SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file
December 31, 1998 number 0-21456
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ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1361276
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
488 Main Avenue
Norwalk, Connecticut 06851
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-849-2500
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Indicate by a check mark whether the registrant (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 as 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
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Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (Section 229.405 of
this chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or
information state-ments incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting and non-
voting common equity held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price<PAGE>
<PAGE>
at which the common equity was sold, or the average bid and asked
prices of such common equity, as of a specified date within 60
days prior to the date of filing.
Aggregate market value as of March 15, 1999....$15,944,740
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date.
Common Stock, $.01 par value,
as of March 15, 1999 . . . . . . . . . . . . .,249,447 shares
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are
incorporated by reference herein, and the part of the Form 10-K
into which the document is incorporated: Proxy Statement to be
filed with respect to the 1999 Annual Meeting of Stockholders-Part
III.
<PAGE>
<PAGE>
AMENDMENT NO. 1
The undersigned hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 (the "Annual
Report"), as set forth in the pages attached hereto:
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Item 13. Certain Relationships and Related
Transactions
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Certain biographical information concerning the directors of
Electronic Retailing Systems International, Inc. (the "Company")
is set forth below. Such information was furnished by them to the
Company.
Name of Director Age Biographical Information
- ---------------- --- ------------------------
Paul A. Biddelman 53 President, Hanseatic Corpor-
ation (private investment
company) since prior to 1994;
Director: Insituform
Technologies, Inc., Celadon
Group, Inc., Premier Parks,
Inc., Star Gas LLC (general
partner of Star Gas Partners,
L.P.); Director of the Company
since 1993.
David Diamond 40 Executive Vice President of
Marketing and New
Applications, Catalina
Marketing Corp. since 1997;
consultant to suppliers of
products and services to the
supermarket industry from 1994
until 1997; Director of the
Company since 1996.
<PAGE>
<PAGE>
Bruce F. Failing, Jr. 50 Founder of the Company in
1990, and its Vice Chairman of
the Board and Chief Executive
Officer; President of the
Company through 1997; Director
of the Company since 1990.
Norton Garfinkle 68 Founder of the Company in
1990, and its Chairman of the
Board; Chairman of Cambridge
Management Corporation
(manufacturer and marketer of
DAP series of massively
parallel processing computers)
since prior to 1994, and
Chairman of its affiliates
(engaged in the research and
development of new tech-
nologies), including Oxford
Management Corporation, during
such period; Director of the
Company since 1990.*
Sheldon Weinig 71 Adjunct Professor at Columbia
University since 1994 and at
State University of New York,
Stony Brook, since prior to
1994; consultant, Sony
Engineering and Manufacturing
of America from 1994 to 1996;
Director: Aseco Corporation,
Insituform Technologies, Inc.,
Intermagnetics General
Corporation, Kentek
Information Systems, Inc.,
U.S. Cast Polymers, Inc.;
Director of the Company since
1998.
Donald E. Zilkha 47 President, Zilkha & Company
(private investment advisor)
since prior to 1994; Director
of the Company since 1993.
________________
* In December 1995, pursuant to an agreement with New York
State authorities, Mr. Garfinkle admitted to a misdemeanor
relating to his 1989 New York State return and paid all taxes
required by the agreement.
<PAGE>
<PAGE>
See "Item 12. Security Ownership of Certain Beneficial Owners
and Management" for information concerning arrangements between
the controlling stockholders of the Company concerning the
election of directors, which information is incorporated herein by
reference.
For information concerning the executive officers of the
Company, see pages 18 to 19 of the Company's Annual Report on Form
10-K for the year ended December 31, 1998 as originally filed,
under the caption "Item 1. Business-Executive Officers", which
information is incorporated herein by reference.
There are no family relationships among any of the executive
officers or directors of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of copies of reports received by
it pursuant to Section 16(a) of the Securities Exchange Act of
1934 (the "Exchange Act"), and the written representations of its
incumbent directors and officers, and holders of more than ten
percent of any registered class of the Company's equity
securities, the Company believes that during 1998 all filing
requirements applicable to its directors, officers and ten percent
holders under said section were satisfied, except that Michael B.
Persky, President of the Company, on his timely filed Form 5 for
1998 reported two transactions involving the purchase of an
aggregate of 1,000 shares of the common stock, $.01 par value (the
"Common Stock"), of the Company during such year.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Director Compensation
The Company maintains the Electronic Retailing Systems
International, Inc. 1993 Director Stock Option Plan (the "Director
Option Plan") previously adopted by the Board of Directors, and
approved by the stockholders, of its predecessor corporation.
Under the Director Option Plan, pursuant to amendments approved by
the stockholders of the Company in January 1997 and June 1998,
options to purchase up to 750,000 shares of the Company's Common
Stock may be granted to directors of the Company. The Company has
the ability to grant options under the Director Option Plan to
executive officers who are directors, which are intended to be
"incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), provided
that the option exercise price is equal to the fair market value
of the Common Stock on the date of grant. Other options granted
under the Director Option Plan will be nonqualified options. <PAGE>
<PAGE>
The Director Option Plan is administered by the Board of
Directors of the Company, which determines the persons who are to
receive options and the number of shares subject to each option.
Paul A. Biddelman, David Diamond and Donald Zilkha hold options
granted under the Director Option Plan :(i) in June 1996 covering,
respectively, 20,000 shares, 12,500 shares and 20,000 shares of
Common Stock, exercisable at a price per share equal to $1.875,
the closing price per share of Common Stock on the Nasdaq Stock
Market on the date of grant, and (ii) in June 1998 covering,
respectively, 10,000 shares, 17,500 shares and 10,000 shares of
Common Stock, exercisable at a price per share equal to $4.00, the
closing price per share of Common Stock on the Nasdaq Stock Market
on the date of grant. Sheldon Weinig holds an option granted under
the Director Option Plan in September 1998 covering 10,000 shares
of Common Stock, exercisable at a price per share equal to $2.75,
the closing price per share of Common Stock on the Nasdaq Stock
Market on the date of grant. All such options expire five years
from the date of grant and are exercisable on the date of grant
with respect to one-quarter of the shares covered thereby, with an
additional one-quarter of such shares becoming exercisable
annually thereafter.
George B. Weathersby, who served as a director through the
1998 annual meeting of stockholders and as President of the
Company through March 1998, held five-year options covering 20,000
shares of Common Stock granted in June 1996 at an exercise price
of $1.875, and covering 50,000 shares granted in December 1996 at
an exercise price of $3.38, in each case exercisable on the date
of grant with respect to one-quarter of the shares covered thereby
and with respect to an additional one-quarter of such shares
annually thereafter. In addition, Mr. Weathersby was granted a
ten-year option in May 1997 covering 50,000 shares, exercisable at
a per share price of $5.69, becoming exercisable after achievement
by the Company of specified performance standards. All such
options were granted at an exercise price equal to the closing
price of the Common Stock on the date of grant. During the year
ended December 31, 1998, Mr. Weathersby exercised options with
respect to 10,000 shares at an exercise price per share of $1.875.
All other options held by Mr. Weathersby expired without exercise
subsequent to the 1998 annual meeting of stockholders.
During the year ended December 31, 1998, the Company paid to
Oxford Management Corporation ("Oxford") the amount of $97,500 for
services rendered by Norton Garfinkle and $18,600 in reimbursement
of other expenses. The Company's continuing arrangements with
Oxford, which are terminable at any time by the Company or Oxford,
provide for payments in the amount per month of $7,500 for
services rendered by Mr. Garfinkle.
<PAGE>
<PAGE>
The Company has not adopted any director fee arrangement, but
reimburses all of its directors for their out-of-pocket expenses
incurred in the performance of their duties as directors of the
Company.
Executive Compensation
Summary Compensation Table. The following table sets forth
information concerning the annual compensation for each of the
Company's last three completed fiscal years of: (i) the Company's
chief executive officer and (ii) each of the other most highly-
compensated executive officers whose salary and bonus exceeded
$100,000 during the most recent fiscal year:
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Compensation All
Securities Other
Name and Annual Compensation Underlying Compen-
Principal Position Year Salary($) Bonus($) Options (#) sation($)
<S> <C> <C> <C> <C> <C>
Bruce F. Failing, Jr... 1998 155,769 -- -- --
Chief Executive Officer 1997 206,731 -- -- --
1996 246,567 -- -- --
Michael B. Persky...... 1998 214,385 -- 450,000(2) 500(3)
President(1) 1997 24,615 -- 60,000 --
1996 -- -- -- --
Lester S. Briney....... 1998 186,923 -- 100,000(5) 500(3)
Vice President, Chief 1997 113,573 -- 100,000 --
Technical Officer(4) 1996 -- -- -- --
Michael R. Valiton..... 1998 160,385 -- -- 500(3)
Senior Vice 1997 149,423 -- -- --
President (6) 1996 140,942 -- 100,000(5) --
(1) Mr. Persky became an executive officer upon joining the Company in December
1997.
(2) Options with respect to 60,000 shares replaced options previously granted and
surrendered contemporaneously with such replacement.
(3) Represents 401(k) contributions by the Company under its defined contribution
plan.
(4) Mr. Briney became an executive officer in July 1997 after joining the Company
earlier in the year and ceased to be an executive officer in January 1999.
(5) Such options replaced options previously granted and surrendered
contemporaneously with such replacement.
<PAGE>
(6) Mr. Valiton became an executive officer in January 1995 after joining the
Company in the prior year and ceased to be an executive officer in January
1999.
</TABLE>
Option Grant Table. The following table sets forth certain
information regarding options granted by the Company during the
year ended December 31, 1998, to the individuals named in the
above compensation table:
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
Number of % of Total Market Annual Rates of
Securities Options Price Stock Price
Underlying Granted to Exercise Per Share Appreciation for
Options Employees in Price on Date Expiration Option Term (1)
Name Granted(#) Fiscal Year ($/sh) of Grant($) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce F. Failing, Jr... -- -- -- -- -- -- --
Michael B. Persky...... 60,000(2) 5.1 3.50 3.50 06/08/08 132,068 334,686
140,000(3) 12.0 3.125 3.125 06/11/08 275,141 697,262
250,000(4) 21.4 2.906 2.906 07/06/08 456,892 1,157,854
Lester S. Briney....... 100,000(2) 8.6 3.50 3.50 06/08/08 220,113 557,810
Michael R. Valiton..... -- -- -- -- -- -- --
(1) Amounts represent hypothetical gains that could be achieved for the respective options
if exercised at the end of the option term. These gains are based on arbitrarily assumed
rates of stock price appreciation of 5% and 10% compounded annually from the date the
respective options are granted to their expiration date.
(2) Such options replace options previously granted and surrendered contemporaneously with
such replacement, one quarter of which become exercisable with respect to the shares
covered thereby on June 8, 1999, with an additional one-quarter thereof subject to
exercise each anniversary of the date of grant thereafter.
(3) Such options become exercisable with respect to one-quarter of the shares covered thereby
on May 11, 1999 and with an additional one-quarter thereof subject to exercise each
anniversary of the date of grant thereafter.
(4) Such stock options were granted with exercisability subject to achievement by the Company
of specified performance standards.
</TABLE>
Aggregate Option Exercises and Year-End Option Table. The
following table sets forth certain information regarding exercises
of stock options, and stock options held as of December 31, 1998
by the individuals named in the above compensation table.
<PAGE>
<PAGE>
<TABLE>
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Acquired Value Options at Fiscal Year-End(#) at Year-End(1)
Name on Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Bruce F. Failing, Jr... -- -- -- -- -- --
Michael B. Persky...... -- -- -- 450,000 -- --
Lester S. Briney....... -- -- -- 100,000 -- --
Michael R. Valiton..... -- -- 56,250 43,750 31,669 24,631
________________________
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date or at year-end, as the case may be, less
the respective exercise prices.
</TABLE>
1993 Employee Stock Option Plan
The Company maintains the Electronic Retailing Systems
International, Inc. 1993 Employee Stock Option Plan (the "Employee
Option Plan") previously adopted by the Board of Directors, and
approved by the stockholders, of its predecessor corporation.
Under the Employee Option Plan, pursuant to amendments approved by
the stockholders of the Company in June 1994, December 1996 and
June 1998, options to purchase up to 3,500,000 shares of the
Company's Common Stock may be granted to key employees of the
Company and its subsidiaries, including executive officers who are
not directors. The Company is able to grant options under the
Employee Option Plan which are intended to be "incentive stock
options" within the meaning of Section 422 of the Code, provided
that the option exercise price is equal to the fair market value
of the Common Stock on the date of grant. Other options granted
under the Employee Option Plan are nonqualified options.
The Employee Option Plan is administered by the Board of
Directors of the Company, which determines the persons who are to
receive options and the number of shares subject to each option.
As of April 1, 1999, options covering an aggregate of 2,125,462
shares of Common Stock were outstanding pursuant to the Employee
Option Plan and options covering an aggregate of 484,133 shares
had been exercised.
<PAGE>
<PAGE>
Certain Agreements with Executive Officers
The Company's severance arrangements with William W. Erdman,
who ceased to be Executive Vice President, Chief Operating
Officer, of the Company in January 1998, provided for bi-weekly
payments at the rate of Mr. Erdman's prior base salary of $9,615,
which continued for six months after his departure. Such payments
would have continued for an additional three months in the event
Mr. Erdman had not commenced other full-time employment in March
1998. Mr. Erdman's severance arrangements also provided for
exercisability through December 1998 of certain options
exercisable at the time of his departure, coverage under the
Company's benefit plans until the earlier of commencement of other
full-time employment or December 31, 1998, maintenance of
confidentiality restrictions and non-competition covenants
effective for one year after departure.
The Company's severance arrangements with Michael
Luetkemeyer, who ceased to be Vice President, Chief Financial
Officer, of the Company in May 1998, provided for bi-weekly
payments at the rate of Mr. Luetkemeyer's prior base salary of
$7,692, which continued for nine months after his departure. Mr.
Luetkemeyer's severance arrangements also provided for
exercisability through December 1998 of certain options
exercisable at the time of his departure, coverage under the
Company's benefit plans until the earlier of commencement of other
full-time employment or the end of the period of his severance
payments, payment of relocation expenses, maintenance of
confidentiality restrictions and non-competition covenants
effective for one year after departure.
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1998, the members of the
Company's Compensation Committee were Norton Garfinkle, Paul
Biddelman and Donald Zilkha.
During the year ended December 31, 1998, Oxford Management
Corporation, a Company controlled by Mr. Garfinkle, was reimbursed
an aggregate amount of $97,500 for services rendered by Mr.
Garfinkle and $18,600 in reimbursement of other expenses. The
Company's continuing arrangements with Oxford, which are
terminable at any time by the Company or Oxford, provide for
payments in the amount per month of $7,500 for services rendered
by Mr. Garfinkle.
Holders of shares of Common Stock obtained upon conversion of
the Company's previously outstanding Series A Cumulative
Convertible Preferred Stock, $1.00 par value (the "Series A <PAGE>
<PAGE>
Preferred Stock"), remain entitled to certain demand and
incidental registration rights which, in the case of such demand
rights, obligate the Company to register such shares, on two
occasions, provided that the holders of at least 500,000 shares
notify the Company that they intend to offer for sale in the
aggregate at least 100,000 shares of Common Stock. Such holders
include Garfinkle Limited Partnership II (an affiliate of Mr.
Garfinkle), an affiliate of Hanseatic Corporation (in which Mr.
Biddelman is an officer), and Mr. Zilkha.
Under agreements entered into by the Company in 1993 with the
limited partners of a partnership affiliated with the Company's
predecessor corporation (including Mr. Zilkha and Hanseatic
Corporation's predecessor-in-interest), such partners hold
certain demand and incidental registration rights and co-sale
rights. In addition, the former stockholders of the Company's
predecessor corporation, including Messrs. Garfinkle and Failing
and their respective affiliates and related family trusts, became
entitled to certain demand and incidental registration rights with
respect to shares of Common Stock held by them upon the Company's
acquisition of its predecessor corporation, which, in the case of
such demand registration rights, operate pursuant to the standards
applicable to the shares obtained upon conversion of Series A
Preferred Stock. Garfinkle Limited Partnership II, Mr. Zilkha and
Bruce F. Failing, Jr., Vice Chairman of the Board and Chief
Executive Officer and a director of the Company, also hold certain
incidental registration rights with respect to shares of Common
Stock purchased by them in the Company's 1996 private placement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
The following table sets forth certain information as of
April 1, 1999 with respect to the number of shares of Common Stock
beneficially owned by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each executive
officer of the Company named in the summary compensation table
under "Item 11. Executive Compensation," and (iv) all directors
and executive officers of the Company as a group:
<PAGE>
<PAGE>
Number of Shares
of Common Stock Percent
Beneficially Owned(1) of Class
Norton Garfinkle
133 East 62nd Street
New York, NY 10021(2)......... 7,890,758(3) 37.1%
Bruce F. Failing, Jr.
230 Round Hill Road
Greenwich, CT 06831(2)........ 3,145,637(4) 14.8
Fidelity International Limited
Pembroke Hall
42 Crow Lane
Hamilton, Bermuda............. 2,099,000(5) 9.9
Connecticut Development Authority
845 Brook Street
Rocky Hill, CT 06067.......... 1,508,785(6) 7.1
Michael B. Persky.............. 88,000(7) (8)
Lester S. Briney............... -- --
Michael Valiton................ 150,000(9) (8)
Paul A. Biddelman.............. 1,017,800(10)(11) 4.8
David Diamond.................. 14,750(12) (8)
Sheldon Weinig................. 2,500(9)
Donald E. Zilkha............... 114,972(11) (8)
All executive officers and
directors as a group
(13 persons).................. 12,374,417(13) 57.7
________________
(1) Except as otherwise indicated, as of April 1, 1999 all of
such shares are owned with sole voting and investment power.
(2) Such stockholders are party to a stockholders agreement among
Norton Garfinkle, Bruce F. Failing, Jr., certain family
trusts and partnerships, and Elizabeth Z. Failing, as
described below.
<PAGE>
<PAGE>
(3) Includes 600,000 shares held by Garfinkle Limited Partnership
I and 6,489,970.5 shares held by Garfinkle Limited
Partnership II, both Delaware limited partnerships and with
respect to each of which G.F. Management Corp. (all of the
shares of which are held by Norton Garfinkle) acts as sole
general partner.
(4) Includes 1,318,489 shares beneficially owned by a trust
established for the benefit of Mr. Failing's children,
168,318 shares beneficially owned by Elizabeth Z. Failing,
Mr. Failing's sister, and 20,000 shares beneficially owned
jointly by Mr. Failing and his wife, Leigh Q. Failing.
(5) In a Statement on Schedule 13D filed with the Securities and
Exchange Commission by Fidelity International Limited
("FIL"), FIL has reported that it beneficially owns such
shares as investment adviser or the parent of the investment
adviser to a number of non-U.S. investment companies or
investment trusts.
(6) Represents (i) 699,724 shares issuable upon exercise of the
Company's warrants exercisable at April 1, 1999 and (ii)
809,061 shares issuable at such date upon conversion of the
Company's convertible promissory note in the principal amount
of $5,000,000. See "Item 13. Certain Relationships and
Related Transactions."
(7) Includes 85,000 shares issuable upon exercise of stock
options granted by the Company exercisable within 60 days of
April 1, 1999.
(8) Less than one percent.
(9) Represents shares issuable upon exercise of stock options
granted by the Company exercisable within 60 days of April 1,
1999.
(10) Includes 969,300 shares held by Hanseatic Americas LDC, a
Bahamian limited duration company in which the sole managing
member is Hansabel Partners, L.L.C., a Delaware limited
liability company in which the sole managing member is
Hanseatic Corporation, of which Mr. Biddelman is an officer.
(11) Includes 17,500 shares issuable upon exercise of stock
options granted by the Company exercisable within 60 days of
April 1, 1999.
<PAGE>
<PAGE>
(12) Includes (i) 1,000 shares beneficially owned jointly by Mr.
Diamond and his wife, and (ii) 13,750 shares issuable upon
exercise of stock options granted by the Company exercisable
within 60 days of April 1, 1999.
(13) Includes 286,250 shares issuable upon exercise of stock
options granted by the Company exercisable within 60 days of
April 1, 1999.
Messrs. Garfinkle and Failing, together with certain family
trusts and partnerships, and Mr. Failing's sister (each, together
with his related parties, a "Stockholder Group"), are parties to
an agreement dated March 1993, as amended (the "Restated
Stockholder Agreement"), under which: (i) both Stockholder Groups
have agreed that, through the year 2003, they will use their best
efforts to provide that the Board of Directors of the Company will
consist of not more than seven directors, six of whom will be
designated by Mr. Garfinkle and Mr. Failing in proportion to the
respective beneficial holdings of shares of Common Stock of the
Garfinkle Stockholder Group and the Failing Stockholder Group,
(ii) except for sales effected pursuant to Rule 144 and transfers
to affiliates, family members or related trusts, no such
Stockholder Group may transfer any shares of Common Stock to any
third party without first offering such shares to the other
Stockholder Group at the same price as offered by such third
party, (iii) through the year 2003, in the event a Stockholder
Group proposes to transfer shares of Common Stock to a third party
in a transaction pursuant to which control of the Company would
change, the other Stockholder Group will have the right, on the
same terms, to participate in such transaction, and (iv) through
the year 2003, Mr. Garfinkle has the option to acquire at fair
market value all shares held by the Failing Stockholder Group upon
the death or incapacity of Mr. Failing, which option may be
assigned to the Company, subject to the Company's acceptance of
such option. Such arrangements terminate in the event either
Stockholder Group owns less than ten percent of the outstanding
Common Stock, or if Messrs. Garfinkle and Failing are unable to
elect at least a majority of the Board of Directors of the
Company.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
-------------------------
At April 1, 1999, Norton Garfinkle, Chairman of the Board and
a director of the Company, together with two affiliated limited
partnerships, beneficially owned approximately 37.1% of the
outstanding Common Stock of the Company, and Bruce F. Failing,
Jr., Vice Chairman of the Board and Chief Executive Officer and a
director of the Company, together with a trust established for the<PAGE>
<PAGE>
benefit of his children, beneficially owned approximately 14.8% of
the outstanding Common Stock of the Company. See "Item 11.
Executive Compensation-Compensation Committee Interlocks and
Insider Participation" above for information concerning certain
demand and incidental registration rights relating to the
Company's Common Stock held by Messrs. Garfinkle and Failing, and
Paul A. Biddelman and Donald E. Zilkha, both directors of the
Company, or their affiliates, and certain reimbursements by the
Company to a company controlled by Mr. Garfinkle, which
information is incorporated herein by reference.
During the year ended December 31, 1998, as a result of the
advances by the Connecticut Development Authority (the "CDA")
under the Company's convertible note (the "CDA Note"), and the
exercisability of the Company's warrant (the "CDA Warrant") held
by the CDA, the CDA was the beneficial owner of in excess of 5% of
the outstanding Common Stock. At April 1, 1999, the Company was
indebted under the CDA Note in the aggregate principal amount of
$5,000,000. All such amounts are repayable in August 1999, accrue
interest, payable monthly, at a rate of 7.4% per annum (of which
$401,000 was paid during the year ended December 31, 1998) and are
secured by the assets of the Company. Such amounts are convertible
into shares of Common Stock, at an adjusted conversion price
calculated at $3.00 plus the average market price of the Common
Stock during the twelve months prior to conversion. The CDA
Warrant is exercisable through August 1999 with respect to 699,724
shares of Common Stock (as adjusted through April 1, 1999), at an
adjusted price calculated at $2.58 plus the average market price
of the Common Stock during the twelve months prior to exercise.
The Company believes that the terms of the foregoing
transactions between the Company and its affiliates were no less
favorable to the Company than it could have obtained from
unaffiliated third parties. The Company will continue, through
August 1999, to remain indebted to the CDA in accordance with its
existing arrangements. As a matter of policy, all future
transactions between the Company and its affiliates will be on
terms no less favorable to the Company than those available with
unaffiliated third parties.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: April 26, 1999 ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By s/Jerry McAuliffe
----------------------------
Jerry McAuliffe
Vice President, Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ------------- -------------
<S> <C> <C>
Bruce F. Failing, Jr.* April 26, 1999
- ----------------------
Bruce F. Failing, Jr. Vice Chairman of the
Board and Principal
Executive Officer
s/Jerry McAuliffe
- ---------------------- April 26, 1999
Jerry McAuliffe Vice President and
Principal Financial
and Accounting
Officer
Paul A. Biddelman* April 26, 1999
- ----------------------
Paul A. Biddelman Director
<PAGE>
David Diamond* April 26, 1999
- ----------------------
David Diamond Director
Norton Garfinkle* April 26, 1999
- ----------------------
Norton Garfinkle Director
Sheldon Weinig* April 26, 1999
- ----------------------
Sheldon Weinig Director
Donald E. Zilkha* April 26, 1999
- ----------------------
Donald E. Zilkha Director
*By s/Jerry McAuliffe
--------------------
Jerry McAuliffe
(Attorney-in-Fact Pursuant
to Power of Attorney on
file with the Securities
and Exchange Commission)
</TABLE>
