,231
1997 93,750
Cindy Hill ................................. 1999 110,096
CFO
Edward Mullen(4) ........................... 1999 33,649 400,000
President
</TABLE>
- ------------------------
(1) Mr. Barbera was appointed Chairman of the Board, Chief Executive Officer and
President effective March 31, 1997. (Mr. Mullen assumed the position of
President upon his appointment in May 1999.) Prior thereto, commencing with
the October 1, 1996 acquisition of Metro, he was Vice President of MSGI and
President and CEO of Metro. Pursuant to an employment agreement dated
May 27, 1997, his annual salary increased from $150,000 to $250,000 through
May 31, 1998. As of June 30, 1997, Mr. Barbera's salary reflects earnings
for the nine months from the date of Metro's acquisition.
(2) During fiscal year end June 30, 1998, Mr. Barbera forgave all interest due
him on a note payable and forgave an increase in his annual salary from
May 27, 1997 to December 31, 1997. In consideration for this, the Board of
Directors granted Mr. Barbera options to acquire 50,000 shares of Common
Stock at the then current fair market price.
(3) The annual salary for Mr. Budlow was $125,000 for 1997. Due to the
acquisition of Metro on October 1, 1996, his annual compensation only
reflects nine months of salary. During fiscal year end June 30, 1998,
Mr. Budlow forgave an increase in his salary from October 1, 1997 to
December 31, 1997. As of January 1, 1998, his salary was increased in
accordance with his employment agreement.
(4) The annual salary for Mr. Mullen was $275,000 for 1999. Due to the
acquisition of CMG Direct Corporation on May 13, 1999, Mr. Mullen's annual
compensation only reflects a month and a half of salary.
9
<PAGE>
STOCK OPTION GRANTS
The table below provides information relating to stock options granted to
the Named Executive Officers during the fiscal year ended June 30, 1999.
OPTIONS GRANTED IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
-----------------------------------
NUMBER OF % OF TOTAL OPTIONS/
SECURITIES SARS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS/ EMPLOYEES IN FISCAL BASE PRICE EXPIRATION GRANT
NAME SARS GRANTED (#) YEAR(2) ($ PER SHARE) DATE DATE VALUE
- ---- ------------------- ------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Edward Mullen(1).......... 400,000 41% $5.17 4/06 $8.25
</TABLE>
- ------------------------
(1) Mr. Mullen's options are exercisable as follows: 133,000 options are
available for exercise immediately, and the remaining 267,000 options become
exercisable at a rate of 11,125 options monthly for a period 24 months
beginning in June 1999.
(2) During the fiscal year ended June 30, 1999, all employees and all
non-employee Directors of the Company received options to purchase a total
of 969,200 shares of Common Stock.
AGGREGATE OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information regarding the number and value of
securities underlying unexercised stock options held by the Named Executive
Officers as of June 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
NUMBER OF OPTIONS/SARS AT FISCAL SARS AT FISCAL YEAR
SECURITIES VALUE YEAR END (#) END ($)(1)
NAME EXERCISED (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------- ------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J. Jeremy Barbera........... 50,000 1,494,922 1,000,000/0 23,146,334/0
Robert Budlow............... -- -- 40,000/15,000 923,120/346,170
Edward Mullen............... -- -- 144,125/255,875 3,029,219/5,377,981
Cindy Hill.................. 10,000 372,845 23,334/16,666 538,502/384,618
</TABLE>
- ------------------------
(1) Fair market value of $26.188 per share at June 30, 1999 was used to
determine the value of in-the-money options.
OPTION REPRICING
On November 16, 1998, the Compensation Committee of the Board of Directors
unanimously resolved to reprice stock options with an exercise price greater
than $3.11 per share for all employees and officers of the company to $3.11 per
share. The resolution was adopted due to the general decline in the Nasdaq
SmallCap which caused the market price of MSGI's common stock to drop to a level
substantially below the exercise price of options granted under the 1991 stock
option plan. The Compensation Committee believed it was in the best interest of
the Company to reduce the exercise price in order to retain officers, directors
and employees of the Company and to provide the incentives originally intended
by the Board of Directors.
10
<PAGE>
The following table sets forth information regarding the repricing of stock
options held by the Named Executive Officers as of June 30, 1999.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE ORIGINAL OPTION
SECURITIES OF STOCK AT EXERCISE PRICE NEW TERM REMAINING
UNDERLYING TIME OF PRICE AT TIME EXERCISE AT DATE OF
NAME DATE OPTIONS REPRICED REPRICING OF REPRICING PRICE REPRICING
- ---- -------- ---------------- ------------ -------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeremy Barbera....... 11/16/98 50,000 2.189 4.6875 3.11 5.98
Robert Budlow........ 11/16/98 55,000 2.189 4.1875 3.11 6.18
Cindy Hill........... 11/16/98 50,000 2.189 4.0625 3.11 6.05
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Coppersmith, Mr. Gerlach, and Mr. Wainwright served as members of the
Compensation Committee of the Company's Board of Directors during all of fiscal
year 1999. None of such persons is an officer or employee, or former officer or
employee of the Company or any of its subsidiaries.
No interlocking relationships exist between the members of the Company's
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such relationship
existed in the past.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions regarding compensation of our executive officers are made by the
Compensation Committee. In making decision on compensation, the Compensation
Committee solicits and recieves the recommendations of the Chief Executive
Officer.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Compensation Committee desires to set compensation at levels through
arrangements that will attract and retain managerial talent desired by us,
reward employees for past contributions and motivate managerial efforts
consistent with corporate growth, strategic progress and the creation of
stockholder value. The Compensation Committee believes that a mix of salary,
incentive bonus and stock options will achieve those objectives.
RELATIONSHIP OF PERFORMANCE TO EXECUTIVE COMPENSATION
The base salaries of Messrs. Barbera, Budlow and Ms. Hill were set by terms
of their employment agreements which were negotiated to attract and retain them.
The Compensation Committee believes these salaries are competitive and represent
a fair estimate of the value of the services rendered by Messrs. Barbera, Budlow
and Ms. Hill.
Mr. Mullen's base salary was set pursuant to an employment agreement which
was negotiated coincident with the Company's acquisition of CMG Direct and his
grant of options to acquire 400,000 shares of common stock of the Company were
granted pursuant to such agreement made at that time. His compensation package
was structured to induce him to remain with us following the acquisition.
The Company did not award any incentive bonuses to executive officers with
respect to the June 30, 1999 fiscal year. Future incentive bonuses may be
awarded based on a combination of individual and company performance.
Respectively submitted,
COMPENSATION COMMITTEE
S. James Coppersmith, Chairman John T. Gerlach C. Anthony Wainwright
11
<PAGE>
STOCK PERFORMANCE GRAPH
The graph presented below compares our cumulative total return, the Russell
2000 index and the Nasdaq Non-Financial index from April 25, 1995, through June
30, 1999. Total return is based on an assumed investment of $100 on April 25,
1995.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS 4/25/95 6/95 6/96 6/97 6/98 6/99
<S> <C> <C> <C> <C> <C> <C>
MARKETING SERVICES GROUP, INC. 100.00 87.88 65.15 37.88 41.67 317.42
RUSSELL 2000 100.00 109.53 138.02 167.95 200.63 204.01
NASDAQ NON-FINANCIAL 100.00 115.63 146.81 172.47 225.22 331.82
</TABLE>
<TABLE>
<CAPTION>
4/25/95 6/95 6/96 6/97 6/98 6/99
<S> <C> <C> <C> <C> <C> <C>
MSGI 100 88 65 38 42 317
Russell 2000 100 110 138 168 201 204
Nasdaq Non-Financial 100 116 147 172 225 332
</TABLE>
12
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
The Company has entered into employment agreements with each of its named
executives.
MR. BARBERA was appointed to the position of Chairman of the Board, Chief
Executive Officer and President of MSGI by the Board, effective March 31, 1997.
Mr. Mullen assumed the position of President upon his appointment in May 1999.
Mr. Barbera had previously served as President and CEO of Metro under an
employment contract dated October 1, 1996. Under the contract, Mr. Barbera's
base salary was $150,000 for the first year of employment. On May 27, 1997, the
Company amended and restated Mr. Barbera's employment contract, based on the
additional responsibilities he assumed on March 31, 1997. Under the terms of the
amended contract, Mr. Barbera's employment term is for three years beginning
May 27, 1997, and is automatically renewable for an additional three year
period, unless the Company or Mr. Barbera gives written notice; his amended
annual base salary for the first year of the amended employment term is
$250,000, $300,000 for the second year and $350,000 for the third year.
Mr. Barbera is also eligible to receive raises and bonuses in each year of the
employment contract, at the determination of the Compensation Committee of the
Board of Directors of the Company, based on earnings and other targeted
criteria. On May 27, 1997, Mr. Barbera was granted options to acquire 1,000,000
shares of Common Stock of the Company; 333,334 exercisable at $2.625 per share,
333,333 exercisable at $3.00 per share and 333,333 exercisable at $3.50 per
share. One third of the options in each tranche vest immediately and one third
of each tranche will become available on each of the next two anniversary dates.
In a separate agreement, Mr. Barbera forgave the increase in his annual salary
from May 27, 1997 to December 31, 1997. If Mr. Barbera is terminated without
cause (as defined in the agreement), then MSGI shall pay him a lump sum payment
equal to one year of his salary at the then base rate.
Mr. Barbera has agreed in his employment agreement (i) not to compete with
MSGI or its subsidiaries, or to be associated with any other similar business
during the employment term, except that he may own up to 5% of the outstanding
common stock of certain corporations, as described more fully in the employment
agreement, and (ii) upon termination of employment with MSGI and its
subsidiaries, not to solicit or encourage certain clients of MSGI or its
subsidiaries to cease doing business with MSGI and its subsidiaries and not to
do business with any other similar business for a period of three years from the
date of such termination.
MR. BUDLOW entered into an employment agreement effective October 1, 1996,
providing for his employment as Executive Vice President of MSGI & President of
Metro. The agreement provides for an initial term expiring on September 30, 1999
(the "Employment Term") and is renewable for an additional three-year term
unless Metro or Mr. Budlow gives written notice. The base salary during the
Employment Term is $125,000 for the first year, $165,000 for the second year and
$200,000 for the third year. Mr. Budlow is eligible to receive raises and
bonuses based upon the achievement of earnings and other targeted criteria if
and as determined by the Compensation Committee of the Board of Directors. The
agreement also provides for the granting to Mr. Budlow of options to acquire
Common Stock if and as determined by the Option Plan Committee. If Mr. Budlow is
terminated without cause (as defined in the agreement), then MSGI shall pay him
a lump sum payment equal to one year of his salary at the then base rate.
Mr. Budlow has agreed in his employment agreement (i) not to compete with
Metro or to be associated with any other similar business during the Employment
Term, except that he may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in his employment agreement, and
(ii) upon termination of employment with Metro, not to solicit or encourage
certain clients of Metro (as more fully described in the relevant employment
agreement) to cease doing business with Metro, and not to do business with any
other similar business, for a period of three years from the date of such
termination.
13
<PAGE>
MS. HILL entered into an employment agreement effective January 1, 1999,
providing for employment as Chief Financial Officer of the Company. The
agreement provides for a two year term expiring on December 31, 2000 (the
"Employment Term"). The base salary during the Employment Term is $125,000 for
the first year and $150,000 for the second year. Ms. Hill is eligible to receive
raises and bonuses based upon the achievement of earnings and other targeted
criteria if and as determined by the Compensation Committee of the Board of
Directors. The agreements also provide for the granting to Ms. Hill of options
to acquire Common Stock if and as determined by the Compensation Committee. If
Ms. Hill is terminated without cause (as defined in the agreement), then MSGI
shall pay her a lump sum payment equal to 6 months of her salary at the then
base rate.
Ms. Hill has agreed in her employment agreement (i) not to compete with MSGI
or to be associated with any other similar business during the Employment Term,
except that she may own up to 5% of the outstanding common stock of certain
corporations, as described more fully in her employment agreement, and
(ii) upon termination of employment with MSGI, not to solicit or encourage
certain clients of MSGI (as more fully described in the relevant employment
agreement), to cease doing business with MSGI, and not to do business with any
other similar business, for a period of three years from the date of such
termination.
MR. MULLEN entered into an employment agreement effective May 13, 1999,
providing for employment as President of MSGI and certain subsidiaries. The
agreement provides for an initial term expiring on May 30, 2003 (the "Employment
Term") and is renewable for an additional four-year term unless MSGI or
Mr. Mullen gives written notice. The base salary during the Employment Term is
an annual rate of $275,000 through June 30, 1999, $300,000 for the period
July 1, 1999 through December 31, 1999, $350,000 for the period January 1, 2000
through June 30, 2000. Thereafter during the Employment Term the base salary
shall be further increased by 10% of the then current base salary on each
July 1st, commencing July 1, 2000 and by $27,500 on each January 1, commencing
on January 1, 2001. Mr. Mullen is eligible to receive annual bonuses of up to
75% of the base salary in effect based upon the achievement of earnings and
other targeted criteria if and as determined by the Compensation Committee of
the Board of Directors. At Mr. Mullen's election, the bonus may be paid half in
cash and half in common stock of MSGI. The agreement also provides for the
granting to Mr. Mullen of 400,000 options to purchase shares of Common Stock at
an exercise price of $5.17 per share. The options vest at a rate of 133,000
immediately and the remaining 267,000 options at a rate of 11,124 options per
month for 24 equal monthly installments beginning with June 1999. In addition,
Mr. Mullen may be eligible for further granting of stock options to acquire
Common Stock if and as determined by the Compensation Committee. If Mr. Mullen
is terminated without cause (as defined in the agreement) due to a change in
control of MSGI or Mr. Mullen electively terminates for good reason (as defined
in the agreement), then MSGI shall pay him a lump sum payment equal to 24 months
of his salary at the then base rate plus two times the historical bonus earned,
or shall pay him $300,000 if the date of termination occurs prior to June 30,
2001.
Mr. Mullen has agreed in his employment agreement (i) not to compete with
MSGI or to be associated with any other similar business during the Employment
Term, except that he may own up to 5% of the outstanding Common Stock of certain
corporations, as described more fully in his employment agreement, and
(ii) upon termination of employment with MSGI, not to solicit or encourage
certain clients of MSGI (as more fully described in the employment agreement) to
cease doing business with MSGI, and not to do business with any other similar
business, for a period of one year from the date of such termination.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of December 31, 1999 by: (i) each Director and each
of the Named Executive Officers; (ii) all executive officers and Directors of
the Company as a group; and (iii) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NAME AND ADDRESS OF BENEFICIAL HOLDER(1) NUMBER PERCENT
- ---------------------------------------- --------- --------
<S> <C> <C>
Directors and Named Executive Officers:
J. Jeremy Barbera(2)........................................ 2,175,000 7.78%
Robert Budlow(3)............................................ 477,200 1.77%
Cindy Hill(4)............................................... 43,500 *
Edward Mullen(5)............................................ 233,125 *
Alan I. Annex(6)............................................ 59,600 *
S. James Coppersmith(7)..................................... 96,000 *
Seymour Jones(8)............................................ 81,000 *
C. Anthony Wainwright(9).................................... 108,408 *
John Gerlach(10)............................................ 46,000 *
Michael Pralle.............................................. -- *
All Directors and Executive Officers as a group (10
persons).................................................. 3,319,833 12.02%
5% Stockholders:
General Electric Capital Corporation(11).................... 4,340,622 16.11%
CMGI Inc.(12)............................................... 2,321,084 8.62%
Fusion Networks, Inc.(13)................................... 1,500,000 5.57%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
All share amounts reflect beneficial ownership determined pursuant to
Rule 13d-3 under the Exchange Act. All information with respect to
beneficial ownership has been furnished by the respective Director,
executive officer or stockholder, as the case may be. Except as otherwise
noted, each person has an address in care of the Company.
(2) Includes 1,000,000 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999.
(3) Includes 55,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999.
(4) Includes 40,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999.
(5) Includes 233,125 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999.
(6) Includes 58,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999.
(7) Includes 46,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999 and 50,000
15
<PAGE>
beneficially owned shares of Common Stock issuable upon the exercise of
currently exercisable warrants.
(8) Includes 56,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999 and 25,000 beneficially owned shares of
Common Stock issuable upon the exercise of currently exercisable warrants.
(9) Includes 55,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999 and 50,000 beneficially owned shares of
Common Stock issuable upon the exercise of currently exercisable warrants.
(10) Includes 42,000 beneficially owned shares of Common Stock issuable upon
the exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 1999.
(11) The address for the 5% Stockholder is as follows: 120 Long Ridge Road,
Stamford, Connecticut 06927.
(12) The address for the 5% Stockholder is as follows: 100 Brickstone Square,
Andover, MA 01810.
(13) The address for the 5% Stockholder is as follows: 8115 N.W. 29th Street,
Miami, Florida 33122
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MR. BARBERA: On December 2, 1998, MSGI loaned
Mr. Barbera $100,000 pursuant to a promissory note. The note bore interest at
the rate earned on the Company's money market fund. Principal and interest were
payable in full in a lump sum. In April 1999, the promissory note, including
accrued interest was repaid.
TRANSACTIONS WITH MR. ANNEX: Mr. Annex, Secretary and a Director of the
Company, is a partner in the law firm of Camhy Karlinsky & Stein LLP, which
provides legal services to the Company. The Company incurred expenses
aggregating approximately $94,000 during fiscal 1999. Mr. Annex has informed the
Company that such fees did not represent more than 5% of such firm's revenues
for its fiscal years ending during such periods. The Company believes that the
fees for services provided by the law firm were at least as favorable to the
Company as the fees for such services from unaffiliated third parties.
TRANSACTIONS WITH 5% STOCKHOLDERS:
TRANSACTIONS WITH GE CAPITAL: In connection with the acquisition of CMG
Direct Corporation, the Company entered into a promissory note agreement with GE
Capital in the amount of $10,000,000. The note is payable in full on November
17, 1999 and accrues interest at the rate of 12% per annum. Interest is payable
in arrears on August 17, 1999 and on the maturity date. Concurrent with issuance
of the promissory note, the original outstanding warrant which was issued in
connection with GE Capital's purchase of redeemable convertible preferred stock
was amended. Upon an occurrence of a Qualified Secondary Offering, as defined in
the agreement, the Original Warrant was fixed at 200,000 shares with an exercise
price of $.01 per share. The amendment changed the amount and exercise price per
share to 300,000 shares with an exercise price of one-third of the secondary
offering price upon an occurrence of a Qualified Secondary Offering. In August
1999, the warrant was amended a second time to amend the definition of a
Qualified Secondary Offering to include a Qualified Private Placement, as
defined, and to change the time frame for the completion of a Qualified
Secondary Offering or Private Placement from December 31, 1999 to on or after
December 20, 1999 through April 30, 2000.
In August 1999, the promissory note was amended to extend the maturity date
to October 15, 2000 with interest to be paid quarterly and provides for certain
increases in the interest rate based on the time the principal remains
outstanding. In addition, in the event the Company completes a private placement
as
16
<PAGE>
defined on or before December 20, 1999, then the maturity date of the promissory
note is subject to acceleration. During September 1999, the Company completed a
private placement of common stock for net proceeds of approximately $30.8
million. In accordance with the amendment, $5,000,000, net of discount is
included in current liabilities and the remaining balance is due on July 1,
2000.
TRANSACTIONS WITH CMGI, INC.: On May 13, 1999, MSGI acquired all of the
outstanding capital stock of CMG Direct Corporation, a wholly-owned subsidiary
of CMGI, Inc. Total consideration for the acquisition was $33,029,237 which
included $13,464,857 in cash and an aggregate of 2,321,084 shares of common
stock of MSGI valued at $19,334,621.
TRANSACTIONS WITH FUSION NETWORK, INC.: On December 20, 1999, MSGI acquired
a 10% equity position in Fusion Networks, Inc. for 1,500,000 shares of MSGI
common stock. Under the terms of the agreement, MSGI also has an option to
acquire an additional 9.13% of Fusion Networks within six months under the same
terms. As part of this agreement, MSGI will have a seat on the Board of
Directors of Fusion Networks.
OTHER MATTERS ARISING AT THE ANNUAL MEETING
The matters referred to in the Notice of Annual Meeting and described in
this Proxy Statement are, to the knowledge of the Board of Directors, the only
matters that will be presented for consideration at the Annual Meeting. If any
other matters should properly come before the Annual Meeting, the persons
appointed by the accompanying proxy will vote on such matters in accordance with
their best judgment, pursuant to the discretionary authority granted to them in
the proxy.
STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATION OF DIRECTORS
A stockholder of the Company who wishes to present a proposal for action at
the Company's 2000 Annual Meeting of Stockholders must submit such proposal to
the Company, and such proposal must be received by the Company, no later than
August 22, 2000 in order to be considered as a proposal. Pursuant to our bylaws,
any record stockholder who desires to submit a proposal for approval of our
stockholders must deliver written notice to our Secretary no later than the
close of business 60 days in advance of such meeting.
Nominations for director, other than those made by our directors, must be
contained in a written notice and be delivered to the Secretary of the Company
not less than 60 days prior to any meeting at which the stockholders shall vote
for nominees for directors. Such notice must include information about the
nominee as required by our bylaws, information required under the rules of the
Securities and Exchange Commission pertaining to a proxy statement, and the
consent of each such nominee to serve as director, if elected. Nominations not
made according to the foregoing procedures will be disregarded.
COST OF SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is made by and
on behalf of the Company's Board of Directors. The cost of such solicitation
will be paid by the Company. Such cost includes the preparation, printing and
mailing of the Notice of Annual Meeting, Proxy Statement, Annual Report and form
of proxy. The solicitation will be conducted principally by mail, although
directors, officers and employees of the Company (at no additional compensation)
may solicit proxies personally or by telephone or telegram. Arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of proxy material to the beneficial owners of shares held of
record by such fiduciaries, and the Company may reimburse such persons for their
reasonable expenses in so doing.
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COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission (the
"Commission") and the NASDAQ National Market. Officers, directors and greater
than ten percent stockholders are required by the Commission's regulations to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file reports on Form 5 for the fiscal year ended June 30,
1999, the Company believes that all its officers, directors and greater than ten
percent beneficial owners complied with all filing requirements applicable to
them with respect to transactions during the fiscal year ended June 30, 1999,
except that Mr. Mullen made one late filing due to administrative timing errors
with respect to reporting the initial filing upon being appointed President and
to the Board of Directors.
ANNUAL REPORT TO STOCKHOLDERS
The annual report to stockholders concerning the operations of the Company
for the fiscal year ended June 30, 1999, including financial statements for that
year, accompanies this proxy statement. Such report is not to be treated as part
of these proxy soliciting materials. The Company will provide to each
stockholder, on written request addressed to the Director of Investor Relations,
MARKETING SERVICES GROUP, INC., 333 Seventh Avenue, New York, New York, 10001 a
copy of the Company's most recent Annual Report on Form 10-K as filed with the
Securities and Exchange Commission including the financial statements and
schedules thereto.
By Order of the Board of Directors
/s/ Alan Annex
--------------------------------------
Alan Annex
SECRETARY
New York, New York
January 18, 2000
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ANNEX A
MARKETING SERVICES GROUP, INC.
1999 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
------------------------
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to retain and attract
key employees (which term, as used herein, shall include officers), and
directors, of Marketing Services Group, Inc. (or any successor thereto) ("MSGI")
or a parent (if any) or any subsidiary thereof (collectively, unless the context
otherwise requires, the "Company"), consultants, and advisors to the Company,
and other persons or entities providing goods or services to the Company by
enabling them to acquire a proprietary interest in the Company through the
ownership of shares of the Corporation's common stock, $.01 par value per share
("Share"). As used herein, the term "parent" or "subsidiary" shall mean any
present or future Company which is or would be a "parent Company" or "subsidiary
Company" of the Company as the term is defined in section 424 of the Internal
Revenue Code of 1986, as amended (the "Code") (determined as if the Company were
the employer Company). Such directors, consultants, advisors, and other persons
or entities providing goods or services to the Company and entitled to receive
options hereunder are hereinafter collectively referred to as the "Associates,"
and the relationship of the Associates to the Company is hereinafter referred to
as "association with" the Company. A key employee or Associate to whom an option
has been granted is referred to as a "Grantee". Such ownership will provide such
Grantees with a more direct stake in the future welfare of the Company and
encourage them to remain employed by or associated with the Company. It is also
expected that the Plan will encourage qualified persons to seek and accept
employment or association with the Company.
2. ADMINISTRATION
(a) The Plan shall be administered by the Compensation Committee of the
Company as from time to time constituted (the "Committee").
(b) The Committee shall consist of not less than two persons appointed by
the Board of Directors of MSGI (the "Board") from among its members. A person
may serve on the Committee only if he or she (i) is a "Non-employee Director"
for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and (ii) satisfies the requirements of an "outside director"
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Committee may, subject to the provisions of the Plan, from
time to time establish such rules and regulations and delegate such authority to
administer the Plan as it deems appropriate for the proper administration of the
Plan, except that no such delegation shall be made in the case of awards
intended to be qualified under Section 162(m) of the Code. The decisions of the
Committee or its authorized delegatees shall be final, conclusive, and binding
with respect to the interpretation and administration of the Plan and any grant
made under it.
(c) Subject to the terms and conditions of the Plan, the Committee shall be
responsible for the overall management and administration of the Plan and shall
have such authority as shall be necessary or appropriate in order to carry out
its responsibilities, including, without limitation, the authority to
(i) interpret and construe the Plan and to determine the terms of all options
granted pursuant to the Plan, including, but not limited to, the persons to
whom, and the time or times at which grants shall be made, the number of options
to be included in the grants, the number of options which shall be treated as
incentive stock options (in the case of options granted to employees) as
described in section 422 of the Code, the number of options which do not qualify
as incentive stock options ("nonqualified options"), and the terms and
conditions thereof; (ii) to adopt rules and regulations and to prescribe forms
for the operation and
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administration of the Plan; and (iii) to take any other action not inconsistent
with the provisions of the Plan that it may deem necessary or appropriate.
3. ELIGIBILITY AND PARTICIPATION
(a) Key employees and Associates are eligible to receive options. Each
option shall be granted, and the number of Shares and the vesting schedule of
such Shares subject thereto shall be determined by the Committee.
(b) Directors who are not officers of the Company shall receive, on an
annual basis on the last trading day of each June starting June 1999, stock
options for 10,000 Shares, at an exercise price equal to the fair market value
of the stock on the date of grant, and such options shall vest immediately upon
grant. The fair market value shall be determined in accordance with Section 8
hereof.
(c) Notwithstanding subsection 5(a), the Committee may grant options to a
person not then in the employ of the Company, in order to induce such person to
become employed by the Company, provided that the grant of options to such
person shall be conditioned upon such person becoming an employee at, or prior
to, the time of execution of an Option Agreement evidencing such Options, and in
no event shall any such person have any rights with respect to Options granted
pursuant to the Plan prior to becoming an employee.
4. SHARES SUBJECT TO THE PLAN
(a) Options shall be evidenced by written agreements, the form of which
shall be approved by the Committee, which shall, among other things
(i) designate the option as either an incentive stock option or a nonqualified
stock option, (ii) specify the number of shares covered by the option;
(iii) specify the exercise price, determined in accordance with paragraph 7
hereof, for the Shares subject to the option; (iv) specify the option period
determined in accordance with paragraph 6 hereof; (v) set forth specifically or
incorporate by reference the applicable provisions of the Plan; and
(vi) contain such other terms and conditions consistent with the Plan as the
Committee may, in its discretion, prescribe.
(b) The Shares to be offered and delivered under the Plan, pursuant to the
exercise of an option, shall be authorized and unissued Shares or reacquired
Shares, as the Committee may from time to time determine. Subject to adjustment
as provided in paragraph 13 hereof, the aggregate number of Shares to be
delivered under the Plan shall not exceed 3,000,000 Shares. If an option expires
or terminates for any reason during the term of the Plan prior to the exercise
thereof in full, the Shares subject to but not delivered under such option shall
be available for options thereafter granted.
5. INCENTIVE STOCK OPTIONS
(a) An option designated by the Committee as an "incentive stock option" is
intended to qualify as an "incentive stock option" within the meaning of section
422 of the Code. An incentive stock option shall be granted only to an employee
of the Company.
(b) No incentive stock option shall provide any person with a right to
purchase Shares to the extent that such right first becomes exercisable during a
prescribed calendar year and the sum of (i) the fair market value (determined as
of the date of grant) of the Shares subject to such incentive stock option which
first become available for purchase during such calendar year, plus (ii) the
fair market value (determined as of the date of grant) of all Shares subject to
incentive stock options previously granted to such person under all plans of the
Company first become available for purchase during such calendar year exceeds
$100,000.
(c) Without prior written notice to the Committee, a Grantee may not dispose
of Shares acquired pursuant to the exercise of an incentive stock option until
after the later of (i) the second anniversary of the date on which the incentive
stock option was granted, or (ii) the first anniversary of the date on which
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the Shares were acquired; provided, however, that a transfer to a trustee,
receiver, or other fiduciary in any insolvency proceeding, as described in
section 422(c)(3) of the Code, shall not be deemed to be such a disposition. The
Grantee shall make appropriate arrangements with the Company for any taxes which
the Company is obligated to collect in connection with any disposition of Shares
acquired pursuant to the exercise of an incentive stock option, including any
Federal, state or local withholding taxes.
(d) Should Section 422 of the Code be amended during the term of the Plan,
the Committee may modify the Plan consistently with such amendment.
6. TERM OF OPTION PERIOD
The term during which options may be granted under the Plan shall expire on
January 11, 2009 and the option period during which each option may be exercised
shall, subject to the provisions of paragraph 12 hereof, expire no later than
the tenth anniversary (the fifth anniversary in the case of incentive stock
options granted to a person who owns (within the meaning of section 424(d) of
the Code) more than 10 percent of the total combined voting power of all classes
of stock of the Company at the time such option is granted) from the date the
option is granted, as may be determined by the Committee.
7. OPTION PRICE
The price at which Shares may be purchased upon exercise of a particular
option shall be such price as may be fixed by the Committee but in no event less
than the minimum required in order to comply with any applicable law, rule or
regulation and, in the case of incentive stock options, shall not be less than
100 percent, or in the case of incentive stock options granted to an optionee
who is a 10 percent stockholder (within the meaning of paragraph 6 hereof),
shall not be less than 110 percent, of the fair market value (as defined in
paragraph 8) of such Shares on the date such option is granted.
8. STOCK AS FORM OF EXERCISE PAYMENT
At the discretion of the Committee, a Grantee who owns Shares may be
permitted to use such Shares, with the value thereof to be determined as the
fair market value of such Shares on the day prior to the date of exercise of the
option, to pay all or part of the option price required under the Plan. For
purposes of the Plan, "fair market value" of a Share on any given date shall be
determined by the Committee as follows: (a) if the Shares are listed for trading
on one or more national securities exchanges, or is traded on the automated
quotation system of NASDAQ, the last reported sales price on the principal such
exchange or on NASDAQ on the date in question, or if such Shares shall not have
been traded on such principal exchange on such date, the last reported sales
price on such principal exchange or on NASDAQ on the first day prior thereto on
which such Shares were so traded; or (b) if the Shares are not listed for
trading on a national securities exchange or on NASDAQ, but are traded in the
over-the-counter market, the closing bid price for Shares on the date in
question, or if there is no such bid price for Shares on such date, the closing
bid price on the first day prior thereto on which such price existed; or (c) if
neither (a) or (b) is applicable, by any means fair and reasonably by the
Committee, which determination shall be final and binding on all parties.
9. EXERCISE OF OPTIONS
(a) Each option granted shall be exercisable in whole or in part at any
time, or from time to time, during the option period as the Committee may
provide in the terms of such option; provided that the election to exercise an
option shall be made in accordance with applicable federal and state laws and
regulations.
(b) No option may at any time be exercised with respect to a fractional
share.
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(c) No Shares shall be delivered pursuant to the exercise of any option, in
whole or in part, until qualified for delivery under such securities laws and
regulations as may be deemed by the Committee to be applicable thereto, until
such Shares are listed on each securities exchange on which Shares may then be
listed, until, in the case of the exercise of an option, payment in full of the
option price is received by the Company in cash or stock as provided in
paragraph 8 and until payment in cash of any applicable withholding taxes is
received by the Company. Unless prior to the exercise of the option the Shares
issuable upon such exercise have been registered with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, the
notice of exercise shall be accompanied by a representation or agreement of the
individual exercising the option to the Company to the effect that such Shares
are being acquired for investment and not with a view to the resale or
distribution thereof or such other documentation as may be required by the
Company unless in the opinion of counsel to the Company such representation,
agreement, or documentation is not necessary to comply with said Act. No holder
of an option, or such holder's legal representative, legatee, or distributee
shall be or be deemed to be a holder of any shares subject to such option unless
and until a certificate or certificates therefor is issued in his name.
10. ACCELERATION OF VESTING
(a) An option shall automatically be vested and immediately exercisable in
full upon the occurrence of any of the following events:
(i) Any person within the meaning of Sections 13(d) and 14(d) of the
1934 Act, other than the Company, has become the beneficial owner, within
the meaning of Rule 13d-3 under the 1934 Act, of 51 percent or more of the
combined voting power of the Company's then outstanding voting securities,
unless such ownership by such person has been approved by the Board
immediately prior to the acquisition of such securities by such person;
(ii) The first day on which shares of the Company's common stock are
purchased pursuant to a tender offer or exchange offer, unless such offer is
made by the Company or unless such offer has been approved or not opposed by
the Board;
(iii) The stockholders of the Company have approved an agreement to merge
or consolidate with or into another Company (and the Company is not the
survivor of such merger or consolidation) or an agreement to sell or
otherwise dispose of all or substantially all of the Company's assets
(including a plan of liquidation), unless the Committee has resolved that
options shall not automatically vest; or
(iv) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election or the
nomination for the election by the Company's stockholders of each new
director was approved by a vote of at least a majority of the directors then
still in office who were directors at the beginning of the period.
(b) Other than upon the occurrence of any of the events described in
paragraph 10(a), the Committee shall have the authority at any time or from time
to time to accelerate the vesting of any individual option and to permit any
stock option not theretofore exercisable to become immediately exercisable.
11. TRANSFER OF OPTIONS
Options granted under the Plan may not be transferred except by will or the
laws of descent and distribution and, during the lifetime of the Grantee to whom
granted, may be exercised only by such or by such Grantee's guardian or legal
representative. Any attempted transfer, assignment, pledge or hypothecation, or
the levy of any attachment or similar process, shall render the option subject
thereto null and void.
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12. TERMINATION OF EMPLOYMENT
(a) Except as specifically provided in this paragraph 12, if the Grantee's
employment or association with the Company shall terminate for any reason before
the option has vested in full, then the unvested portion of the option shall
automatically terminate on the date of termination of employment or association
and all rights and interests of the Grantee in and to such unvested portion
shall thereupon terminate.
(b) After the date on which an option vests, if the Grantee's employment by
or association with the Company is terminated for any reason, the option shall
be exercisable for the lesser of (i) three (3) months from the date of such
termination or (ii) the balance of such option's term; PROVIDED, HOWEVER, that
in the event that the termination is as a result of the death or disability
(within the meaning of section 22(e)(3) of the Code) of the Grantee, the options
held by such Grantee which were otherwise exercisable on the date of his
termination of employment shall expire unless exercised by such Grantee, or, in
the case of the death of a Grantee, by his heirs, legatees, or personal
representatives, within a period of twelve (12) months after the date of
termination of employment. In no event, however, shall any option be exercisable
after ten years from the date it was granted. Nothing in the Plan or in any
option shall confer upon any Grantee the right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate the
employment of a Grantee at any time. The Committee's determination that a
Grantee's employment has terminated and the date thereof shall be final and
conclusive on all persons affected thereby.
(c) The Committee may, if it determines that to do so would be in the
Company's best interests, provide in a specific case or cases for the exercise
of options which would otherwise terminate upon termination of employment or
association with the Company for any reason, upon such terms and conditions as
the Committee determines to be appropriate.
(d) In the case of a Grantee on an approved leave of absence, the Committee
may, if it determines that to do so would be in the best interests of the
Company, provide in a specific case for continuation of options during such
leave of absence, such continuation to be on such terms and conditions as the
Committee determines to be appropriate. Leaves of absence for such period and
purposes conforming to the personnel policy of the Company as may be approved by
the Committee shall not be deemed terminations or interruptions of employment.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If Shares are hereafter changed by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, combination,
or exchange of shares or the like, or dividends payable in Shares, an
appropriate adjustment shall be made by the Committee in the aggregate number of
Shares available under the Plan and in the number of Shares and price per Share
subject to outstanding options. If the Company shall be reorganized,
consolidated, or merged with another Company, or if all or substantially all of
the assets of the Company shall be sold or exchanged, the holder of an option
shall, after the occurrence of such a corporate event, be entitled to receive
upon the exercise of his option the same number and kind of Shares of stock or
the same amount of property, cash, or securities as he would have been entitled
to receive upon the happening of any such corporate event as if he had exercised
such option and had been, immediately prior to such event, the holder of the
number of Shares covered by such option. All adjustments made pursuant to this
paragraph to the terms or conditions of an incentive stock option shall be
subject to the requirements of section 424 of the Code.
(b) Any adjustment in the number of Shares shall apply proportionately to
only the unexercised portion of any option granted hereunder. If fractions of a
Share would result from any such adjustment, the adjustment shall be revised to
the next higher whole number of Shares.
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14. TERMINATION, MODIFICATION, AND AMENDMENT
(a) The Plan shall terminate on January 11, 2009, which is 10 years from the
earlier of the date of its adoption by the Board or the date on which the Plan
is approved by the stockholders of MSGI and no option shall be granted after
termination of the Plan.
(b) The Board or the Committee may at any time terminate the Plan or from
time to time make such modifications or amendments of the Plan as it may deem
advisable or appropriate, but no amendment, alteration, or discontinuation shall
be made (i) which would adversely impair the rights of a participant under an
option theretofore granted, without the participant's consent, or (ii) which
without the approval of the shareholders of the Corporation would cause the Plan
to no longer comply with Rule l6b-3 under the Securities Exchange Act of 1934,
Section 422 of the Code or any other regulatory requirements.
(c) No termination, modification, or amendment of the Plan, may, without the
consent of the Grantee, adversely affect the rights conferred by such option.
15. MISCELLANEOUS
(a) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(b) The Committee shall have the right to condition any grant of any option
under the Plan upon the recipient's execution and delivery to the Corporation of
an agreement not to compete with the Corporation during the recipient's
employment or service with the Corporation and for such period thereafter as
shall be determined by the Committee. Such covenant against competition shall be
in a form satisfactory to the Committee.
(c) Nothing in the Plan gives to any person any right to continued
employment by the Corporation or to continued service as a consultant to the
Corporation or limits in any way the right of the Corporation or the
Corporation's shareholders at any time to terminate or alter the terms of that
employment or service.
(d) The Plan shall be governed by and construed in accordance with the laws
of the State of New York.
16. EFFECTIVE DATE
The Plan became effective on January 12, 1999 upon the adoption by the Board
subject to the approval by the affirmative vote of the holders of a majority of
the outstanding shares of the Company which occurred on March 29, 1999. All
options granted prior to the date of such stockholder approval shall be subject
to such approval.
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PROXY CARD
This proxy is solicited on behalf of the Board of Directors of MARKETING
SERVICES GROUP, INC., for the Annual Meeting of Stockholders to be held on
February 25, 2000. The Board of Directors recommends a vote "FOR" the following
proposals:
1. Election of Class II directors:
J. Jeremy Barbera, Seymour Jones and Michael E. Pralle.
INSTRUCTION: To withhold authority to vote for any nominee(s), write that
nominee's name in the space provided:
----------------------------------------------------------------------------
/ / FOR all of the nominees / / WITHHOLD for all nominees
2. Amendment to the 1999 Stock Option Plan increasing the number of authorized
shares from 1,000,000 shares to 3,000,000 shares:
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of selection of Independent Auditors:
/ / FOR / / AGAINST / / ABSTAIN
Votes MUST be indicated by placing an "X" in one of the above boxes using black
or blue ink.
(SEE REVERSE SIDE)
<PAGE>
The undersigned hereby appoints J. Jeremy Barbera and Alan I. Annex, and
each of them, proxies, with full power of substitution, to vote all shares of
Common Stock of the undersigned in MARKETING SERVICES GROUP, INC. at the Annual
Meeting of Stockholders to be held on February 25, 2000, and at any adjournment
thereof, upon all subjects that may properly come before the meeting. IF
SPECIFIC DIRECTIONS ARE NOT GIVEN WITH RESPECT TO THE PROPOSALS OR ANY OTHER
MATTERS TO BE ACTED UPON AT THE ANNUAL MEETING AND THIS PROXY CARD IS SIGNED AND
RETURNED, THE PROXIES WILL VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATION
(I.E., FOR THE PROPOSALS) AND ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING.
Please date and sign exactly as
your name or names appear on this
proxy card. If the shares are held
jointly, each Stockholder should
sign. If signing as an executor,
trustee, administrator, custodian,
guardian, corporate officer, or
pursuant to a power of attorney,
please so indicate below.
Dated: ___________________________
By: ______________________________
__________________________________
/ / Check this box if you have either a change of address or comments, and
please note the same on this proxy card.
