MEDIA SOURCE, INC.
PROXY STATEMENT
For Annual Meeting of Stockholders
To be Held on August 29, 2000
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 29, 2000 at 8:30 a.m., Eastern Standard Time, at 6360 Rings Road, Amlin,
Ohio 43002 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, 1999 are first being mailed to stockholders
entitled to vote at the meeting on or about July 21, 2000.
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.
The close of business on July 21, 2000, 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 14,936 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 167,072 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.
<PAGE>
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.
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. Votes cast by proxy or in person at the Annual Meeting
will be tabulated by an 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 outstanding 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. Davis, Sotos, Tierney, and Asmo can be found under "Directors
and Executive Officers."
<PAGE>
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. 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
Randall J. Asmo .......... 35 Vice President and Director 1992
Juan F. Sotos, M.D ....... 73 Director 1992
Robert J. Tierney ........ 52 Director 1992
</TABLE>
(1) All positions are those held with the Company, except as otherwise
indicated.
<PAGE>
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 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 Mr. Davis has served as a director and Chairman of the
Board since 1990, and has served as Assistant Secretary since 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. Mr. Davis is also the Chairman of the Board 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 Mr. Asmo was elected Vice President in 1992 and has served
as a director since 1997. In 1998, Mr. Asmo was elected Secretary and Executive
Vice President. 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. Mr. Asmo is also a director of
CASCO INTERNATIONAL, INC. as well as an officer in several other small business
enterprises.
Juan F. Sotos, M.D Dr. Sotos has served as a director since 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.
<PAGE>
Robert J. Tierney Mr. Tierney has served as a director since 1992. Dr.
Tierney currently serves as the Dean of Education at the University of British
Columbia. Dr. Tierney is also active in education research and previously served
as a professor at The Ohio State University from 1984 to 2000.
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 four meetings during the fiscal year ended December 31, 1999.
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.
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, 1999.
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, 1999.
The Company has no nominating committee or any committee performing a
similar function.
<PAGE>
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 officer or 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 July 21, 2000, 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 Company's outstanding Common
Stock, (ii) each Director and nominee, (iii) the President (the Company's only
executive officer whose salary and bonus during 1999 exceeded $100,000) and (iv)
all Directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Beneficial Ownership (1) of Class(2)
---------------- --------------------------- -----------
<S> <C> <C>
S. Robert Davis ............................... 154,786(3) 47.16%
6360 Rings Road
Amlin, Ohio 43002
Charles R. Davis .............................. 25,610 7.80%
13900 Conlan Circle, Suite 150
Charlotte, North Carolina 28277
Randall J. Asmo ............................... 9,258 2.82%
6360 Rings Road
Amlin, Ohio 43002
Juan F. Sotos, M.D ............................ 2,890 *
4400 Squirrel Bend
Columbus, Ohio 43220
Robert J. Tierney ............................. 138 *
4805 Olentangy Blvd ...........................
Columbus, Ohio 43214
All executive officers and directors .......... 167,072(4) 50.91%
======= ========
as a group (4 persons)
*less than 1%
</TABLE>
<PAGE>
(1) Represents sole voting and investment power unless otherwise indicated.
(2) Based on 328,200 shares of Common Stock outstanding as of June 29, 2000.
(3) Includes 1,255 shares owned by Mr. Davis' wife as to which Mr. Davis
disclaims beneficial ownership.
(4) The number of shares of Common Stock beneficially owned by all executive
officers 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 were 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.
<PAGE>
In July 1997, the Company sold $850,000 in principal amount of 12
percent Subordinated Convertible Notes for $850,000. S. Robert Davis, Chairman
of Media Source, Inc., purchased $500,000 of the Notes. After one year from the
Note's issue date, up to 85 percent of the face value of the debt is convertible
at $37.50 per share, as adjusted for the one for twenty reverse stock split,
into common stock of the Company. The Company retired $350,000 of the Notes in
January 2000. The Note with S. Robert Davis remains outstanding, but is due on
August 1, 2000.
In May 2000, on option to purchase Company common stock was granted to
the Company Chairman, S. Robert Davis, holder of a $500,000 Subordinated
Convertible Note payable due August 1, 2000. In exchange for granting this
option, S. Robert Davis agreed to extend the due date of his Note, cancel the
conversion feature associated with the Note, and allow the Company to repay the
Note over 20 quarterly installments of $25,000 each starting in April, 2000. The
stock option entitles S. Robert Davis to purchase from the Company 100,000
shares at 1/8th over the closing bid price on the day of grant, which was
$2.125. Therefore the exercise price is $2.25 per share. The option is only
exercisable after May 10, 2003, and expires on May 10, 2006.
In May 1998, S. Robert Davis deferred his compensation through June
1999 and also deferred certain rental payments for corporate offices in Dublin,
Ohio from July 1998 until April 1999. In June 1999, S. Robert Davis informed the
Company of his intention to defer his compensation for an additional 24 months.
S. Robert Davis' 1999 deferred compensation was $185,000. At December 31, 1999,
S. Robert Davis' total deferred compensation was $308,333. Mr. Davis' deferred
compensation earns interest at 7 percent. Interest on deferred compensation at
December 31, 1999 was $21,583.
<PAGE>
Legal Proceedings
The Company was subject to litigation filed in the 125th District Court
of Harris County, Texas on December 4, 1998 by expert witnesses used in its 1996
suit against its former auditors. The Company settled the case through mediation
and paid $61,000 on February 16, 2000.
The Illinois Department of Revenue issued two assessments on April 17,
1998 and March 24, 1998 against Pages Book Fairs, Inc., a wholly-owned
subsidiary of the Company (PBF), seeking approximately $478,000, plus interest,
in sales tax from 1993 through 1996. A hearing was held before the State of
Illinois, Department of Revenue on April 27, 2000 and the Company is currently
awaiting the decision. The taxing authority is claiming that there had been an
agency relationship between PBF and the schools to which PBF provided school
book fairs. The Company denies that such a relationship existed and is
vigorously defending this matter, seeking full discharge of the assessments. The
Company anticipates legal cost to be in the $25,000 to $40,000 range and has
recorded a liability of approximately $650,000 relating to the assessments.
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.
<PAGE>
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, 1999, 1998, and 1997, 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
executive officer whose salary and bonus during 1999 exceeded $100,000):
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
----------------------------------------------------------------
Securities
Underlying
Options/
Name and Other Annual Warrants
Principal Position Year Salary Bonus Compensation SAR's(#) (1)
------------------------ ---- --------- ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
S. Robert Davis, 1999 $185,000(2) $ 0 $ 0 0
Chairman and 1998 $185,000(2) $ 0 $ 0 0
President 1997 $192,115 $ 0 $ 0 9,663
</TABLE>
(1) Stock options previously granted to Mr. Davis, by their terms,
automatically adjust to reflect certain changes in the outstanding Common
Shares of the Company, including stock dividends.
(2) Mr. Davis was paid $54,423 in salary through May 7, 1998, after which he
elected to defer and accrue his salary. In June 1999, Mr. Davis elected to
continue to defer and accrue his annual salary of $185,000 per year. Mr.
Davis' accrued salary earns interest at 7 percent. See also, "Certain
Transactions".
No executive officers have employment agreements with the Company.
<PAGE>
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. Other benefits
offered to executives are generally the same as those offered to the Company's
other employees.
<PAGE>
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 $185,000 per annum until the Board of Directors determines that
the Company has sufficient cash flow to pay it. Accordingly, Mr. Davis' salary,
plus interest at 7% per annum, is accrued until paid. Mr. Davis' 1999 base
salary was determined primarily by reference to historical compensation, scope
of responsibility, and the Company's desire to retain his services. The
Committee believes its compensation policies with respect to its executive
officers promote the interests of the Company and its Stockholders through
current motivation of the executive officers coupled with an emphasis on the
Company's long-term success.
Executive Compensation Committee
Juan F. Sotos, M.D.
Robert J. Tierney
Option Grants in Last Fiscal Year. The Company granted no options during 1999.
Aggregated Options Exercised in 1999 and Fiscal Year-End Option Values.
No options were exercised in the last fiscal year and no options remained
unexercised and outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-Money (1)
Options /Warrants Options/Warrants
Shares at Year End(#) at Year End($) (2)
Acquired on ------------------- --------------
Name Exercise Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
S. Robert Davis . None 0 0 $0 $0
</TABLE>
<PAGE>
Performance Graph
The following graph 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 Specialty Retail for the five-year period from December 31,
1994 to December 31, 1999. 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.
<TABLE>
<CAPTION>
Nasdaq Composite S&P Specialty Retail MESH
---------------- -------------------- ----
<S> <C> <C> <C>
Dec-94 ......... 100.0 100.0 100.0
Dec-95 ......... 139.9 75.4 36.1
Dec-96 ......... 171.7 106.0 72.2
Dec-97 ......... 210.2 106.4 33.3
Dec-98 ......... 291.6 82.6 44.4
Dec-99 ......... 536.9 59.0 1.7
</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, 1999
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 1999 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 ended
December 31, 1999, including the financial statements and the financial
statement schedules thereto. Such requests should be addressed to S. Robert
Davis, Chairman, Media Source, Inc., 6360 Rings Road, Amlin, Ohio, 43002, (800)
242-8749.
<PAGE>
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 this 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 2001 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 February 18, 2001. Notice of a 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 May
3, 2001.
<PAGE>
Exhibit A
PROXY
MEDIA SOURCE, INC.
6360 Rings Road
Amlin, Ohio 43002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints S. Robert Davis and Randall J. Asmo and
each of them, as Proxies, each the power to appoint his substitute, and hereby
authorizes each of them to represent and vote, as designated below, all of the
shares of the Common Stock of Media Source, Inc. (the "Company") held of record
by the undersigned at the close of business on July 21, 2000, at the Annual
Meeting of Stockholders to be held on August 29, 2000, or any adjournment(s)
thereof.
1. Election of Directors
|_| For all nominees listed below (except as marked to the
contrary below)
|_| Withhold Authority to vote for all
nominees listed below
S. Robert Davis, Randall J. Asmo, Juan F. Sotos, M.D., and Robert J. Tierney.
(Instruction: To withhold authority to vote for any nominee, write that
nominee's name in the space below. Do not make "Withhold Authority"
above unless you intend to withhold authority for all nominees.)
Please execute this proxy as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized persons. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE NOMINEES LISTED ABOVE AND IN THE DISCRETION OF THE
PROXY WITH RESPECT TO ANY OTHER MATTER THAT IS PROPERLY PRESENTED AT THE
MEETING.
DATED: __________________, 2000
Signature
Signature if held jointly
