<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by Registrant [x]
Filed by a Party other than 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 Information Statement
MEDIA SOURCE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
Media Source, Inc.
5720 Avery Road
Dublin, OH 43016
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on August 3, 1999
To the Stockholders of Media Source, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of
Media Source, Inc. (the "Company") will be held at the Holiday Inn, 212
Woodlawn Road, Charlotte, North Carolina 28217 on August 3, 1999, at 10:00
a.m., Eastern Standard Time, to consider and take action on the following
matters:
1. To elect four Directors to serve on the Board of Directors of the
Company for one year and until their successors are duly elected
and shall qualify.
2. To approve and adopt an amendment to the Company's Certificate of
Incorporation to decrease the authorized shares of common stock
from 20,000,000 shares of common stock, $.01 par value to 500,000
shares of common stock, $.01 par value.
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on June 10, 1999 are
entitled to notice of and to vote at the meeting or any adjournment thereof. A
list of stockholders entitled to notice of and to vote at the meeting may be
examined at the executive offices of the Company at 5720 Avery Road, Dublin, OH
43016.
So that we may be sure your vote will be included, please date, sign
and return the enclosed proxy promptly. For your convenience, a postage paid
return envelope is enclosed for your use in returning your proxy. If you attend
the meeting, you may revoke your proxy and vote in person.
If you would like to attend the meeting and your shares are held by a
broker, bank or other nominee, you must bring to the meeting a recent brokerage
statement or a letter from the nominee confirming your beneficial ownership of
the shares. You must also bring a form of personal identification. In order to
vote your shares at the meeting, you must obtain from the nominee a proxy
issued in your name.
Dated June 18, 1999 By Order of the Board of Directors
/s/ S. Robert Davis
-----------------------------------
S. Robert Davis, Chairman
<PAGE> 3
Media Source, Inc.
5720 Avery Road
Dublin, OH 43016
June 18, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Media Source, Inc. on Tuesday, August 3, 1999. The meeting will begin at
10:00 a.m. at the Holiday Inn, 212 Woodlawn Road, Charlotte, North Carolina
28217.
Information regarding the matters to be voted upon at the Annual
Meeting is contained in the attached Proxy Statement. We urge you to read the
Proxy Statement carefully.
Because it is important that your shares be voted at the Annual
Meeting, whether or not you plan to attend in person, we urge you to complete,
date and sign the enclosed proxy card and return it as promptly as possible in
the accompanying envelope. If you do attend the meeting and wish to vote your
shares in person, even after returning your proxy, you still may do so.
We look forward to seeing you in Charlotte on August 3, 1999.
Very truly yours,
/s/ S. Robert Davis
S. Robert Davis, Chairman
<PAGE> 4
MEDIA SOURCE, INC.
PROXY STATEMENT
For Annual Meeting of Stockholders
To be Held on August 3, 1999
SUMMARY
This Proxy Statement is furnished to Stockholders in connection with
the solicitation of proxies on behalf of the Board of Directors of Media
Source, Inc. (the "Company") for use at its Annual Meeting of Stockholders to
be held on August 3, 1999 at 10:00 a.m., Eastern Standard Time, at the Holiday
Inn, 212 Woodlawn Road, Charlotte, North Carolina 28217 as set forth in the
accompanying Notice of Annual Meeting of Stockholders and at any adjournments
thereof. This Proxy Statement, the accompanying form of proxy, and the
Company's Annual report on Form 10-K for the fiscal year ended December 31,
1998 are first being mailed to stockholders entitled to vote at the meeting on
or about June 18, 1999.
The Annual Meeting has been called to consider and take action on the
election of four Directors to serve on the Board of Directors of the Company
for one year and until their successors have been duly elected and shall
qualify, and to approve an amendment to the Company's Certificate of
Incorporation to decrease the authorized shares of common stock from 20,000,000
to 500,000. The purpose of the proposal to decrease the Company's authorized
shares of common stock is to lower the annual corporate franchise tax the
Company is required to pay in Delaware, the state of its incorporation.
The close of business on June 10, 1999, has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Annual Meeting and any adjournments thereof (the "Record Date"). The
stock transfer books will not be closed.
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is being furnished to Stockholders in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held at the time, place, and
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders and at any adjournments thereof.
As of the Record Date, there were 328,200 shares of the Company's
common stock, $.01 par value ("Common Stock") issued and outstanding,
(exclusive of 14,485 shares held in treasury). As of the Record Date, all of
the present directors and executive officers of the Company, a group of four
persons, owned beneficially 143,897 shares of Common Stock. The Company
believes that such officers and directors intend to vote their shares of Common
Stock for each of the nominees to be elected as Directors named in this Proxy
Statement and for the proposed amendment to the Company's Certificate of
Incorporation.
<PAGE> 5
The presence in person or by proxy of a majority of the issued and
outstanding shares of Common Stock constitutes a quorum at the meeting. To be
elected, the nominees as Directors named in this Proxy Statement must receive a
plurality of the votes cast by the Common Stock entitled to vote. The proposal
to amend the Company's Certificate of Incorporation will be adopted if a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote at the meeting vote in favor of such proposal.
Proxies given by stockholders for use at the meeting, may be revoked
at any time prior to the exercise of the powers conferred by giving notice of
revocation to the Company in writing or at the meeting or by delivering to the
Company a later appointment which supersedes the earlier one. Abstentions and
broker non-votes will be counted only for the purpose of determining the
existence of a quorum but have the effect of a no vote on the proposal to amend
the Company's Certificate of Incorporation. Votes cast by proxy or in person at
the Annual Meeting will be tabulated by the Inspector of Elections appointed
for that purpose.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED IN SUCH PROXIES. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT
MAY COME BEFORE THE MEETING.
The cost of soliciting proxies in the accompanying form will be borne
by the Company. Proxies may also be solicited by personal interview or by
telephone, in addition to the use of the mails, by directors, officers and
regular employees of the Company without additional compensation therefor. The
Company may reimburse brokerage firms and others for their expenses in
forwarding proxy materials to the beneficial owners and soliciting them to
execute proxies.
VOTING RIGHTS
Stockholders of record at the close of business on the Record Date,
are entitled to notice of and to vote at the Annual Meeting of Stockholders or
any adjournments thereof. Each share of Common Stock of record as of the Record
Date is entitled to one vote in all matters properly brought before the
meeting.
ITEM 1. ELECTION OF FOUR DIRECTORS TO SERVE FOR ONE YEAR AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND SHALL QUALIFY
The Board of Directors has concluded that the election of S. Robert
Davis, Juan F. Sotos, M.D., Robert J. Tierney, and Randall J. Asmo as Directors
is in the best interests of the Company and recommends their election. The
Board of Directors has no reason to believe that the nominees named below will
be unavailable, or if elected, will decline to serve. Biographical information
concerning Messrs. S. Robert Davis, Sotos, Tierney, and Asmo can be found under
"Directors and Executive Officers."
2
<PAGE> 6
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed proxy will be voted for the election of the nominees listed
herein. Although the Board of Directors of the Company does not contemplate
that any of such nominees will be unable to serve, if such a situation exists
prior to the Annual Meeting, the persons named in the enclosed proxy will vote
for the election of such other persons as may be nominated by the Board of
Directors.
The Board of Directors unanimously recommends a vote FOR the election
of the nominees listed above. Unless indicated to the contrary, the enclosed
Proxy will be voted "FOR" such nominees.
ITEM 2. AMENDMENT TO CERTIFICATE OF INCORPORATION
Currently, the Company's Certificate of Incorporation authorizes the
Company to issue 20,000,000 shares of common stock. The Delaware General
Corporation Law requires the Company to pay an annual franchise tax, a portion
of which is computed based upon the number of the Company's authorized shares
of capital stock. In order to reduce its Delaware annual franchise tax, the
Company is proposing to amend its Certificate of Incorporation to reduce the
number of its authorized shares of common stock from 20,000,000 to 500,000.
The Board of Directors unanimously recommends a vote FOR the amendment
to the Company's Certificate of Incorporation. Unless indicated to the
contrary, the enclosed Proxy will be voted "FOR" such amendment.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
DIRECTOR OR EXECUTIVE
NAME AGE POSITION (1) OFFICER SINCE
---- --- -------- ---------------------
<S> <C> <C> <C>
S. Robert Davis 61 Chairman of the Board, President, 1990
Assistant Secretary, and Director
Randall J. Asmo 34 Vice President and Director 1992
Juan F. Sotos, M.D. 72 Director 1992
Robert J. Tierney 51 Director 1992
</TABLE>
(1) All positions are those held with the Company, except as otherwise
indicated.
Executive officers are elected by the Board of Directors and serve until their
successors are duly elected and qualify, subject to earlier removal by the
Board of Directors. Directors are elected at
3
<PAGE> 7
the annual meeting of shareholders to serve for one year and until their
respective successors are duly elected and qualify, or until their earlier
resignation, removal from office, or death. The remaining directors may fill
any vacancy in the Board of Directors for an unexpired term.
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS AND NOMINEE FOR DIRECTOR
S. ROBERT DAVIS was elected a director and Chairman of the Board in
1990, and Assistant Secretary in 1992. Prior to his election to the Board of
Directors, he served as Assistant to the President from 1988 to 1990, on a
part-time basis. Additionally, during the past five years, Mr. Davis has
operated several private businesses involving the developing, sale and/or
leasing of real estate but devotes substantially all of his business time to
the Company. Mr. Davis is also the Chairman and a director of CASCO
INTERNATIONAL, INC., a company with a class of securities registered pursuant
to section 12 of the Securities Exchange Act of 1934.
RANDALL J. ASMO was elected Vice President in 1992 and a director in
1997. Prior to that time, he served as Assistant to the President from 1990 to
1992. Additionally, since 1987, Mr. Asmo has served as Vice President of
Mid-States Development Corp., a privately-held real estate development and
leasing company, as Vice President of American Home Building Corp., a
privately-held real estate development company, and as an officer of several
other small business enterprises. Mr. Asmo is also a director of CASCO
INTERNATIONAL, INC., a company with a class of securities registered pursuant
to section 12 of the Securities Exchange Act of 1934.
JUAN F. SOTOS, M.D. was elected as a director in 1992. Dr. Sotos has
been a Professor of Pediatrics at The Ohio State University College of Medicine
since 1962 and also serves as Chief of Endocrinology and Metabolism at
Children's Hospital in Columbus, Ohio.
ROBERT J. TIERNEY was elected as a director in 1992. Dr. Tierney
currently serves as the Acting Chairperson of the Ohio State University
Department of Education Theory and Practice. Dr. Tierney is also active in
education research and has served as a professor at The Ohio State University
since 1984.
THE BOARD OF DIRECTORS
The Company's Bylaws provide that the number of Directors which shall
constitute the whole Board of Directors shall be as from time to time
determined by resolution of the Board of Directors, but the number shall not be
less than three. The Board of Directors currently consists of four members. The
Board of Directors held 7 meetings during the fiscal year ended December 31,
1998.
There are no material proceedings to which any Director, officer or
affiliate of the Company, any owner of record or beneficially of more than 5%
of any class of voting securities of the Company, or any associate of any such
Director, officer, affiliate of the Company, or security holder is a party
adverse to the Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries.
4
<PAGE> 8
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The Audit Committee is responsible for making
recommendations to the Board of Directors concerning the selection and
engagement of the Company's independent certified public accountants and
reviews the scope of the annual audit, audit fees, and results of the audit.
The Audit Committee also reviews and discusses with management and the Board of
Directors such matters as accounting policies and internal accounting controls,
and procedures for preparation of financial statements. Dr. Sotos, and Messrs.
Tierney and S. Robert Davis are members of such Committee. The Committee met
once during the fiscal year ended December 31, 1998.
EXECUTIVE COMPENSATION COMMITTEE. The Executive Compensation Committee
approves the compensation for executive employees of the Company. Dr. Sotos,
and Mr. Tierney are members of such Committee. The Committee met twice during
the fiscal year ended December 31, 1998.
The Company has no nominating committee or any committee performing a
similar function.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Juan F.
Sotos, M.D. and Robert J. Tierney served as the Executive Compensation
Committee during the last fiscal year. Neither Dr. Tierney nor Dr. Sotos serve
or have served as an employee of the Company or any of its subsidiaries.
Neither of such persons serves on the board of Directors of any other public
company.
STOCK OWNERSHIP
The following table sets forth, to the best of the Company's
knowledge, certain information as of May 24, 1999, with respect to the
beneficial ownership of shares of the Common Stock by (i) each person known to
the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each Director, (iii) the President, the Company's only
executive officer whose salary and bonus during 1998 exceeded $100,000 (the
"Named Executive Officer"), and (iv) all Directors and executive officers of
the Company as a group:
5
<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP (1) OF CLASS(2)
- ---------------- --------------------------- -----------
<S> <C> <C>
S. Robert Davis 134,768(3) 39.23%
5720 Avery Road
Dublin, Ohio 43016
Charles R. Davis 25,311 7.37%
2124 Pine Valley Club Drive
Charlotte, North Carolina 28277
Randall J. Asmo 4,945(4) 1.44%
5720 Avery Road
Dublin, Ohio 43016
Juan F. Sotos, M.D. 3,468(5) 1.01%
4400 Squirrel Bend
Columbus, Ohio 43220
Robert J. Tierney 716(6) *
4805 Olentangy Blvd.
Columbus, Ohio 43214
All executive officers and directors 143,897(7) 41.88%
as a group (4 persons) ======= =====
</TABLE>
- ----------------------
*less than 1%
(1) Represents sole voting and investment power unless otherwise indicated.
(2) Based on 328,200 shares of Common Stock outstanding as of March 15,
1999, plus, as to each person listed, that portion of the 34,188
unissued shares of Common Stock subject to outstanding options and
warrants which may be exercised by such person, and as to all
executive officers and Directors as a group, unissued shares of Common
Stock as to which the members of such group have the right to acquire
beneficial ownership upon the exercise of stock options/warrants
within the next 60 days.
(3) Includes 1,255 shares owned by Mr. Davis' wife as to which Mr. Davis
disclaims beneficial ownership and includes 9,663 unissued Shares as
to which Mr. Davis has the right to acquire beneficial ownership upon
the exercise of stock options and warrants within the next 60 days.
(4) Includes 4,539 unissued shares as to which Mr. Asmo, an executive
officer and Director of the Company, has the right to acquire
beneficial ownership upon the exercise of stock options and warrants
within the next 60 days.
(5) Includes 578 unissued shares of Common Stock as to which Dr. Sotos, a
Director of the Company, has the right to acquire beneficial ownership
upon the exercise of stock options within the next 60 days.
(6) Includes 578 unissued shares of Common Stock as to which Dr. Tierney, a
Director of the Company, has the right to acquire beneficial ownership
upon the exercise of stock options within the next 60 days.
6
<PAGE> 10
(7) The number of shares of Common Stock beneficially owned by all
executive officers and Directors as a group includes 15,358 unissued
shares of Common Stock as to which they have the right to acquire
beneficial ownership upon the exercise of stock options and warrants
within the next 60 days, and 1,255 shares of Common Stock owned by
Mrs. S. Robert Davis as to which Mr. Davis disclaims any beneficial
ownership.
CERTAIN TRANSACTIONS
In the third and fourth quarters of 1996, the Company loaned a total
of $903,122 to certain of its officers and employees, the proceeds of which
were used to purchase Company common stock in connection with the exercise of
employee stock options. The loans are due and payable in full in September,
1999. Interest on the loans at 7% per annum is payable only in the event and
only to the extent that the fair market value of the purchased shares of common
stock at the close of business at that time exceeds the exercise price. In May,
1999, the Company extended the due date of the outstanding loans to certain of
the Company's current and former employees to September 2002 and offered to
persons not currently employed by the Company the option to pay their loans by
transferring to the Company the shares purchased (including the CASCO
INTERNATIONAL, INC. shares spun off by the Company) with the proceeds of such
loans.
In July, 1997, the Company entered into a 12% subordinated convertible
debt agreement for $500,000 with S. Robert Davis, Chairman of Media Source,
Inc. After one year from the debt's issue date, up to 85% of the face value of
the debt is convertible at $37.50 per share into common stock of the Company.
In August 1997, the Company issued a $130,000 13.5% subordinated note
to Charles R. Davis, son of S. Robert Davis and a 7.4% owner of Media Source,
Inc. This note was originally due February 22, 1998, and was extended and paid
in full on June 30, 1998.
In September, 1997, in exchange for personally guaranteeing the
Company's $1.0 million time note, S. Robert Davis, Chairman, received a three
year warrant to purchase 2,500 shares of common stock, exercisable at $45.00
per share.
In 1998, several investors provided the Company $850,000 in
subordinated notes payable with interest paid quarterly at 12% due August 1,
2000, of which 85% of the face value is convertible into common stock after one
year from purchase at a conversion rate between $37.50 and $55.00 per share. S.
Robert Davis, Chairman of the Company, provided $500,000 of the total.
In May 1998, S. Robert Davis deferred compensation through June 1999
and also deferred certain rental payments for corporate offices in Dublin, Ohio
from July 1998 forward. Also in 1998, S. Robert Davis personally guaranteed to
The Huntington National Bank, a $200,000 subordinated note payable of the
Company.
On June 25, 1998, the Company sold its book fair company assets to
Scholastic, Inc. Certain requirements and stipulations were mandated by
Scholastic in order for it to enter into
7
<PAGE> 11
the purchase agreement, including the following: (1) that S. Robert Davis
personally guarantee, to Scholastic, $6,400,000 of inventory located in
approximately 70 distributor warehouses and the Company's warehouse in
Columbus, Ohio; (2) that S. Robert Davis personally guarantee to Scholastic the
delivery of 11,000 cases used in the marketing of books. For each case not
delivered of the 11,000 cases, the Company was required to pay $350. The
maximum exposure under this portion of the agreement to Mr. Davis was
$3,850,000 if the Company was unable to deliver any of the cases; (3) that S.
Robert Davis, Charles R. Davis and Randall J. Asmo sign non-compete agreements
for five years.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and Directors, and persons who beneficially own more than
10% of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC") and the National Association of Securities Dealers, Inc. Executive
officers, Directors and greater than 10% beneficial owners are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and Directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, Directors, and greater than 10% beneficial owners were
complied with.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
DIRECTOR COMPENSATION. Each Director who is not an officer of the
Company receives a fee of $1,100 for attendance at each Board meeting, a fee of
$550 for attendance at each telephonic Board meeting, and a fee of $500 for
attendance at each meeting of a Board committee of which he is a member.
Directors who are also officers of the Company receive no additional
compensation for their services as Directors.
EXECUTIVE COMPENSATION. The following table shows, for the fiscal
years ended December 31, 1998, 1997, and 1996, the cash compensation paid by
the Company and its subsidiaries, as well as certain other compensation paid or
accrued for those years, to the Company's President (the Company's only Named
Executive Officer):
8
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------------------------------------------
SECURITIES UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/WARRANTS
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SAR'S(#) (1)
- ------------------ ---- -------- ----- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
S. Robert Davis, 1998 $185,000(2) $0 $ 0 $ 0
Chairman and 1997 $192,115 $0 $ 0 $ 9,663
President 1996 $167,704 $0 $138,086(3) $12,204
</TABLE>
(1) Stock options previously granted to the Named Executive Officer, by
their terms, automatically adjust to reflect certain changes in the
outstanding Common Shares of the Company, including stock dividends.
(2) Mr. Davis has not drawn a salary since May 7, 1998. Instead, he has
agreed with the Company that his salary (currently set at $185,000 per
year), plus interest at 7% per annum, will accrue and will be paid at
such time as the Board of Directors determines that the Company has
sufficient cash to pay it. In June, 1999, Mr. Davis may elect to
continue to defer his salary or to be paid current. The Board's may
elect to pay Mr. Davis accrued salary in cash or Company common stock.
(3) Represents the difference between the fair market value of the shares
of Common Stock received and the stock option exercise price on the
date of exercise.
The Named Executive Officer does not have an employment agreement with the
Company, but has entered into an agreement to defer and accrue the payment of
his compensation.
EXECUTIVE COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION.
The Executive Compensation Committee (the "Committee") has designed its
executive compensation policies to provide incentives to its executives to
focus on both current and long-term Company goals, with an overriding emphasis
on the ultimate objective of enhancing stockholder value. The Committee has
followed an executive compensation program, comprised of cash and equity-based
incentives, which recognizes individual achievement and encourages executive
loyalty and initiative. The Committee considers equity ownership to be an
important factor in providing executives with a closer orientation to the
Company and its stockholders. Accordingly, the Committee encourages equity
ownership by its executives through the grant of options to purchase Common
Stock.
The Company believes that providing attractive compensation
opportunities is necessary to assist the Company in attracting and retaining
competent and experienced executives. Base salaries for the Company's
executives are established on a case-by-case basis by the Committee, based upon
current market practices and the executive's level of responsibility, prior
experience, breadth of knowledge, and salary requirements. The base salaries of
executive officers are reviewed annually by the Committee. Adjustments to such
base salaries have been made considering: (a) historical compensation levels;
(b) the overall competitive environment for executives; and (c) the level of
compensation necessary to attract and retain executive talent. Stock options
have historically been awarded upon hiring, promotion, or based upon merit
considerations. As the value of a stock option is directly related to the
market price of the Company's Common Stock, the Board of Directors believes the
grant of stock options to executives encourages executives to take a view
toward the long-term performance of the Company. Other benefits offered to
executives are generally the same as those offered to the Company's other
employees.
9
<PAGE> 13
The Committee utilizes the same policies and considerations enumerated
above with respect to compensation decisions regarding the Chairman of the
Board and President, S. Robert Davis. Since May, 1998, Mr. Davis has agreed to
defer his salary of $185,000 per annum until the Board of Directors determines
that the Company has sufficient cash flow to pay it. Accordingly, Mr. Davis'
salary, plus interest at 7% per annum, is accrued until paid. Mr. Davis' 1998
base salary was determined primarily by reference to historical compensation,
scope of responsibility, and the Company's desire to retain his services. The
Committee believes its compensation policies with respect to its executive
officers promote the interests of the Company and its Stockholders through
current motivation of the executive officers coupled with an emphasis on the
Company's long-term success.
Executive Compensation Committee
Juan F. Sotos, M.D.
Robert J. Tierney
OPTION GRANTS IN LAST FISCAL YEAR. All options which were granted by
the Company during 1998 were also canceled during 1998 by mutual agreement
between the Company and each optionee.
AGGREGATED OPTIONS EXERCISED IN 1998 AND FISCAL YEAR-END OPTION
VALUES. The following table provides certain information with respect to
options exercised in the last fiscal year by the Named Executive Officer and
the value of such officer's unexercised options at December 31, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY (1) OPTIONS/WARRANTS
SHARES OPTIONS /WARRANTS AT YEAR END(#) AT YEAR END($) (2)
ACQUIRED ON VALUE ------------------------------- ---------------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
S. Robert Davis None N/A 9,663 0 $ 0 $ 0
</TABLE>
(1) "In-the-Money" options are options whose base (or exercise) price was
less than the market price of Common Stock at December 31, 1998.
(2) Assuming a stock price of $2.00 per share, which was the closing price
of a share of Common Stock reported by the OTC Bulletin Board on
December 31, 1998.
PERFORMANCE GRAPH. The following line graph compares the yearly change
in the Company's total return to its stockholders as compared to total return
of the Center for Research in Securities Prices Total Return Index for the
NASDAQ Stock Market (U.S.) and the Standard & Poors Publishing Group, assuming
a common starting point of 100 for the five-year period from December 31, 1993
to December 31, 1998. Total stockholder return for the Company, as well as for
the Indexes, was determined by adding (a) the cumulative amount of dividends
for a given year (assuming dividend reinvestment), and (b) the difference
between the share price at the beginning
10
<PAGE> 14
and at the end of the year, the sum of which is then divided by the share price
at the beginning of such year.
PERFORMANCE CHART
The following chart compares the yearly change in the Company's total
return (which reflect the restatement of results due to discontinued
operations) to its Stockholders as compared to total return of the Center for
Research in Securities Prices Total Return Index for the NASDAQ Stock Market
(U.S.) and the Standard and Poors Publishing Group for the five-year period
from December 31, 1993 to December 31, 1998. Total stockholder return for the
Company, as well as for the Indexes, was determined by adding (a) the
cumulative amount of dividends for a given year (assuming dividend
reinvestment), and (b) the difference between the share price at the beginning
and at the end of the year, the sum of which is then divided by the share price
at the beginning of the year.
INDEXED RETURNS
YEARS ENDED
<TABLE>
<CAPTION>
Base period
Company/Index 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- ------------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Media Source, Inc. 0.8 14.0 30.2 15.1 41.9 100
Standard & Poor
Publishing 500 192.1 163.8 113.0 114.5 92.5 100
Nasdaq Composite 282.3 202.2 166.2 135.4 96.8 100
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Hausser + Taylor LLP, Columbus, Ohio, was the
Company's principal auditor and accountant for the year ended December 31, 1998
and has been selected as the Company's auditor and accountant for the next
fiscal year. Management expects that a representative of Hausser + Taylor LLP
will be present at the Annual Meeting of Stockholders. The Hausser + Taylor
representative will be afforded an opportunity to make a statement at the
meeting if desired and is expected to be available to respond to appropriate
questions.
ANNUAL REPORT
The 1998 Annual Report, which includes financial statements was mailed
to each shareholder receiving this Proxy Statement.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO ANY PERSON RECEIVING A
COPY OF THIS PROXY STATEMENT, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, BY
FIRST CLASS A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
1998, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES
THERETO. SUCH REQUESTS SHOULD BE ADDRESSED TO S. ROBERT DAVIS, CHAIRMAN, MEDIA
SOURCE, INC., 5720 AVERY ROAD, DUBLIN, OHIO, 43016 (800) 242-8749.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other matters
before the meeting nor does the Board of Directors know of any matters which
other persons intend to bring before the meeting. If, however, other matters
not mentioned in tills Proxy Statement properly come before the meeting, the
persons named in the accompanying form of proxy will vote thereon in accordance
with the recommendation of the Board of Directors.
STOCKHOLDER PROPOSALS AND SUBMISSIONS FOR THE 2000 ANNUAL MEETING
If any Stockholder wishes to present a proposal pursuant to Rule 14a-8
of the Securities Exchange Act of 1934 for inclusion in the proxy materials to
be solicited by the Company's Board of Directors with respect to the next
Annual Meeting of Stockholders, such proposal must be presented to the
Company's management on or before November 30, 1999. Notice of a
11
<PAGE> 15
shareholder proposal submitted outside the processes of Rule 14a-8 of the
Securities Exchange Act of 1934 will be considered untimely if it is not
received by the Company before November 30, 1999.
12
