<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Micro-Media Solutions, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(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:
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<PAGE> 2
July 31, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Micro-Media Solutions, Inc. (the "Company") to be held at 10:00 a.m. local time,
on Monday, September 21, 1998, at the offices of the Company located at 501
Waller Street, Austin, Texas. At this meeting you will be asked to:
(i) Elect five directors to serve until the annual meeting of
shareholders to be held in 1999;
(ii) Approve an amendment to the Company's Articles of Incorporation
to change the name of the Company to MSI Holdings, Inc.;
(iii) Approve the adoption of the Micro-Media Solutions, Inc. 1998
Stock Option Plan;
(iv) Approve and ratify the appointment of Brown, Graham & Company,
P.C. as independent auditors of the Company for the fiscal year ended March
31, 1998 and the fiscal year ending March 31, 1999; and
(v) Transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
It is important that your shares be represented at the meeting; therefore,
if you do not expect to attend in person, please sign and date the enclosed
proxy and return it in the enclosed envelope at your earliest convenience.
Very truly yours,
Jose G. Chavez
Chairman of the Board
Austin, Texas
August 3, 1998
<PAGE> 3
MICRO-MEDIA SOLUTIONS, INC.
501 WALLER STREET
AUSTIN, TEXAS 78702
------------------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 21, 1998
------------------------
The Annual Meeting of Shareholders of Micro-Media Solutions, Inc., a Utah
corporation (hereinafter the "Company"), will be held at the offices of the
Company located at 501 Waller, Austin, Texas, on Monday, September 21, 1998, at
10:00 a.m. local time. The annual meeting will be held for the following
purposes:
1. Election of five directors to serve until the annual meeting of
shareholders to be held in 1999;
2. Approval of an amendment to the Company's Articles of Incorporation
to change the name of the Company to MSI Holdings, Inc.;
3. Approval of the adoption of the Micro-Media Solutions, Inc. 1998
Stock Option Plan;
4. Approval and ratification of the appointment of Brown, Graham &
Company, P.C. as independent auditors of the Company for the fiscal year
ended March 31, 1998 and for the fiscal year ending March 31, 1999; and
5. The transaction of such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on August 17, 1998 are
entitled to notice of, and to vote at, the meeting or any adjournments thereof.
A list of shareholders entitled to vote at the meeting will be available at the
meeting for examination by any shareholder.
It is desirable that as large a proportion as possible of the shareholders'
interests be represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, IT IS REQUESTED THAT THE ENCLOSED FORM OF PROXY BE PROPERLY EXECUTED
AND PROMPTLY RETURNED TO THE COMPANY IN THE ENCLOSED ADDRESSED AND STAMPED
ENVELOPE. You may revoke the proxy at any time before the proxy is exercised by
delivering written notice of revocation to the Secretary of the Company, by
delivering a subsequently dated proxy or by attending the meeting and
withdrawing the proxy. Please date, sign and return the enclosed proxy
immediately in the stamped envelope provided.
By Order of the Board of Directors
Mitchell C. Kettrick,
Secretary
Austin, Texas
August 3, 1998
<PAGE> 4
MICRO-MEDIA SOLUTIONS, INC.
501 WALLER STREET
AUSTIN, TEXAS 78702
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 21, 1998
This Proxy Statement is furnished to shareholders of Micro-Media Solutions,
Inc., a Utah corporation (the "Company"), in connection with the solicitation of
proxies to be used at the 1998 Annual Meeting of Shareholders of the Company to
be held September 21, 1998 (the "Annual Meeting"). Proxies in the form enclosed
will be voted at the meeting if properly executed, returned to the Company
before the Annual Meeting and not revoked. Any shareholder giving such a proxy
may revoke it at any time before it is voted by delivering written notice of
revocation to the Secretary of the Company, by delivering a subsequently dated
proxy or by attending the meeting and withdrawing the proxy. Attendance at the
meeting will not constitute automatic revocation of the proxy. This Proxy
Statement and the enclosed proxy form are first being sent to shareholders on or
about August 3, 1998.
Included with this Proxy Statement are copies of the Company's Annual
Report for 1998 for the fiscal year ended March 31, 1998. The Annual Report for
1998 does not form any part of the proxy solicitation material.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Voting of Proxies at Meeting................................
Persons Making the Solicitation.............................
Outstanding Capital Stock...................................
Quorum and Voting...........................................
Security Ownership of Certain Beneficial Owners and
Management................................................
Election of Directors.......................................
Nominees..................................................
Board Meetings, Committees and Attendance...................
Board Meetings............................................
Audit Committee...........................................
Compensation Committee....................................
Section 16 Requirements.....................................
Transactions with Directors, Officers and Affiliates........
Management..................................................
Executive Officers........................................
Executive Compensation......................................
Summary Compensation Table................................
Option Grants During 1998 Fiscal Year.....................
Option Exercises During 1998 Fiscal Year and Fiscal Year
End Option Values......................................
Aggregated Option Exercises in Last Fiscal Year and FY-End
Option Values.............................................
Compensation of Directors.................................
Employment Agreement......................................
Audit Committee...........................................
Compensation Committee Interlocks and Insider
Participation..........................................
Proposal to Approve Amendment to Articles of Incorporation
to Change Name of Company.................................
</TABLE>
1
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Proposal to Approve Adoption of 1998 Stock Option Plan......
Background and Summary of Terms...........................
Tax Status of Stock Options...............................
Required Vote.............................................
Proposal to Ratify the Appointment of Brown, Graham &
Company, P.C. as Independent Auditors.....................
Shareholders' Proposals.....................................
Miscellaneous...............................................
</TABLE>
VOTING OF PROXIES AT MEETING
When shareholders have appropriately specified how their proxies should be
voted, the proxies will be voted accordingly. Unless the shareholder otherwise
specifies therein, the proxy will be voted (i) FOR the election as directors of
the five nominees listed under "Election of Directors," (ii) FOR the approval of
an amendment to the Company's Articles of Incorporation to change the name of
the Company to "MSI Holdings, Inc."; (iii) FOR approval of the adoption of the
Micro-Media Solutions, Inc. 1998 Stock Option Plan; (iv) FOR approval and
ratification of the appointment of Brown, Graham & Company, P.C. as independent
auditors of the Company for the fiscal year ended March 31, 1998 and for the
fiscal year ending March 31, 1999, and (v) at the discretion of the proxy
holders, either FOR or AGAINST any other matter or business that may properly
come before the meeting. The Board of Directors does not know of any such other
matter or business.
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited by the Board of Directors of the
Company. The cost of soliciting the proxies will be borne entirely by the
Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by forwarding brokers and
intermediaries, directors and officers and employees of the Company. Such
brokers and intermediaries, officers and employees will not be additionally
compensated but will be reimbursed for out-of-pocket expenses.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to notice of, and to vote at, the
Annual Meeting is August 17, 1998 (the "Record Date"). At the close of business
on July 22, 1998 the Company had 10,851,261 shares of common stock, $0.10 par
value per share, issued and outstanding ("Common Stock") and entitled to vote at
the Annual Meeting.
QUORUM AND VOTING
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Common Stock is necessary to constitute a quorum at
the Annual Meeting of Shareholders. Each outstanding share of Common Stock is
entitled to one vote. Abstentions will be included in vote totals and, as such,
will have the same effect as a negative vote on each proposal other than the
election of directors. Broker non-votes, if any, will not be included in vote
totals and, as such, will have no effect on any proposal. Cumulative voting is
prohibited in the election of directors. Abstentions are considered as shares
present and entitled to vote but are not counted as affirmative votes cast on a
given matter. Any amendment to the Articles of Incorporation as set forth herein
shall require the affirmative vote of the holders of shares entitling them to
exercise a majority of the voting power of the Company. Any other proposals
shall require the affirmative vote of a majority of the shares entitled to vote
and represented in person or by proxy at the Annual Meeting.
2
<PAGE> 6
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 22, 1998, the number of shares
of Common Stock beneficially owned by (1) each person or group known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (2) each director and each nominee for director of the Company, (3) the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers, and (4) all directors and executive
officers as a group. Except as otherwise indicated, the Company believes that
each of the persons or groups named below has sole voting power and investment
power with respect to such Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NAME OF BENEFICIAL NUMBER OF
OWNER OR GROUP SHARES PERCENT
------------------ ----------- ---------
<S> <C> <C>
Entrepreneurial Investors, Ltd.(2).......................... 8,286,740 37.97%
Jose G. Chavez(3)........................................... 7,225,000 33.10%
Mitchell C. Kettrick(4)..................................... 1,500,000 6.87%
George Villalva(5).......................................... 475,000 2.18%
Ernesto M. Chavarria(6)..................................... 75,000 0.34%
All officers and directors as a group (4 persons)(7)........ 9,275,000 42.49%
</TABLE>
- ---------------
* Less than one percent
(1) Includes shares of Common Stock of the Company beneficially owned by such
persons. If a person has the right to acquire beneficial ownership of any
shares by exercise of options within 60 days after July 22, 1998, such
shares are deemed beneficially owned by such person and are deemed to be
outstanding solely for the purpose of determining the percentage of Common
Stock that such person owns. Such shares are not included in the computation
for any other person.
(2) Consists of ownership of (i) 400,000 shares of Series B 5% cumulative,
convertible, non-voting preferred stock with a stated value of $5.30 per
share (the "Series B Preferred Stock"), with each share of Series B
Preferred Stock immediately convertible into 10 shares of Common Stock
immediately and 6 warrants to purchase 6 shares of Common Stock exercisable
immediately; (ii) 94,340 shares of Series C 6% cumulative, convertible,
non-voting preferred stock with a stated value of $10.60 (the "Series C
Preferred Stock"), each of which is immediately convertible into 10 shares
of Company's Common Stock; and (iii) 94,340 shares of Series D 6%
cumulative, convertible, non-voting preferred stock with a stated value of
$10.60 (the "Series D Preferred Stock"), each of which is immediately
convertible into 10 shares of Common Stock. EIL is a Bahamian company with
its principal place of business at Citibank Building, 2nd Floor, East Mall
Drive, Freeport, Bahamas.
(3) Includes options to purchase 100,000 shares of Common Stock.
(4) Includes options to purchase 75,000 shares of Common Stock.
(5) Mr. Villalva resigned from the Board of Directors and as Vice President of
the Company effective July 20, 1998.
(6) Includes options to purchase 75,000 shares of Common Stock.
(7) Includes the options to purchase shares identified in the preceding notes 3,
4 and 6.
3
<PAGE> 7
ELECTION OF DIRECTORS
(ITEM I)
Five directors are to be elected at the Annual Meeting for a term expiring
at the next annual meeting or until their respective successors are duly elected
and qualified. Shareholders are not permitted to cumulatively vote their shares
in connection with the election of directors.
Set forth below is certain information concerning the persons nominated for
election as directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE
NOMINEES.
NOMINEES:
JOSE G. CHAVEZ
Mr. Chavez, the President and Chief Executive Officer of the Company, has
over 25 years' experience in manufacturing, engineering, system design and
development, energy engineering, and computer technology management. He
previously was plant manager for HDS, a division of Hart Graphics, Inc., a
computer disk manufacturer, from 1991 to 1993, and manufacturing manager for
Compuadd Corporation, a personal computer manufacturer, from 1989 to 1991. Mr.
Chavez holds an electrical engineering degree from the University of Texas at El
Paso and a business degree from the University of Redlands, Redlands,
California. Mr. Chavez has been a director of the Company since June, 1997.
MITCHELL C. KETTRICK
Mr. Kettrick, the Vice-President of Technical Operations, has over 10
years' experience in manufacturing, test diagnostics, and networking. As
co-founder of the Company in 1993, and the Company's Chief Technology Officer,
he oversees technical services, system design, and information services.
Previously, he was manager for quality assurance for Hart Distributions
Services, a computer disk manufacturer, during 1992, and manufacturing systems
test manager for Compuadd Corporation, a personal computer manufacturer, from
1987 to 1991. Mr. Kettrick holds an Associate of Applied Science in Computer
Technology from Texas State Technical College. Mr. Kettrick has been a director
of the Company since June, 1997.
ERNESTO M. CHAVARRIA
Mr. Chavarria, Director, has over 25 years' experience providing consulting
services in the areas of international business development and public affairs
to Fortune 500 Companies such as Southwestern Bell and GTE. He has been the
President of ITBR, Inc., an international trade and consulting company since
1990. Mr. Chavarria has been a director of the Company since November, 1997.
BLANDIDA CARDENAS
Ms. Cardenas, Director, has been a Professor at the LBJ Institute for
Teaching and Learning at the University of Texas-San Antonio since 1993 and has
served as a Director of the Office of Minorities in Higher Education. She has
also served as the Commissioner of Presidential Appointments to the U.S.
Commission of Civil Rights. Ms. Cardenas has been a director of the Company
since November, 1997.
DANIEL DORNIER
Mr. Dornier, a nominee for director, has been an investment banker with
Bear, Stearns & Co. He currently serves as . Mr. Dornier was
appointed to the Company's Board of Directors on July 18, 1998 to fill the
vacancy created by the resignation of Mr. George Villalva.
4
<PAGE> 8
BOARD MEETINGS, COMMITTEES AND ATTENDANCE
BOARD MEETINGS
The Board of Directors of the Company met one (1) time during the fiscal
year ended March 31, 1998. Each director attended at least 75% of the called
meetings. The Board of Directors currently has appointed two committees, the
Audit Committee and the Compensation Committee.
AUDIT COMMITTEE
The Audit Committee is responsible for engaging and discharging the
independent auditors of the Company and for monitoring internal audit functions
and procedures. The members of the Audit Committee Ms. Cardenas and Messrs.
Chavarria and Dornier. Neither Ms. Cardenas nor Mr. Chavarria nor Mr. Dornier is
an officer or employee of the Company. The Audit Committee was appointed
effective July 18, 1998, and thus did not meet during the fiscal year ended
March 31, 1998.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for review and making
recommendations to the Board of Directors on all matters relating to
compensation and benefits provided to executive management. The members of the
Compensation Committee are Ms. Cardenas and Messrs. Chavarria and Dornier.
Neither Ms. Cardenas nor Mr. Chavarria nor Mr. Dornier is an officer or employee
of the Company. The Compensation Committee was appointed effective July 18,
1998, and thus did not meet during the fiscal year ended March 31, 1998.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC") and The Nasdaq Stock Market. Such persons are required by
the SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 1998 or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been complied with, except that Messrs.
Chavez and Kettrick were late in filing Form 5 to report a grant of stock
options.
5
<PAGE> 9
TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES
The Company has advanced funds of Prima Development and Construction, Inc.,
Quality Communications, Inc. and Salas Concessions, Inc. (The "Related
Parties"). The ownership and control of the Related Parties includes officers
and directors of MSI and other outside investors.
As of March 31, 1997, the Company had advanced funds to the following
Related Parties:
<TABLE>
<S> <C>
Prima Development and Construction, Inc.
(10% Note Receivable from a related party)................ $251,983
Quality Communications, Inc.
(10% Note Receivable from a related party)................ 84,394
Salas Concessions, Inc.
(10% Note Receivable from a related party)................ 83,397
--------
TOTAL............................................. $419,774
========
</TABLE>
During the year ended March 31, 1998, the Company loaned an additional
$142,265 to these Related Parties and received payments in the amount of
$562,039. At March 31, 1998 the Company did not have any notes receivable or
payables to Related Parties.
6
<PAGE> 10
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Jose G. Chavez............................ Chairman of the Board of Directors, President
and Chief Executive Officer
Mitchell C. Kettrick...................... Vice President, Secretary and Director
George Villalva........................... Vice President and Director
Jaime Munoz............................... Director of Operations
Stephen Hoelscher......................... Controller
</TABLE>
Information concerning the business experience of Messrs. Chavez and
Kettrick is provided under the section entitled "Nominees."
Jaime Munoz, Director of Operations, has over 10 years direct experience in
all related Project Management implementation. His background includes extensive
experience with strategic planning, market assessment, new business development,
preparing organizations for public offerings and mergers/acquisitions. Mr. Munoz
manages the day-to-day operations including approval of all financial
requirements and maintaining shareholder relations. Most recently he worked as a
consultant for American Residential Services and assisted with acquiring several
businesses. Mr. Munoz has a B.S. in Mechanical Engineering from the University
of Texas at El Paso.
Stephen Hoelscher, Controller, has 17 years experience in accounting and
auditing as a Certified Public Accountant. As Controller, Mr. Hoelscher manages
the Company's accounting department, and banking and audit relationships. Before
joining the Company, Mr. Hoelscher was Controller for Protos Software Co., a
computer software manufacturer from 1995 to 1997. From 1989 to 1995 Mr.
Hoelscher was employed by Brown, Graham & Co., CPAs, of Austin, Texas as Audit
Manager.
George Villalva, Vice-President of Operations from June 23, 1997 to July,
1998, is a registered architect. Prior to joining the Company, Mr. Villalva was
an architect in solo practice in Austin, Texas for thirty years. Mr. Villalva
resigned from the Board of Directors and as Vice President of the Company
effective July 20, 1998.
7
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid to the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers, with respect to each of the
Company's last three fiscal years, based on salary and bonus earned during each
year (the "Named Executive Officers"), excluding any executive officer whose
total salary and bonus do not exceed $100,000:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
-------------------- OTHER ANNUAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION (#)(1) ($)(2)
- --------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jose G. Chavez............. 1998 $105,000 $ 0 $0 100,000 $7,800
President and Chief 1997 100,000 0 0 0 0
Executive Officer 1996 50,500 34,000 0 0 0
</TABLE>
- ---------------
(1) Options to acquire shares of Common Stock.
(2) Represents car allowance of $650.00 per month.
OPTION GRANTS DURING 1998 FISCAL YEAR
The following table sets forth the options granted during fiscal 1998 to
the Named Executive Officers of the Company pursuant to the Chavez Agreement (as
defined below). The Company did not grant any stock appreciation rights during
fiscal 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
% OF
TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE
---- ------- ---------- -------- --------------
<S> <C> <C> <C> <C>
Jose G. Chavez............................. 100,000 100% $1.50 March 31, 2003
</TABLE>
OPTION EXERCISES DURING 1998 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised by
the Named Executive Officers during the 1998 fiscal year and the number and
value of options held at fiscal year end. The Company does not have any
outstanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES ----------------- ----------------
ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) VALUE REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(1)
---- -------------- -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Jose G. Chavez.................... -- -- 100,000/0 $853,125/0
</TABLE>
- ---------------
(1) Value is calculated on the basis of the difference between the option
exercise price and the market value of the Common Stock on the exercise
date.
8
<PAGE> 12
COMPENSATION OF DIRECTORS
Directors of the Company who are employees of the Company do not receive
compensation as directors. The Company paid each non-employee director $1,000
for each meeting of the Board of Directors that he attended plus reasonable
out-of-pocket expenses incurred by him or her.
EMPLOYMENT AGREEMENT
On June 15, 1997, the Company entered into an employment agreement with
Jose G. Chavez, President (the "Chavez Agreement"). The agreement terminates on
March 31, 2001, subject to two one-year extensions. The Chavez Agreement
provides for an annual salary of $100,000 and reimbursement of all reasonable
out-of-pocket expenses. The Chavez Agreement also provides for a grant of an
option to purchase up to 100,000 shares of Common Stock at a price of $1.50 per
share exercisable for a period of five (5) years commencing on March 31, 1998.
In addition, Chavez is entitled to a bonus, at the discretion of the Board of
Directors, consisting of cash and common stock, calculated as follows: (1) for
each ten percent (10%) increase in revenues above the base of $10,000,000 in
fiscal 1998, Chavez shall be issued 100,000 shares of Common Stock at fifty
percent (50%) of the then-current market value, not to exceed $1.70 per share;
and (2) for each $1.00 increase in the Common Stock value above the base value
of $3.00 per share in fiscal 1998, calculated on the last ninety (90) day
average, the Company shall pay Chavez a cash bonus of $100,000 due no later than
June 30 of each fiscal year. Chavez also is entitled to an automobile allowance
of up to $650.00 per month.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors provides the opportunity for
direct communication between the independent certified public accountants, the
internal accounting staff and the Board of Directors. The members of the Audit
Committee are Ms. Cardenas and Messrs. Chavarria and Dornier. Neither Ms.
Cardenas nor Mr. Chavarria nor Mr. Dornier is an officer or employee of the
Company. The Audit Committee was appointed effective July 18, 1998, and thus did
not meet during the fiscal year ended March 31, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible for
structuring, evaluating and recommending to the Board of Directors the Company's
executive compensation policies and the annual compensation of the executive
officers and other senior management of the Company thereunder. In connection
with such responsibilities, the Compensation Committee has exclusive authority
to administer the Company's 1998 Stock Option Plan, including the grant of stock
options and other awards thereunder. All other actions of the Compensation
Committee are subject to the approval of the Board of Directors. The members of
the Compensation Committee are Ms. Cardenas and Messrs. Chavarria and Dornier.
Neither Ms. Cardenas nor Mr. Chavarria nor Mr. Dornier is an officer or employee
of the Company. The Compensation Committee was appointed effective July 18,
1998, and thus did not meet during the fiscal year ended March 31, 1998.
9
<PAGE> 13
PROPOSAL TO APPROVE AMENDMENT TO
ARTICLES OF INCORPORATION
TO CHANGE NAME OF COMPANY
(ITEM II)
The Board of Directors believes that it is desirable for the shareholders
to consider and act upon a proposal to amend the Company's Articles of
Incorporation (the "Articles") to change the name of the Company to a name that
reflects the increased diversification of the Company's business. Pursuant to
the proposal, the name of the Company will be changed from Micro-Media
Solutions, Inc. to MSI Holdings, Inc.
Other than changing the name of the Company to MSI Holdings, Inc., the
proposed amendment in no way changes the Articles.
The Board has adopted resolutions setting forth the proposed amendment to
the Articles, declaring its advisability and directing that the proposed
amendment be submitted to the shareholders for their approval at the Annual
Meeting on September 21, 1998. If adopted by the shareholders, the amendment
will become effective upon filing as required by the Utah Business Corporation
Act.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
OF THE ARTICLES, AS PROPOSED ABOVE.
10
<PAGE> 14
PROPOSAL TO APPROVE ADOPTION OF 1998 STOCK OPTION PLAN
(ITEM III)
BACKGROUND AND SUMMARY OF TERMS
On July 18, 1998, the Board of Directors of the Company adopted the
Micro-Media Solutions, Inc. 1998 Stock Option Plan (the "1998 Option Plan")
pursuant to which options may be granted to the key employees of the Company and
its subsidiaries for the purchase of shares of Common Stock, subject to the
approval of the shareholders. At the Annual Meeting, shareholders are being
asked to approve the 1998 Option Plan. The Company intends for all options
granted under the 1998 Option Plan to conform with the provisions of Rule 16b-3
under the Exchange Act.
The following description of the 1998 Option Plan is a summary, does not
purport to be detailed, and is qualified in its entirety by reference to the
provisions of the 1998 Option Plan itself. A copy of the 1998 Option Plan is
attached as Exhibit "A" to this Proxy Statement.
The 1998 Option Plan permits the grant of options to the key employees
(including officers) of the Company and its subsidiaries to purchase shares of
Common Stock. The employees eligible for options under the 1998 Option Plan are
those employees whose performance and responsibilities are determined by the
Compensation Committee of the Board of Directors to be influential to the
success of the Company and its subsidiaries. The total number of shares of
Common Stock available for grant under the 1998 Option Plan is 1,500,000 shares.
The option period (i.e., the term of an option) may not be more than ten years
from the date the option is granted. The Compensation Committee determines in
its discretion the key employees who will receive grants, the number of shares
subject to each option granted, the exercise price and the option period, and it
administers and interprets the 1998 Option Plan. Approximately fifty (50) of the
Company's employees are eligible to participate in the 1998 Option Plan.
Full payment for shares purchased upon exercise of an option must be made
at the time of exercise, and no shares may be issued until full payment is made.
The exercise price of each option is payable in cash or by check or, if the
applicable stock option agreement so provides, in shares of Common Stock at the
fair market value per share on the date of exercise.
Though the Compensation Committee has discretion to determine the terms of
the exercise of any option, it is expected that options will generally be
exercisable in equal annual installments over a four-year period. All
installments that become exercisable are cumulative and may be exercised at any
time after they become exercisable until the expiration of the option period.
Incentive stock options and, unless otherwise specified in the applicable stock
option agreements, nonqualified stock options may not be transferred other than
by will or by the laws of descent and distribution. If an optionee dies or
becomes permanently disabled before the termination of his option without having
totally exercised the option, the option may be exercised, to the extent that
the optionee could have exercised it on the date of his death or disability, by
(i) in the case of death, his estate or the person who acquired the right to
exercise the option by bequest or inheritance, or (ii) in the case of
disability, the optionee or his personal representative, provided that the
option is exercised before the date of the expiration of the option period of
one year after the date of the optionee's death or disability, whichever occurs
first.
Both incentive stock options and nonqualified stock options may be granted
under the 1998 Option Plan. The 1998 Option Plan requires that the exercise
price of each incentive stock option will not be less than 100% of the fair
market value of the Common Stock at the time of the grant of the option. No
incentive stock option, however, may be granted under the 1998 Option Plan to
anyone who owns more than 10% of the outstanding Common Stock unless the
exercise price is at least 110% of the fair market value of the Common Stock at
the date of grant and the option is not exercisable for more than five years
after it is granted. There is no limit on the fair market value of incentive
stock options that may be granted to an employee in any calendar year, but no
employee maybe granted incentive options that first become exercisable during a
calendar year for the purchase of stock with an aggregate fair market value
(determined as of the date of grant of each option) in excess of $100,000. An
option (or an installment thereof) counts against the annual limitation only in
the calendar year it first becomes exercisable.
11
<PAGE> 15
Unless the Board of Directors terminates it sooner, the 1998 Option Plan
will terminate on July 18, 2008, and no options may be granted under the 1998
Option Plan thereafter. The Board of Directors or the Compensation Committee may
amend, alter or discontinue the 1998 Option Plan without the shareholders'
approval, except that the Board of Directors or the Compensation Committee does
not have the power or authority to materially increase the number of securities
that may be issued under the 1998 Option Plan or to materially modify the
requirements of eligibility for participation in the 1998 Option Plan. The Board
of Directors or the Compensation Committee, however, may make appropriate
adjustments in the number of shares the 1998 Option Plan covers, in the number
of outstanding options, and in the option exercise prices to reflect any stock
dividend, stock split, share combination or other recapitalization and, with
respect to outstanding options and option prices, to reflect any merger,
consolidation, reorganization, liquidation or similar transaction involving the
Company.
On the date of this Proxy Statement, no options have been granted pursuant
to the 1998 Option Plan.
TAX STATUS OF STOCK OPTIONS
Pursuant to the 1998 Option Plan, the Compensation Committee may provide
for an option to qualify either as an "incentive stock option" ("ISO") or as a
"nonqualified option" for United States federal income tax purposes.
Incentive Stock Options. All stock options that qualify under the rules of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), will
be entitled to ISO treatment. To receive ISO treatment, an optionee must not
dispose of the acquired stock within two years after the option is granted or
within one year after exercise. In addition, the individual must have been an
employee of the Company for the entire time from the date of granting of the
option until three months (or one year if the employee is disabled) before the
date of the exercise. The requirement that the individual be an employee and the
two-year and one-year holding periods are waived in the case of death of the
employee. If all such requirements are met, no tax will be imposed upon exercise
of the option, and any gain upon sale of the stock will be entitled to capital
gain treatment. The employee's gain on exercise (the excess of fair market value
at the time of exercise over the exercise price) of an ISO is a tax preference
item and, accordingly, is included in the computation of alternative minimum
taxable income.
If an employee does not meet the two-year and one-year holding requirement
(a "disqualifying disposition"), but does meet all other requirements, tax will
be imposed at the time of sale of the stock, but the employee's gain on exercise
will be treated as ordinary income rather than capital gain and the Company will
get a corresponding deduction at the time of sale. Any remaining gain on sale
will be short-term or long-term capital gain, depending on the holding period of
the stock. If the amount realized on the disqualifying disposition is less than
the value at the date of exercise, the amount includible in gross income, and
the amount deductible by the Company, will equal the excess of the amount
realized on the sale or exchange over the exercise price.
An optionee's stock option agreement may permit payment for stock upon the
exercise of an ISO to be made with other shares of Common Stock. In such a case,
in general, if an employee uses stock acquired pursuant to the exercise of an
ISO to acquire other stock in connection with the exercise of an ISO, it may
result in ordinary income if the stock so used has not met the minimum statutory
holding period necessary for favorable tax treatment as an ISO.
Nonqualified Options. In general, no taxable income will be recognized by
the optionee, and no deduction will be allowed to the Company, upon the grant of
an option. Upon exercise of a nonqualified option an optionee will recognize
ordinary income (and the Company will be entitled to a corresponding tax
deduction if applicable withholding requirements are satisfied) in an amount
equal to the amount by which the fair market value of the shares on the exercise
date exceeds the option exercise price. Any gain or loss realized by an optionee
on disposition of such shares generally is a capital gain or loss and does not
result in any tax deduction to the Company.
12
<PAGE> 16
The foregoing statements are based upon present federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, are changed.
REQUIRED VOTE
The favorable vote of the holders of a majority of the shares of Common
Stock present and entitled to vote at the Annual Meeting in person or by proxy
is required to approve the 1998 Option Plan. If the requisite vote of the
shareholders is not obtained, the 1998 Option Plan will be null and void.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE 1998 OPTION PLAN.
13
<PAGE> 17
PROPOSAL TO RATIFY THE APPOINTMENT OF BROWN, GRAHAM & COMPANY, P.C.
AS INDEPENDENT AUDITORS
(ITEM IV)
The firm of Brown, Graham & Company, P.C. has been the Company's
independent certified public accountants since May 11, 1998. Brown, Graham &
Company, P.C. has been approved by the Board of Directors as the Company's
independent auditors for the fiscal year ending March 31, 1998 and for the
fiscal year ending March 31, 1999, subject to ratification of such appointment
by the shareholders. Representatives of Brown, Graham & Company, P.C. are
expected to be present at the Annual Meeting of Shareholders with the
opportunity to make a statement if they desire to do so and such representatives
are expected to be available to respond to appropriate questions by
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO RATIFY THE APPOINTMENT OF BROWN, GRAHAM & COMPANY, P.C. AS INDEPENDENT
AUDITORS.
14
<PAGE> 18
SHAREHOLDERS' PROPOSALS
Shareholders must submit their proposals to the Secretary of the Company on
or before April 15, 1999 for consideration at the Company's next Annual Meeting.
MISCELLANEOUS
(ITEM V)
The Board of Directors knows of no business other than that set forth above
to be transacted at the Annual Meeting. If other matters requiring a vote of the
shareholders arise, the persons designated as proxies will vote the shares of
Common Stock represented by the proxies in accordance with their judgment on
such matters.
The information contained in the Proxy Statement relating to the
occupations and security holdings of the directors and officers of the Company
and their transactions with the Company is based upon information received from
the individual directors and officers. All information relating to any
beneficial owner of more than 5% of the Company's Common Stock is based upon
information contained in reports filed by such owner with the Securities and
Exchange Commission.
15
<PAGE> 19
EXHIBIT "A"
MICRO-MEDIA SOLUTIONS, INC.
1998 STOCK OPTION PLAN
On July 18, 1998, the Board of Directors of Micro-Media Solutions, Inc.
adopted the following 1998 Stock Option Plan:
1. PURPOSE. The purpose of the Plan is to provide key employees with a
proprietary interest in the Company through the granting of options which will:
(a) increase the interest of the key employees in the Company's and
its Subsidiaries' welfare;
(b) furnish an incentive to the key employees to continue their
services for the Company and its Subsidiaries; and
(c) provide a means through which the Company and its Subsidiaries may
attract able persons to enter its employ.
2. ADMINISTRATION. The Plan will be administered by the Committee.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular key employees of the Company and its Subsidiaries to whom options are
to be granted and who will, upon such grant, become participants in the Plan.
For purposes of the Plan, "key employees" are those employees of the Company and
its Subsidiaries whose performance and responsibilities are determined by the
Committee to have a direct and significant effect on the performance of the
Company and its Subsidiaries.
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to a key
employee who owns more than 10% of the voting power of all classes of capital
stock of the Company or its Parent or Subsidiaries. This limitation will not
apply, however, if the option price is at least 110% of the fair market value of
the capital stock at the time the Incentive Option is granted and the Incentive
Option is not exercisable more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant options under the
Plan for more than 1,500,000 shares of Common Stock, but this number may be
adjusted to reflect, if deemed appropriate by the Committee, any stock dividend,
stock split, share combination, recapitalization, or the like of or by the
Company. Shares to be optioned and sold may be made available from either
authorized but unissued Common Stock or Common Stock held by the Company in its
treasury. Shares that by reason of the expiration of an option or otherwise are
no longer subject to purchase pursuant to an option granted under the Plan may
be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined at the
time of grant) of the shares of Common Stock which any key employee is first
eligible to purchase in any calendar year by exercise of Incentive Options
granted under the Plan and all other incentive stock option plans (if any) of
the Company or its Parent or Subsidiaries shall not exceed $100,000. For this
purpose, the fair market value (determined at the date of grant of each option)
of the Common Stock purchasable by exercise of an Incentive Option (or an
installment thereof) shall be counted against the $100,000 annual limitation for
a key employee only for the calendar year such Common Stock is first purchasable
under the terms of the option.
7. ALLOTMENT OF SHARES. The Committee shall determine the number of shares
of Common Stock to be offered from time to time by grant of options to key
employees of the Company or its Subsidiaries. The grant of an option to a key
employee shall not be deemed to entitle the employee to, or to disqualify the
employee from, participation in any other grant of options under the Plan.
8. GRANT OF OPTIONS. All the options under the Plan shall be granted by the
Committee. The Committee is authorized to grant Incentive Options and
Nonqualified Options. The grant of options shall be evidenced by stock option
agreements containing such terms and provisions as are approved by the
<PAGE> 20
Committee, but not inconsistent with the Plan, including (without limitation)
provisions that may be necessary to assure that any option that is intended to
be an Incentive Option will comply with Section 422 of the Internal Revenue
Code. The Company shall execute stock option agreements upon instructions from
the Committee. A stock option agreement may provide that the option holder may
exercise an option or a portion thereof by tendering shares of Common Stock, at
the fair market value per share on the date of exercise, in lieu of cash payment
of the exercise price. The Plan shall be submitted to the Company's shareholders
for approval. The Committee may grant options under the Plan before the time of
shareholder approval, and those options will be effective when granted; but if
for any reason the shareholders of the Company do not approve the Plan within
one year from the date of adoption of the Plan by the Board, all options granted
under the Plan will terminate and be of no effect, and no such option may be
exercised in whole or in part prior to such shareholder approval.
9. OPTION PRICE. The option price of an Incentive Option shall not be less
than 100% of the fair market value per share of the Common Stock (or 110% of
such amount as required by Section 4) on the date the Incentive Option is
granted. For purposes of the Plan, the fair market value of a share of the
Common Stock shall be (i) if the Common Stock is traded on an established
securities market, the closing price of such Common Stock on the trading day
immediately preceding the day on which the option is granted, and (ii) if the
Common Stock is not so traded, an amount determined by the Committee in good
faith and based on such factors as it deems relevant to such determination.
10. OPTION PERIOD. The Option Period will begin on the date the option is
granted, which will be the date the Committee authorizes the option unless the
Committee specifies another date (which can only be a later date if the option
is an Incentive Option). No Incentive Option may terminate later than ten years
from the date the option is granted. The Committee may provide for the exercise
of options upon or subject to such terms, conditions, and restrictions as it may
determine. The Committee may provide for termination of an option in the case of
termination of employment or for any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Internal Revenue
Code) prior to termination of his right to exercise an option in accordance with
the provisions of his stock option agreement, the option agreement may provide
that the option may be exercised, to the extent of the shares with respect to
which the option could have been exercised by the participant on the date of the
participant's death or disability, by (i) in the case of death, the
participant's estate or by the person who acquired the right to exercise the
option by bequest or inheritance or by reason of the death of the participant,
or (ii) in the case of disability, the participant or his personal
representative; provided, that (in either case) the option is exercised prior to
the date of its expiration or not more than one year from the date of the
participant's death or disability, whichever first occurs. The date of
disability of a participant shall be determined by the Committee.
12. PAYMENT. Full payment for shares purchased upon exercising an option
shall be made in cash or by check or, if the stock option agreement so permits,
by tendering shares of Common Stock at the fair market value per share at that
time, or on such other terms as are set forth in the applicable stock option
agreement. The Committee may permit an option holder exercising an option to
simultaneously exercise the option and sell a portion of the shares acquired,
pursuant to a brokerage or similar arrangement authorized or approved in advance
by the Committee, and use proceeds from the sale to pay the exercise price of
the Common Stock acquired by exercise of the option. In addition, the
participants shall tender payment of such amount as may be requested by the
Company, if any, for the purpose of satisfying its liability to withhold
federal, state, or local income or other taxes incurred by reason of the
exercise of an option. No shares may be issued until full payment of the
purchase price therefor has been made, and a participant will have none of the
rights of a shareholder until shares are issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be exercised
during the Option Period at such times, in such amounts, in accordance with such
terms, and subject to such restrictions as are set forth in the applicable stock
option agreements. A stock option agreement may provide for acceleration of
exercise of an option upon termination of employment for any reason. In no event
may an option be exercised
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<PAGE> 21
or shares be issued pursuant to an option if any requisite action, approval, or
consent of any governmental authority of any kind having jurisdiction over the
exercise of options has not been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS; ANTIDILUTION. The number of
shares of Common Stock covered by each outstanding option, and the option or
exercise price thereof, may be adjusted to reflect, as deemed appropriate by the
Committee, any stock dividend, stock split, share combination, or the like of or
by the Company. In the event of a merger, consolidation, share exchange,
reorganization, sale of all or substantially all assets, liquidation,
recapitalization, separation, or the like of or by the Company, the Company
(acting by or through the Board or the Committee) may make such arrangements as
it deems advisable with respect to outstanding options granted under the Plan,
and those arrangements shall be binding upon the participants, including
(without limitation) arrangements for the substitution of new options for any
options then outstanding (by conversion or otherwise), the assumption of any
such outstanding options, or the payment for any such outstanding options. If
(i) the Company becomes a party to an agreement providing for the merger,
consolidation, or share exchange of or by the Company, any other sale of all or
substantially all of the outstanding Common Stock, or any sale of all or
substantially all of the assets of the Company (in any case, a "Transaction")
and the agreement provides that the holders of the outstanding shares of Common
Stock will receive cash, securities, or other property directly or indirectly
from one or more persons or entities other than the Company or any of its
Subsidiaries (collectively, if more than one, the "Purchaser") upon the
effectiveness of the Transaction, and (ii) the Company does not make
arrangements for the substitution of new options from the Purchaser for any
options then outstanding (by conversion or otherwise), the assumption of such
options by the Purchaser, or the payment for such options, then the Plan shall
terminate and any options outstanding under the Plan shall terminate upon the
effectiveness of the Transaction; provided, however, that all outstanding
options granted under the Plan (whether or not theretofore vested or
exercisable) shall become immediately exercisable during the 15 days immediately
preceding the effective date of the Transaction as well as on the effective date
of the Transaction until it is effective. If the options will so terminate upon
the effectiveness of a Transaction, the Company shall give each holder of an
option at least ten days' notice of the opportunity to exercise his option
before such termination. The Company shall, before the effectiveness of the
Transaction, issue all Common Stock purchased by exercise of outstanding
options, and that Common Stock shall be treated as issued and outstanding for
purposes of the Transaction.
15. TAX WITHHOLDING. The Committee may establish such rules and procedures
as it considers desirable in order to satisfy any obligation of the Company to
withhold federal income taxes or other taxes with respect to any option granted
under the Plan. Such rules and procedures may provide that, in the case of the
exercise of a Nonqualified Option, the withholding obligation shall be satisfied
by the Company's withholding shares of Common Stock otherwise issuable upon
exercise of such Nonqualified Option.
16. NON-ASSIGNABILITY. Incentive Options and, except as otherwise provided
by the applicable stock option agreements, Nonqualified Options may not be
transferred other than by will or by the laws of descent and distribution.
Except in the case of the death or disability of a participant, Incentive
Options and, except as otherwise provided by the applicable stock option
agreements, Nonqualified Options granted to a participant may be exercised only
by the participant.
17. INTERPRETATION. The Committee shall interpret the Plan and prescribe
such rules and regulations in connection with the operation of the Plan as it
determines to be advisable for the administration of the Plan. The Committee may
rescind or amend any or all of its rules and regulations.
18. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued by
the Board or the Committee without the approval of the shareholders of the
Company, except that any amendment that would (i) materially increase the number
of securities that may be issued under the Plan or (ii) materially modify the
requirements of eligibility for participation in the Plan must be approved by
the shareholders of the Company.
19. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any employee any right to be
granted an option to purchase Common Stock or any other rights except as may be
evidenced by a stock option agreement, or any amendment thereto,
A-3
<PAGE> 22
duly authorized by the Committee and executed on behalf of the Company, and then
only to the extent and on the terms and conditions expressly set forth therein.
The existence of the Plan and the options granted hereunder shall not affect in
any way the right or power of the Board, the Committee, or the shareholders of
the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, or shares of preferred stock ahead of or affecting Common Stock or
the rights thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding. Nothing contained in the Plan or in any agreement for an
option granted thereunder shall (i) confer upon any employee any right to
continue in the employ of, or to hold any office or position with, the Company
or any of its Subsidiaries or (ii) interfere in any way with the right of the
Company or any of its Subsidiaries to terminate any employee's employment at any
time.
20. TERM. Unless sooner terminated by action of the Board, this Plan will
terminate on July 18, 2008. The Committee may not grant options under the Plan
after that date, but options granted before that date will continue to be
effective in accordance with their terms.
21. DEFINITIONS. For the purpose of the Plan, unless the context requires
otherwise, the following terms shall have the respective meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the committee of the Board appointed to
administer the Plan or, in the absence of such a Committee, the Board.
(c) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized to issue
(as long as the common stock varies from that currently authorized, if at
all, only in amount of par value).
(d) "Company" means Micro-Media Solutions, Inc., a Utah corporation.
(e) "Incentive Option" means an option granted under the Plan which
meets the requirements of Section 422 of the Internal Revenue Code.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, and any successor statute.
(g) "Nonqualified Option" means an option granted under the Plan which
is not intended to be an Incentive Option.
(h) "Option Period" means the period during which an option may be
exercised.
(i) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting of the
option, each of the corporations other than the Company owns capital stock
possessing 50% or more of the total combined voting power of all classes of
capital stock in one of the other corporations in the chain.
(j) "Plan" means this 1998 Stock Option Plan, as may be amended from
time to time.
(k) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of
the option, each of the corporations other than the last corporation in the
unbroken chain owns capital stock possessing 50% or more of the total
combined voting power of all classes of capital stock in one or the other
corporations in the chain, and "Subsidiaries" means more than one or any
such corporations.
A-4
<PAGE> 23
MICRO-MEDIA SOLUTIONS, INC.
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. Pursuant to the 1998 Stock Option Plan (the "Plan") for
key employees of Micro-Media Solutions, Inc. (the "Company") and its
Subsidiaries, the Company grants to
------------------------------------------------------
(the "Option Holder")
an Incentive Option to purchase from the Company a total of shares of
Common Stock at $ per share (being at least the fair market value per share
of the Common Stock on the date of this grant) in the amounts, during the
periods, and upon the terms and conditions set forth in this Agreement.
2. Time of Exercise. Except only as specifically provided elsewhere in this
Agreement, this option is exercisable in the following cumulative installments:
(a) Up to % of the total optioned shares at any time on or after
, ;
(b) Up to an additional % of the total optioned shares at any time
on or after , ;
(c) Up to an additional % of the total optioned shares at any time
on or after , ; and
(d) Up to an additional % of the total optioned shares at any time
on or after , .
If an installment covers a fractional share, such installment will be rounded
off to the next highest share, except the final installment, which will be for
the balance of the total optioned shares. In the event of the Option Holder's
termination of employment with the Company and its Subsidiaries for any reason,
this option will be exercisable only to the extent that the Option Holder could
have exercised it on the date of his termination of employment. The installments
of this option may become exercisable earlier than stated above in this Section
2 to the extent provided in Section 14 of the Plan.
3. Subject to Plan. This option and the grant and exercise thereof are
subject to the terms and conditions of (including, without limitation, the
definitions set forth in) the Plan, which is incorporated herein by reference
and made a part hereof, but the terms of the Plan shall not be considered an
enlargement of any benefits under this Agreement. In addition, this option is
subject to any rules and regulations promulgated pursuant to the Plan, now or
hereafter in effect.
4. Term. This option will terminate at the first of the following:
(a) 5 p.m., Austin, Texas time, on , 20 .
(b) 5 p.m., Austin, Texas time, on the date one year following the
date the Option Holder's employment with the Company and its Subsidiaries
terminates by reason of the Option Holder's death or disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code).
(c) 5 p.m., Austin, Texas time, on the date the Option Holder's
employment with the Company and its Subsidiaries terminates for Cause. In
this Agreement, "Cause" shall be deemed to have occurred if the Option
Holder's employment is terminated because of (i) the Option Holder's
conviction of, or plea of nolo contendere to, a felony or a crime involving
moral turpitude; (ii) the Option Holder's personal dishonesty,
incompetence, willful misconduct, willful violation of any law, rule, or
regulation (other than minor traffic violations or similar offenses), or
breach of fiduciary duty which involves personal profit; (iii) the Option
Holder's commission of material mismanagement in the conduct of his duties
as assigned to him by the Company; (iv) the Option Holder's willful failure
to execute or comply with the policies of the Company or his stated duties
as established by the Company, or intentional failure to perform his stated
duties; or (v) the illegal use of drugs on the part of the Option Holder.
The determination that there exists "Cause" for termination shall be made
in good faith by the Company, and such determination shall be conclusive.
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<PAGE> 24
(d) 5 p.m., Austin, Texas time, on the date three months following the
date the Option Holder's employment with the Company and its Subsidiaries
terminates for any reason other than death, disability, or Cause.
5. Who May Exercise. Except in the case of the death or disability of the
Option Holder, this option may be exercised only by the Option Holder. If the
Option Holder dies or becomes disabled prior to the termination date specified
in Section 4(a) hereof without having exercised this option as to all of the
optioned shares, this option may be exercised to the extent the Option Holder
could have exercised this option on the date of his death or disability at any
time prior to the earlier of the dates specified in Sections 4(a) and 4(b)
hereof by (i) the Option Holder's estate or a person who acquired the right to
exercise this option by bequest or inheritance or by reason of the death of the
Option Holder in the event of the Option Holder's death, or (ii) the Option
Holder or his personal representative in the event of the Option Holder's
disability, subject to the other terms of this Agreement, the Plan, and
applicable laws, rules, and regulations. For purposes of this Agreement, the
Company shall determine the date of disability of the Option Holder.
6. Restrictions on Exercise. This option:
(a) may be exercised only with respect to full shares, and no
fractional share of stock shall be issued;
(b) may not be exercised in whole or in part, and no cash or
certificates representing shares subject to this option shall be delivered,
if any requisite approval or consent of any government authority of any
kind having jurisdiction over the exercise of options has not been
obtained; and
(c) may be exercised only if at all times during the period beginning
with the date of the ranting of this option and ending on the date three
months prior to the date of exercise the Option Holder was an employee of
either the Company or a Subsidiary; provided, that if the Option Holder's
continuous employment is terminated by (i) Cause, this option will
terminate as provided in Section 4(c), (ii) disability, this option may be
exercised in accordance with Section 5, or (iii) death, or if the Option
Holder dies within that three-month period, this option may be exercised in
accordance with Section 5.
7. Manner of Exercise. Subject to such administrative regulations as the
Committee may from time to time adopt, the Option Holder or beneficiary shall,
in order to exercise this option,
(a) give written notice to the Company of the exercise price and the
number of shares which he will purchase; and
(b) give written notice to the Company, if he desires to tender other
shares of Common Stock in exchange for option shares, of the number of
shares for which he is requesting approval from the Company for a stock
tender.
Any notice shall include an undertaking to furnish or execute such
documents as the Company in its discretion shall deem necessary to (i) evidence
such exercise, in whole or in part, of the option evidenced by this Agreement,
(ii) determine whether registration is then required under the Securities Act of
1933, or any other similar law, as then in effect, and (iii) comply with or
satisfy the requirements of the Securities Act of 1933, or any other similar
law, as then in effect.
In addition, if an exercise is under paragraph (a) of this Section 7, the
notice shall be accompanied by full payment in United States dollars of the
option exercise price for the shares of Common Stock being purchased.
Alternatively, if an exercise under paragraph (b) of this Section 7 is
requested, the notice shall include an undertaking to tender to the Company,
promptly after receipt of (i) any denial by the Company of the request, full
payment in United States dollars of the option exercise price for the shares of
Common Stock being purchased hereunder or (ii) approval by the Company of
exercise of this option by payment of Common Stock, full payment in Common Stock
in exchange for shares being purchased hereunder.
A-6
<PAGE> 25
If the Company approves payment by the Option Holder by tendering shares of
Common Stock, the Company may also, upon confirming that the Option Holder owns
the number of additional shares being tendered, authorize the issuance of a new
certificate for the number of shares being acquired pursuant to the exercise of
this option less the number of shares being tendered upon the exercise and
return to the Option Holder (or not require surrender of) the certificate for
the shares being tendered upon the exercise.
If the Option Holder does not elect, or is not permitted, to exercise this
option by tendering shares of Common Stock, the Company may permit the Option
Holder to exercise this option by delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a securities broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option exercise price; provided, that the Option Holder and
the broker comply with such procedures, and enter into such agreements of
indemnity and other agreements, as the Company may prescribe as a condition of
such payment procedure.
8. Non-Assignability. This option is not assignable or transferable by the
Option Holder except by will or by the laws of descent and distribution.
9. Rights of Shareholder. The Option Holder will have no rights as a
shareholder with respect to any shares covered by this option until the issuance
of a certificate or certificates to the Option Holder for those shares. Except
as otherwise provided in Section 10 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.
10. Capital Adjustments; Antidilution. The number of shares of Common Stock
covered by this option, and the option or exercise price thereof, may be
adjusted to reflect, as deemed appropriate by the Committee any stock dividend,
stock split, share combination, share exchange, sale of all or substantially all
outstanding capital stock, recapitalization, merger, consolidation, separation,
reorganization, sale of all or substantially all assets, liquidation, or the
like of or by the Company. The Company (acting by or through the Board or the
Committee) may also, in the event of any transaction of the kind described in
the preceding sentence, make such arrangements as it deems advisable with
respect to outstanding options granted under the Plan, and those arrangements
shall be binding upon Option Holder. As provided in Section 14 of the Plan,
those arrangements may include (without limitation) the substitution of new
options for any options then outstanding, the assumption of any such options, or
payment for the outstanding options. Any such arrangements relating to the
option evidenced by this Agreement shall comply with the requirements of Section
422 of the Internal Revenue Code and the regulations thereunder.
11. Law Governing. This Agreement is intended to be performed in the State
of Texas and shall be construed and enforced in accordance with, and governed
by, the laws of such State.
12. Date of Grant. The date of grant of this option is ,
.
13. Notices. All notices or other communications required or permitted
hereunder to be given to either of the parties hereto shall be in writing and
shall be effective upon receipt by the party entitled to such notice when
personally delivered or when transmitted by overnight or same-day courier or by
United States registered or certified mail, postage prepaid, to the appropriate
one of the following addresses:
If to the Company:
Micro-Media Solutions, Inc.
501 Waller Street
Austin, Texas 78702
Attention: Jose G. Chavez
If to the Option Holder:
A party's address for notice may be changed by that party's giving notice of
such change of address to the other party hereto in accordance with the
foregoing provisions of this Section 13.
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<PAGE> 26
14. Inurement. Subject to the restrictions against transfer or assignment
set forth herein, the provisions of this Agreement shall inure to the benefit
of, and shall be binding upon, the assignee, successors in interest, personal
representatives, guardians, estates, heirs, and legatees of the parties hereto
(as appropriate). Except as permitted or contemplated by this Agreement, the
Option Holder agrees that he or she will not hypothecate or otherwise create or
suffer to exist any lien, claim, or encumbrance on this option. Except as
provided herein, this Agreement is not intended to confer any rights or benefits
upon any person or entity that is not a party hereto.
15. Severability and Reformation. The parties intend all provisions of this
Agreement to be enforced to the fullest extent permitted by law. Accordingly,
should a court of competent jurisdiction determine that the scope of any
provision is too broad to be enforced as written, the parties intend that the
court should reform the provision to such narrower scope as it determines to be
enforceable. If, however, any provision of this Agreement is held to be wholly
illegal, invalid, or unenforceable under present or future law, such provision
shall be fully severable and severed, and this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision were never a
part hereof, and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance.
16. Attorneys' Fees. If any legal action is brought by either party to
enforce the terms and conditions of this Agreement, the prevailing party shall
be entitled, in addition to any other relief which may be awarded, to recover
from the other party the prevailing party's reasonable attorneys' fees together
with its other costs and reasonable and necessary expenses incurred in
connection with such litigation.
17. Definitions; Gender and Number. In this Agreement, (i) terms with their
initial letters capitalized are used as defined in the Plan, unless otherwise
defined herein, and (ii) whenever required by the context, the pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine, or
neuter, and the singular shall include the plural, and vice versa.
18. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Option Holder, to evidence his consent and
approval of all the terms hereof, has duly executed this Agreement to be
effective as of the date specified in Section 12 hereof.
Company:
MICRO-MEDIA SOLUTIONS, INC.
By:
Option Holder:
A-8
<PAGE> 27
MICRO-MEDIA SOLUTIONS, INC.
The undersigned hereby (i) acknowledges receipt of the Notice dated July 31,
1998, of the Annual Meeting of Shareholders of Micro-Media Solutions, Inc. (the
"Company") to be held at the Company's offices located at 501 Waller Street,
Austin, Texas on Monday, September 21, 1998 at 10:00 a.m., local time, and the
Proxy Statement in connection therewith; and (ii) appoints Jose G. Chavez and
Mitchell C. Kettrick, and each of them, his/her proxies with full power of
substitution, for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Common Stock of the Company
standing in the name of the undersigned or with respect to which the undersigned
is entitled to vote and act, at the meeting and at any adjournment thereof, and
the undersigned directs that his proxy be voted as follows:
(a) Proposal to elect five directors to serve until the 1999 annual meeting of
shareholders, or until their respective successors are elected and
qualified.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below (except as [ ] WITHHOLD AUTHORITY to vote for all nominees
marked to the contrary) listed below
</TABLE>
Directors: Jose G. Chavez, Mitchell C. Kettrick, Ernest M. Chavarria, Blandida
Cardenas, Daniel Dornier
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE BELOW.)
- --------------------------------------------------------------------------------
(b) Proposal to approve and ratify the appointment by the Board of Directors of
Brown, Graham & Company, P.C. as independent auditors of the Company for the
fiscal year ending March 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(c) Proposal to approve adoption of the Micro-Media Solutions, Inc. 1998 Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(d) Proposal to approve an amendment to the Company's Articles of Incorporation
to change the name of the Company to MSI Holdings, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(e) In the discretion of the proxies on any other matter that may properly come
before the meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO ABOVE.
If more than one of the proxies named above shall be present in person or by
substitute at the meeting or any adjournment thereof, both of the proxies so
present and voting, either in person or by substitute, shall exercise all of the
proxies hereby given.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such Common Stock and hereby ratifies and confirms
all that the proxies, their substitutes, or any of them may lawfully do by
virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated:
--------------------------------------
--------------------------------------
--------------------------------------
Please date this Proxy and sign your
name exactly as it appears hereon.
Where there is more than one owner,
each should sign. When signing as an
attorney, administrator, executor,
guardian or trustee, please add your
title as such. If executed by a
corporation, the Proxy should be
signed by a duly authorized officer.
Please date, sign and mail this proxy
card in the enclosed envelope. No
postage is required.
