UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to______________________
Commission file number 0-16730
MARKETING SERVICES GROUP, INC.
------------------------------
(Name of small business issuer in its charter)
Nevada 88-0085608
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
333 Seventh Avenue, 20th Floor
New York, New York 10001
------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:(917) 339-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
[ ] The issuer's revenues for its fiscal year ended June 30, 2000 are
$128,606,882.
As of October 23, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $44,600,000.
As of October 23, 2000, there were 30,021,570 shares of the Registrant's common
stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
Introduction
------------
On October 13, 2000, Marketing Services Group, Inc. ("MSGi" or the "Company"),
filed with the Securities and Exchange Commission (the "Commission") its Annual
Report on Form 10-K for its fiscal year June 30, 2000 (the "2000 Form 10-K").
The information called for by items 10, 11, 12 and 13 of Part III of Form 10-K
was not included in the body of the 2000 Form 10-K as filed, but was
incorporated by reference to the Company's Proxy Statement which was expected to
be filed with the Commission within the 120-day period. Because the Company is
not in fact filing its Proxy Statement with in such 120 day period, this Form
10-K/A amends the 2000 Form 10-K by deleting therefrom the caption and first
paragraph and substituting therefore the following replacements for Items 10,
11, 12 and 13.
Item 10 - Executive Officers and Directors of the Registrant
------------------------------------------------------------
The Company's executive officers and directors and their positions with MSGi are
as follows:
Name Age Position
------------------- --- ------------------------------------------------
Alan I. Annex 38 Director and Secretary
J. Jeremy Barbera 44 Chairman of the Board of Directors and
Chief Executive Officer
Robert M. Budlow 39 Vice President of MSGi and President of
MSGi Direct - New York
Michael Dzvonik 58 Chief Operating Officer
Cindy H. Hill 31 Chief Accounting Officer
Rudy Howard 41 Chief Financial Officer
Stephen Killeen 38 President and Director
S. James Coppersmith 67 Director
John T. Gerlach 68 Director
Seymour Jones 69 Director
C. Anthony Wainwright 67 Director
Mr. Annex has been a Director and Secretary of the Company since May 1997. Mr.
Annex is a member of the M&A Committee of the Board of Directors. Mr. Annex has
been a partner in the law firm of Greenberg Traurig LLP since August 2000, where
he practices corporate and securities law. Greenberg Traurig is the Company's
legal counsel. Prior thereto, he was a partner in the law firm Camhy Karlinsky &
Stein LLP from July 1995 to July 2000. 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 MSGi Direct - New York, Inc. since its
formation in 1987. Mr. Barbera is a member of the M&A Committee of the Board of
Directors. Mr. Barbera has eighteen years of experience in data management
services, and over twenty years of experience in the entertainment marketing
area. Mr. Barbera also serves as a director of Greatergood.com.
Mr. Budlow has been Vice President of the Company since October 1996 and
President of MSGi Direct - New York, Inc. since April 1997. Prior thereto, he
was Executive Vice President and Chief Operating Officer of MSGi Direct - New
York since 1990. He has fourteen years of experience in database management
services and subscription, membership and donor renewal programs.
Mr. Dzvonik has been Chief Operating Officer since March 2000. From 1997 to 2000
he was Chairman and Chief Executive Officer of Grizzard Advertising and has
acted as Grizzard's President since 1994. Prior thereto, he was an Executive
Vice President of Grizzard for nine years. He serves as the Immediate Past
Chairman of the Board of Directors of the Mail Advertising Service Association
(MASA) and is a frequent speaker at conferences and postal customer councils.
Ms. Hill has been Chief Accounting Officer of the Company since January 2000,
prior thereto she was Chief Financial Officer of the Company from June 1998 to
December 1999, and Corporate Controller of the Company from January to May 1998.
Prior thereto, she was a manager in the business assurance division of
PricewaterhouseCoopers, LLP, where she was employed for the previous six years.
Ms. Hill is a Certified Public Accountant.
Mr. Howard has been Chief Financial Officer since January 2000. Prior to his
appointment, he served for four years as Chief Financial Officer of
Pharmaceutical Product Development, Inc. (PPD), a research and development
services provider to pharmaceutical and biotechnology companies. Prior thereto,
he was a Partner with PricewaterhouseCoopers LLP, culminating over a decade of
public consultancy experience as a senior manager with both
PricewaterhouseCoopers and Deloitte & Touche. Mr. Howard is a Certified Public
Accountant.
Mr. Killeen has been President since July 2000 and a Director of the Company
since February 2000. Previously, he was Vice President and General Manager of
Alta Vista, a CMGi company. He joined Alta Vista upon its merger with Raging
Bull in 1999 where he acted as President and Chief Executive Officer. Prior
thereto, he spent ten years in the online financial services industry most
recently as Senior Vice President of Brokerage Services with Fidelity
Investments and as Senior Vice President of Marketing with DLJ Direct. Mr.
Killeen also serves as 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 the chairman of
the Audit Committee of the Board of Directors. He was Chairman of the Board of
Trustees of Boston's Emerson College from 1994 until his term expired in
December 1997. Until his retirement in 1994, Mr. Coppersmith held various senior
executive positions with Metromedia Broadcasting where he managed its television
operations in Los Angeles, New York, and Boston and served as President and
General Manager of Boston's WCVB-TV, an ABC affiliate owned by The Hearst
Corporation. Mr. Coppersmith also serves as a director for B.J.'s Wholesale
Club, Sun America Asset Management Corporation and The Boston Stock Exchange.
Mr. Gerlach has been a Director of the Company since December 1997. Mr. Gerlach
is the chairman of the M&A Committee and a member of the Audit Committee and the
Compensation Committee of the Board of Directors. He is presently Senior
Executive Professor of the graduate business program and an associate professor
of finance at Sacred Heart University in Fairfield, CT. Previously, Mr. Gerlach
was a Director in Bear Stearns' corporate finance department, with
responsibility for mergers and financial restructuring projects; he was
President and Chief Operating Officer of Horn & Hardart, supervising restaurant
and mail order subsidiaries, including Hanover Direct; and he was the Founder
and President of Consumer Growth Capital, a venture capital firm. Mr. Gerlach
also serves as a director for Uno Restaurant Co.; SAFE Inc.; Cycergie (a French
company); Akona Corp.; the Board of Regents at St. John's University in
Collegeville, MN; and is a member of an advisory board for the College of
Business & Administration at Drexel University.
Mr. Jones has been a Director of the Company since June 1996. Mr. Jones is a
member of the Audit Committee. Since September 1993, Mr. Jones has been a
professor of accounting at New York University. From April 1974 to September
1995, Mr. Jones was a senior partner of the accounting firm of
PricewaterhouseCoopers L.L.P. Mr. Jones has over 40 years of accounting
experience and over ten years of experience and as an arbitrator and as an
expert witness, particularly in the areas of fraud and mergers and acquisitions.
Mr. Jones also functions as a consultant to Milberg Factors and CHF Industries
and acts as an expert witness in accounting matters. Mr. Jones also serves as a
director for Reliance Bank.
Mr. Wainwright has been a Director of the Company since May 1996. Mr. Wainwright
is a member of the Compensation Committee of the Board of Directors. Mr.
Wainwright is currently Vice Chairman of the advertising agency McKinney &
Silver and was Chairman of the advertising firm Harris Drury Cohen, Inc., from
1995 to 1997. From 1994 to 1995, he served as a Chairman 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 Audio Visual Service Corp., Del Webb Corporation,
American Woodmark Corporation, Danka P.L.C. and Advanced Polymer Systems.
Section 16(A) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission (the
"Commission") and the NASDAQ National Market. Officers, directors and greater
than ten percent stockholders are required by the Commission's regulations to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has received
and written representations from certain reporting persons that they were not
required to file reports on Form 5 for the fiscal year ended June 30, 2000, 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, 2000.
Item 11 - Executive Compensation:
---------------------------------
The following table provides certain information concerning compensation of the
Company's Chief Executive Officer and any other executive officer of the Company
who received compensation in excess of $100,000 during the fiscal year ended
June 30, 2000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Securities
Fiscal Year Annual Annual Underlying
Name and Principal Position Ended June 30, Salary ($) Bonus Options/SARs (#)
--------------------------- -------------- ---------- ------ ----------------
<S> <C> <C> <C> <C>
J. Jeremy Barbera (1)(2) 2000 356,730 825,000
Chairman of the Board and CEO 1999 298,077 -
1998 198,077 50,000
Michael Dzvonik (3) 2000 83,695 250,000
Chief Operating Officer
Rudy Howard (4) 2000 117,692 375,000
Chief Financial Officer
Cindy Hill (5) 2000 135,336 100,000
Chief Accounting Officer 1999 110,096 -
1998 48,077 50,000
Robert Budlow 2000 207,692 -
Vice President 1999 178,654 -
1998 144,321 55,000
-----------
</TABLE>
(1) The annual salary for Mr. Barbera commencing January 1, 2000 was raised
from $350,000 to $500,000. Notwithstanding, Mr. Barbera has forgiven this
increase for an unspecified period of time.
(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. Dzvonik was $300,000 for 2000. Due to the
acquisition of Grizzard Communications Group, Inc. on March 22, 2000, Mr.
Dzvonik's annual compensation only reflects approximately three months
salary.
(4) The annual salary for Mr. Howard was $300,000 for 2000. Due to his
appointment in February 2000, Mr. Howard's annual compensation only
reflects approximately four months salary.
(5) The annual salary from Ms. Hill was $100,000 for 1998. Due to her
appointment in January 1998, Ms. Hill's compensation only reflects six
months salary.
STOCK OPTION GRANTS
The table below provides information relating to stock options granted to the
Named Executive Officers during the fiscal year ended June 30, 2000.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN THE LAST FISCAL YEAR
Individual Grant
------------------------------------------------------------------------------------------
Number of % of Total Options/
Securities SARs Granted to Exercise or
Underlying Options/ Employees in Base Price Expiration Grant
SARs Granted (#) Fiscal Year (5) ($ per share) Date Date Value
---------------- --------------- ------------- ---- ----------
<S> <C> <C> <C> <C> <C>
Jeremy Barbera (1) 825,000 30% $4.4375 01/09 $4.4375
Michael Dzvonik (2) 250,000 9% $4.4375 01/09 $4.4375
Rudy Howard (3) 250,000 9% $17.625 01/09 $17.625
125,000 6% $4.4375 01/09 $4.4375
Cindy Hill (4) 100,000 4% $4.4375 01/09 $4.4375
</TABLE>
-----------------------
(1) Mr. Barbera's options are exercisable as follows: 412,500 on December 31,
2000, 206,250 on December 31, 2001 and 2002.
(2) Mr. Dzvonik's options are exercisable as follows: 83,334 available on March
22, 2001, 83,333 on March 22, 2002 and 83,333 on March 22, 2003.
(3) Mr. Howard's options are exercisable as follows: 250,000 options were
granted in January 2000 which are exercisable monthly at a rate of one
twenty-fourth per month for a period of 24 months. 125,000 options were
granted in June 2000 of which 31,250 are exercisable immediately, 5,214 on
July 30, 2000 and 5,208 monthly for 17 months beginning August 30, 2000.
(4) Ms. Hill's options are exercisable as follows: 33,334 available
immediately, 2,795 on July 31, 2000 and 2,777 monthly for a period of 23
months beginning June 2000.
(5) During the fiscal year ended June 30, 2000, all employees and all
non-employee Directors of the Company received options to purchase a total
of 2,707,906 shares of Common Stock.
AGGREGATE OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information regarding the number and value of
securities underlying unexercised stock options held by the Named Executive
Officers as of June 30, 2000.
<TABLE>
<CAPTION>
Number of Securities Value of unexercised
Underlying Unexercised In-the-Money Options/
Number of Options/SARs at Fiscal SARs at Fiscal Year
Securities Value Year End (#) End ($)(1)
Exercised (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
J. Jeremy Barbera - - 1,000,000/825,000 1,395,834/0
Michael Dzvonik - - 0/250,000 0/0
Rudy Howard - - 93,750/281,250 0/0
Cindy Hill - - 73,334/66,666 53,100/0
Robert Budlow - - 55,000/0 73,013/0
-----------
</TABLE>
(1) Fair market value of $4.4375 per share at June 30, 2000 was used to
determine the value of in-the-money options.
COMPENSATION OF DIRECTORS
Commencing April 1, 2000, Directors who are not employees of the Company receive
an annual retainer fee of $25,000, $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 on June 30 of each year to
acquire 10,000 shares of common stock for each fiscal year of service, at an
exercise price equal to the fair market value on the date of grant. Any Director
who is also an employee of the Company is not entitled to any compensation or
reimbursement of expenses for serving as a Director of the Company or a member
of any committee thereof. Mr. Annex has indicated that since his firm acts as
counsel to the Company he would waive that described cash and stock retainer.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
The Company has entered into employment agreements with each of its Named
Executive Officers.
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.
Stephen Killeen assumed the position of President upon his appointment in July
2000. Mr. Barbera had previously served as President and CEO of MSGi Direct -
New York, Inc. Mr. Barbera entered into a new employment agreement effective
January 1, 2000. The agreement provides for a three year term expiring December
31, 2002 (the "Employment Term"). The base salary during the employment term is
$500,000 for the first year and an amount not less than $500,000 for the
remaining two years. Mr. Barbera is eligible to receive bonuses equal to 100% of
the base salary each year at the determination of the Compensation Committee of
the Board of Directors of the Company, based on earnings and other targeted
criteria. Mr. Barbera has forgone the increase in his salary for an indefinite
period of time. 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. On June 30, 2000, Mr. Barbera was granted options to acquire
825,000 shares of Common Stock of the Company at $4.4375 per share; 412,500
exercisable on December 31, 2000; 206,250 exercisable on December 31, 2001 and
2002. If Mr. Barbera is terminated without cause (as defined in the agreement),
then MSGi shall pay him a lump sum payment equal to 2.99 times the compensation
paid during the preceding 12 months and all outstanding stock options shall
fully vest and become immediately exercisable.
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. Howard entered into an employment agreement effective January 1, 2000
providing for his employment as Chief Financial Officer of MSGi. The agreement
provides for a three year term expiring December 31, 2003 (the "Employment
Term"). The base salary during the Employment Term is $300,000 for the first
year and not less than $300,000 for the remaining two years. Mr. Howard is
eligible to receive bonuses equal to 50% of the base salary each year at the
determination of the Audit Committee of the Board of Directors of the Company,
based on earnings and other targeted criteria. On January 27, 2000, Mr. Howard
was granted options to acquire 250,000 shares of Common Stock of the Company at
$17.625 per share which are exercisable equally over a period of 24 months
beginning January 27, 2000. On June 30, 2000, Mr. Howard was granted options to
acquire 125,000 shares of Common Stock of the Company at $4.4375 per shares
which are exercisable equally over a period of 24 months beginning January 27,
2000. If Mr. Howard is terminated without cause (as defined in the agreement),
then MSGi shall pay him a lump sum payment equal to 2.99 times the compensation
paid during the preceding 12 months and all out outstanding stock options shall
fully vest and become immediately exercisable.
Mr. Budlow entered into an employment agreement effective October 1, 1996,
providing for his employment as Executive Vice President of MSGi & President of
MSGi Direct - New York, Inc. 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 MSGi Direct New York, Inc. 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. The
agreement has been renewed for an additional three year term at a base salary of
$250,000 for the first year and not less than $250,000 for each additional 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 MSGi
Direct - New York or to be associated with any other similar business during the
Employment Term, except that he may own up to 5% of the outstanding common stock
of certain corporations, as described more fully in his employment agreement,
and (ii) upon termination of employment with Metro, not to solicit or encourage
certain clients of Metro (as more fully described in the relevant employment
agreement) to cease doing business with Metro, and not to do business with any
other similar business, for a period of three years from the date of such
termination.
Ms. Hill entered into an employment agreement effective January 1, 2000,
providing for employment as Chief Accounting Officer of the Company. The
agreement provides for a two year term expiring on December 31, 2001 (the
"Employment Term"). The base salary during the Employment Term is $200,000 for
the first year and not less than $200,000 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 two times 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.
In addition, the Company has entered into an employment agreement with Mr.
Killeen and Mr. Dzvonik.
Mr. Killeen entered into an employment agreement effective July 7, 2000
providing for his employment as President of MSGi. The agreement provides for a
three year term expiring June 30, 2003 (the "Employment Term"). The base salary
during the Employment Term is $400,000 for the first year and not less than
$400,000 for the remaining two years. Mr. Killeen is eligible to receive bonuses
equal to 50% of the base salary each year at the determination of the
Compensation Committee of the Board of Directors of the Company, based on
earnings and other targeted criteria. On July 7, 2000, Mr. Killeen was granted
options to acquire 400,000 shares of Common Stock of the Company at $4.50 per
share of which one third are exercisable on July 7, 2000 and the remaining two
thirds vest equally over 24 months beginning August 7, 2000. If Mr. Killeen is
terminated without cause (as defined in the agreement), then MSGi shall pay him
a lump sum payment equal to 2.99 times the compensation paid during the
preceding 12 months and all out outstanding stock options shall fully vest and
become immediately exercisable.
Mr. Dzvonik entered into an employment agreement effective March 22, 2000
providing for his employment as Chief Operating Officer of MSGi. The agreement
provides for a three year term expiring March 21, 2003 (the "Employment Term").
The base salary during the Employment Term is $300,000 for the first year and
not less than $300,000 for the remaining two years. Mr. Dzvonik is eligible to
receive bonuses equal to 50% of the base salary each year at the determination
of the Compensation Committee of the Board of Directors of the Company, based on
earnings and other targeted criteria. On March 22, 2000, Mr. Dzvonik was granted
options to acquire 250,000 shares of Common Stock of the Company at $4.4375 per
share of which one third are exercisable on March 22, 2001, one third on
March22, 2002 and one third on March 22, 2003. If Mr. Dzvonik is terminated
without cause (as defined in the agreement), then MSGi shall pay him a lump sum
payment equal to two times the then base salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are S. James Coppersmith, C. Anthony
Wainwright, and John Gerlach. Mr. Coppersmith is Chairman of the Committee.
There were no compensation interlocks.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of October 16, 2000 by: (i) each Director and each
of the Named Executive Officers; (ii) all executive officers and Directors of
the Company as a group; and (iii) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock.
Amount and Nature of
Common Stock Beneficially
Owned
Name and Address of Beneficial Holder(1) Number Percent
---------------------------------------- ------ -------
Directors and Named Executive Officers:
J. Jeremy Barbera(2)................................... 3,200,000 10.05%
Michael Dzvonik(3)..................................... 449,744 1.49%
Rudy Howard(4)......................................... 375,000 1.23%
Cindy Hill(5).......................................... 144,000 *
Robert Budlow(6)....................................... 477,200 1.59%
Stephen Killeen(7)..................................... 400,000 1.31%
Alan I. Annex(8)....................................... 87,620 *
S. James Coppersmith(9)................................ 56,000 *
Seymour Jones(10)...................................... 88,362 *
C. Anthony Wainwright(11).............................. 68,408 *
John Gerlach(12)....................................... 108,500 *
All Directors and Executive Officers as a group
(11 persons) ......................................... 5,454,834 16.31%
5% Stockholders:
General Electric Capital Corporation(13)............... 4,340,622 14.46%
CMGI Inc.(14).......................................... 2,321,084 7.73%
Fusion Networks, Inc.(15).............................. 1,500,000 5.00%
-----------
* 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 1,825,000 beneficially owned shares of Common Stock issuable upon
the exercise of options of which 1,412,500 are currently exercisable
exercisable within 60 days of December 31, 2000.
(3) Includes 250,000 beneficially owned shares of Common Stock issuable upon
the exercise of options of which zero are currently exercisable or
exercisable within 60 days of December 31, 2000.
(4) Includes 325,000 beneficially owned shares of Common Stock issuable upon
the exercise of options of which 177,083 are currently exercisable or are
exercisable within 60 days of December 31, 2000.
(5) Includes 140,000 beneficially owned shares of Common Stock issuable upon
the exercise of options of which 73,334 are currently exercisable or are
exercisable within 60 days of December 31, 2000.
(6) 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, 2000.
(7) Includes 400,000 beneficially owned shares of Common Stock issuable upon
the exercise of options of which 211,111 are currently exercisable
exercisable within 60 days of December 31, 2000.
(8) Includes 83,000 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, 2000.
(9) 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, 2000.
(10) Includes 66,000 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, 2000.
(11) Includes 65,000 beneficially owned shares of Common Stock issuable upon the
exercise of options which are currently exercisable or are exercisable
within 60 days of December 31, 2000.
(12) Includes 102,000 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, 2000.
(13) The address for the 5% Stockholder is as follows: 120 Long Ridge Road,
Stamford, Connecticut 06927.
(14) The address for the 5% Stockholder is as follows: 100 Brickstone Square,
Andover, MA 01810.
(15) The address for the 5% Stockholder is as follows: 8115 N.W. 29th Street,
Miami, Florida 33122
Item 13 - Certain Relationships and Related Transactions
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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 $1,272,000 during fiscal 2000. 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.
The Company has not completed a Qualified Secondary Offering or Private
Placement during the specified period, accordingly the Original Warrant remains
exercisable for up to 10,670,000 shares subject to reduction or cancellation
based on the Company's meeting certain financial goals for fiscal year 2001.
In August 1999, the promissory note was amended to extend the maturity date to
October 15, 2000 with interest to be paid quarterly and provides for certain
increases in the interest rate based on the time the principal remains
outstanding. In addition, in the event the Company completes a private placement
as defined on or before December 20, 1999, then the maturity date of the
promissory note is subject to acceleration. During September 1999, the Company
completed a private placement of common stock for net proceeds of approximately
$30.8 million. In accordance with the amendment, $5,000,000, net of discount is
included in current liabilities and the remaining balance is due on July 1,
2000.
Transactions with CMGI, Inc.: On May 13, 1999, MSGi acquired all of the
outstanding capital stock of CMG Direct Corporation, a wholly-owned subsidiary
of CMGI, Inc. Total consideration for the acquisition was $33,029,237 which
included $13,464,857 in cash and an aggregate of 2,321,084 shares of common
stock of MSGi valued at $19,334,621.
Transactions with Fusion Networks, Inc.: In December 1999, the Company acquired
approximately a 10% interest in Fusion Networks, Inc. for 1,500,000 shares of
common stock of MSGi valued at approximately $27.5 million. In June 2000, the
Company wrote its investment in Fusion Networks down by approximately $20.3
million to the fair value as determined by the quoted market price. The charge
was recorded through the statement of operations due to the fact that the
Company believes the impairment in market value is other than temporary.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
MARKETING SERVICES GROUP, INC.
By: /s/ Jeremy Barbera
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Name : J. Jeremy Barbera
Title : Chief Executive Officer
By: /s/ Cindy H. Hill
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Name : Cindy H. Hill
Title : Chief Accounting Officer
Date: October 27, 2000
