<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-21894
SOURCE MEDIA, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 13-3700438
(State of incorporation) (I.R.S. Employer Identification No.)
5400 LBJ FREEWAY
SUITE 680
DALLAS, TEXAS 75240
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 701-5400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes [X] No [ ]
Aggregate market value of Common Stock held by nonaffiliates as of
March 24, 1998: $119,593,904.
Number of shares of Common Stock outstanding as of March 24, 1998:
11,589,954
DOCUMENTS INCORPORATED BY REFERENCE: None
No exhibits are filed with this Amendment.
<PAGE> 2
The following items of Source Media, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 are hereby amended. Each such item
is set forth herein in its entirety, as amended. No exhibits are filed with this
Amendment.
<TABLE>
<CAPTION>
Page
----
PART III
<S> <C> <C>
Item 10. Directors and Executive Officers of the Registrant......................................................2
Item 11. Executive Compensation..................................................................................3
Item 12. Security Ownership of Certain Beneficial Owners and Management.........................................10
Item 13. Certain Relationships and Related Transactions.........................................................12
</TABLE>
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<PAGE> 3
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Certain information with respect to persons who are or may be deemed to
be executive officers of the Company is set forth under the caption "Executive
Officers of the Company" in Part I of this report.
Except for Mr. Bedford, all the nominees for director are presently
directors of the Company and have served continuously as directors since the
date of their first election to the Board. The Board of Directors' nominees for
the office of director are as follows:
Timothy P. Peters, age 40, has served as a director of the Company
since its inception in 1988, as President from inception through May 1996, and
was elected Chief Executive Officer in December 1992 and Chairman of the Board
in August 1994. In 1986, Mr. Peters founded Information Express, Co., an
operator-assisted Yellow Pages company that served the Denver area, where he
acted as a Vice President from 1986 to 1988. From 1979 to 1986 Mr. Peters served
as Regional Manager for Penn Central Telecommunications Company.
W. Scott Bedford, age 41, served as a director of the Company from its
inception in 1988 until 1997 and has served as Chief Financial Officer and
Treasurer since December 1997. Mr. Bedford served as Chief Operating Officer
from December 1992 until December 1997. From 1988 to 1992, Mr. Bedford served in
various positions with the Company, including Executive Vice President, Vice
President of Sales and Secretary. From October 1993 until January 1997, Mr.
Bedford served as Chairman of the Board of ICT.
Michael J. Marocco, age 39, has served as a director of the Company
since May 1996. Mr. Marocco is a Managing Director of Sandler Capital Management
("Sandler") and has been associated with Sandler since April 1989. Prior to
that, Mr. Marocco was a vice president at Morgan Stanley & Co., Incorporated
where he was involved in raising capital and merger and acquisition
transactions. Mr. Marocco serves as a director of Mentus Media Corp. and
numerous private companies involved in cable television, advertising and
cellular telephone industries.
James L. Greenwald, age 71, has served as a director of the Company
since May 1996. Mr. Greenwald has served as chairman emeritus of Katz Media
Corporation ("Katz"), a communications representative firm, since August 1995.
Mr. Greenwald joined Katz in 1956 and has held various positions, including
President of the radio division from 1965 through 1970, Executive Vice President
from 1970 through 1975, President from 1975 through 1982 and Chairman of the
Board of Directors and Chief Executive Officer from 1975 through 1994. Mr.
Greenwald is a director of Granite Broadcasting Company and the Young Adult
Institute, an honorary trustee of the Foundation of American Women in Radio and
Television and past president of the International Radio and Television
Foundation and the Station Representatives Association.
Robert H. Alter, age 69, has served as a director of the Company since
May 1997. Mr. Alter has served as the President of Alter Associates, Inc., a
domestic and international television consulting firm, since its founding in
1992. Mr. Alter is currently vice-chairman and director of Cabletelevision
Advertising Bureau, with which he held the position of founding president and
chief executive officer from 1981 to 1991. From November 1991 through December
1992, he was a senior advisor to the Board of Star TV in Hong Kong. From 1958
through 1981, he was employed with the Radio Advertising Bureau, where his last
position was that of Executive Vice President. Mr. Alter is a director of
International Post, Ltd., AdCom, Inc., The Taft Institute of Government, The
International Council of the National Academy of Television Arts and Science and
The Young Adult Institute and Mentor.
Robert J. Cresci, age 54, has served as a director of the Company since
May 1997. Mr. Cresci has been a Managing Director of Pecks, an investment
management firm, since September 1990. Mr. Cresci serves as a director of
Bridgeport Machines, Inc., EIS International, Inc., Sepracor, Inc., Arcadia
Financial, Ltd., Hitox, Inc., Garnet Resources Corporation, HarCor Energy, Inc.,
Meris Laboratories, Inc., Film Roman, Inc., Educational Medical, Inc., Castle
Dental Centers, Inc., Candlewood Hotel Co., Inc., SeraCare, Inc. and several
private companies.
Barry Rubenstein, age 54, has served as a director of the Company since
September 1997. In 1994, Mr. Rubenstein co-founded the 21st Century
partnerships, of which he is presently a principal. In 1992, Mr. Rubenstein
co-founded Applewood Associates, L.P., of which he is presently a principal.
Prior to 1992, Mr. Rubenstein was a founder of or founding consultant to Applied
Digital Data Systems, Inc., Novell, Inc., and Cheyenne Software, Inc.
-2-
<PAGE> 4
From 1983 to 1987, Mr. Rubenstein held various positions with Cheyenne Software,
Inc., including President, Chief Executive Officer, Director and Chairman of the
Board. Mr. Rubenstein is a director of or advisor to Infonautics Corporation,
Millwood Press and several private technology companies.
Michael S. Willner, age 46, has served as a director of the Company
since April 1998. Mr. Willner is President and Chief Executive Officer of
Insight Communications, a company he co-founded in 1985. Mr. Willner presently
serves on the boards of NTL Incorporated, the National Cable Television
Association and C- SPAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of
the Company, and persons who own more than ten percent of the Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Directors, officers and more than ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1997, all Section
16(a) filing requirements applicable to its directors, officers and more than
ten percent beneficial owners were in compliance.
ITEM 11. EXECUTIVE COMPENSATION
The Compensation Committee Report appearing below and the information
presented herein under the caption "Executive Compensation -- Performance Graph"
shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission (the "SEC") or subject to the SEC's proxy
rules, except for the required disclosure herein, or to the liabilities of
Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), and such
information shall not be deemed to be incorporated by reference into any filing
made by the Company under the Exchange Act or under the Securities Act of 1933
(the "Securities Act").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors
(the "Compensation Committee") are currently Robert H. Alter and James L.
Greenwald, both of whom became members of the Compensation Committee on May 21,
1997. John F. Baring was a member of the Compensation Committee from January 1,
1997 until April 28, 1997, the effective date of Mr. Baring's resignation from
the Company's Board of Directors. Alan M. Flaherty was a member of the
Compensation Committee until May 21, 1997.
Mr. Baring is a principal of Hackman, Baring & Co., Incorporated,
which has provided financial and investor relations consulting services to the
Company. On July 13, 1995, the Company entered into an agreement with Hackman,
Baring & Co., Incorporated, a stockholder of the Company owned equally by
Rhodric C. Hackman and Mr. Baring, whereby Hackman, Baring & Co., Incorporated
was engaged to act as advisor to the Company in connection with investor
relations. In connection with this agreement, the Company agreed to pay to
Hackman, Baring & Co., Incorporated a monthly retainer of $2,500. This
obligation to pay a monthly retainer of $2,500 terminated in April 1997.
-3-
<PAGE> 5
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
To the Stockholders of
Source Media, Inc.:
The Compensation Committee establishes the level of compensation of the
executive officers of the Company, administers the Annual Management Incentive
Plan and administers the Company's stock option plans.
The Compensation Committee held three meetings during 1997.
GENERAL
The goal of the Company's executive compensation policy is to ensure
that an appropriate relationship exists between executive pay and the creation
of stockholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policies
integrate competitive levels of annual base compensation with bonuses based upon
corporate performance and individual goals and initiatives. This annual cash
compensation, together with the payment of equity-based incentive compensation,
is designed to attract and retain qualified executives and to ensure that such
executives have a continuing stake in the long-term success of the Company. All
executive officers and managers participate in the Company's incentive
compensation plans.
In establishing executive compensation, the Compensation Committee
neither bases its decisions entirely on quantitative relative weights of various
factors, nor does it follow a mathematical formula. Rather, the Compensation
Committee exercises discretion and makes judgments after considering all factors
that it considers relevant, including industry compensation information,
individual performance, level of responsibility, and the achievement of certain
objective targets relating to the Company's operating and financial performance.
In making its decisions about 1998 compensation, the Compensation Committee also
considered a comparative study prepared for the Company by Coopers & Lybrand LLP
in 1996. Coopers & Lybrand provided data extrapolated from its survey of
executive compensation at approximately 27 telecommunications and 11 cable
companies. Companies chosen for comparison purposes in the compensation survey
did not include all the companies in the peer group indices in the performance
graphs included in this Report on Form 10-K. The Compensation Committee believes
that the pool of executive talent for the Company comes from a broader group of
companies than those comprising the peer groups established for comparing
stockholder returns. The Coopers & Lybrand data indicated that total
compensation of all the executive officers, including the chief executive
officer, was below the range for executives holding similar positions at other
companies in the study.
CASH COMPENSATION
Base Salary. The base salaries of executive officers of the Company are
reviewed periodically by the Compensation Committee. Salaries are based
generally on consideration of factors such as the Company's performance and
financial condition, competitive conditions, general economic conditions and
cost of living increases. The Compensation Committee's evaluation of these
factors is subjective, with no particular weight being assigned to any one
factor. In March 1996, the Compensation Committee adjusted base salaries for
each of the executive officers on an individual basis. Effective April 1, 1996,
Mr. Peters' base salary was increased to $225,000 per year, and the salaries of
the Company's other executive officers were increased by an average of 60%.
These compensation adjustments were made to align the cash compensation of the
Company's executive officers more closely with executive officers in other
companies in the Coopers & Lybrand study. Base salaries for each of the
executive officers, including the chief executive officer, were not adjusted
during 1997.
Bonuses. The Compensation Committee believes that linking a substantial
portion of executive officer cash compensation to Company operating and
financial performance provides a meaningful incentive to such officers to
enhance Company performance. Accordingly, an integral part of executive officer
cash compensation is the use of cash bonuses under the Company's Annual
Management Incentive Plan. The majority of the bonus payments depends on
achievement of corporate and individual goals, which are established both
annually and quarterly to reflect those elements of Company performance that the
Compensation Committee deems of special significance in a particular period, and
the competitive environment in which the Company operates. The remaining portion
of the bonus may be paid at the discretion of the Compensation Committee.
-4-
<PAGE> 6
STOCK OPTIONS
The executive officers are also granted stock options under the
Company's stock option plans. The timing of such grants is determined by the
Compensation Committee based upon market conditions affecting the price of the
Company's Common Stock and other factors. The size of the overall option pool to
be awarded in any year is determined by the Compensation Committee based on such
factors as Company performance and the dilutive impact of such grants. Grants to
individual executive officers are based on the Compensation Committee's
evaluation of their performance and their contribution to the long-term
performance of the Company. The Compensation Committee's evaluation of these
factors is subjective with no particular weight being assigned to any one
factor. During 1997, stock options for 12,500 shares of Common Stock were
granted to Mr. Peters, and stock options for an aggregate of 79,000 shares of
Common Stock were granted to other executive officers. In January 1998, the
Compensation Committee granted stock options for 212,500 shares of Common Stock
to Mr. Peters and stock options for an aggregate of 404,000 shares of Common
Stock to other executive officers. Of such grants, the vesting of stock options
for 200,000 shares granted to Mr. Peters and 380,000 shares granted to other
executive officers may be accelerated by attainment of certain targets for the
market price of Common Stock. There are not enough shares remaining under the
Company's option plans to cover all of the Company's most recent option grants.
The Company intends to seek the approval of its stockholders at its next annual
meeting of an amendment to the 1995 Performance Equity Plan that would, among
other things, increase the number of shares authorized for issuance under such
plan to an amount sufficient to allow such options. As a result, such options
are, in effect, subject to stockholder approval.
COMPENSATION COMMITTEE
Robert H. Alter
James L. Greenwald
-5-
<PAGE> 7
COMPARISON OF STOCK PRICE PERFORMANCE
On June 23, 1995, Holdings merged (the "Merger") into a wholly-owned
subsidiary of HBAC. HBAC was formed as a Delaware corporation in January 1993
for the purpose of acquiring a company in the communications industry. In
connection with the Merger, HBAC changed its name to Source Media, Inc. Because
HBAC was engaged in an activity substantially different than the activities of
Source Media Inc., two stock price performance comparisons follow. In addition,
in December 1995, in connection with its public offering of Common Stock, the
Common Stock was included in the Nasdaq Stock Market's National Market.
Post-Merger Performance Graph
The following graph and table compare cumulative total return of the
Company's Common Stock (listed in the graph and table under the symbol "SRCM")
with the cumulative total return of (i) the Total Return Index for The Nasdaq
Stock Market ("Nasdaq Index") and (ii) the Total Return Index for The Nasdaq
Telecommunication Stocks ("Telecom Index"). The graph and table assume $100 was
invested on June 23, 1995 (the date of the Merger) in each of the Company's
Common Stock, the Nasdaq Index and the Telecom Index, and the reinvestment of
dividends. The stockholder return shown is not necessarily indicative of future
stock performance.
STOCK PRICE PERFORMANCE COMPARISON
[GRAPH]
<TABLE>
<CAPTION>
6/23/95 6/30/95 12/31/95 6/30/96 12/31/96 6/30/97 12/31/97
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SRCM 100.00 100.00 86.90 89.29 65.48 95.24 83.33
- ------------------------------------------------------------------------------------------------------------
TELECOM INDEX 100.00 104.25 119.30 129.42 121.95 142.33 180.19
- ------------------------------------------------------------------------------------------------------------
NASDAQ INDEX 100.00 99.44 112.78 127.68 138.72 155.32 170.31
- ------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 8
Pre-Merger Performance Graph
The following graph and table compare cumulative total return of HBAC's
common stock (listed in the graph and table under the symbol "HBAC") with the
cumulative total return of (i) the Standard & Poor's Midcap 400 Index ("S&P
Index") and (ii) an industry peer group index consisting of four publicly held
Special Purpose Acquisition Corporation's (SPACsm) ("SPAC Index"). The graph and
table assume $100 was invested on June 30, 1993 (the day HBAC's common stock was
first traded on the OTC Bulletin Board) in each of HBAC common stock, the S&P
Index and the SPAC Index, and the reinvestment of dividends, through June 23,
1995, the date of the Merger.
STOCK PRICE PERFORMANCE COMPARISON
[GRAPH]
<TABLE>
<CAPTION>
6/30/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/23/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HBAC 100.00 100.00 100.00 97.37 96.05 102.63 100.00 110.53 110.53
- ---------------------------------------------------------------------------------------------------------------------------
SPAC INDEX 100.00 96.20 96.80 101.80 95.60 101.80 98.20 98.40 98.00
- ---------------------------------------------------------------------------------------------------------------------------
S&P INDEX 100.00 104.57 106.76 102.21 97.98 104.07 100.85 110.33 118.74
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 9
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the annual
compensation paid or accrued, together with the number of shares covered by
options granted, to the Company's Chief Executive Officer and the four other
highest paid executive officers in 1997 (the "named executive officers") for the
years indicated:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION (1) COMPENSATION
-------------------------------- ------------------
COMMON STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Timothy P. Peters 1997 $225,000 $132,656 12,500 --
Chairman of the Board and 1996 200,580 27,323 75,000 --
Chief Executive Officer 1995 125,000 56,121 7,554 --
John J. Reed 1997 $210,000 $ 44,012 38,000 --
President 1996 189,330 21,210 70,000 --
1995 125,000 39,854 7,097 --
W. Scott Bedford 1997 $210,000 $107,120 10,000 --
Chief Financial Officer 1996 189,330 23,607 70,000 --
and Treasurer 1995 125,000 43,604 7,097 --
Daniel D. Maitland (2) 1997 $170,000 $105,002 5,000 --
Executive Vice President 1996 -- -- 60,000(3) --
1995 -- -- -- --
W. Thomas Oliver (4) 1997 $250,000 $ 37,856 25,000 --
Executive Vice President 1996 140,224 12,375 225,000 --
1995 -- -- -- --
Michael G. Pate 1997 $183,333 $100,406 -- --
former Chief Financial Officer 1996 181,610 28,292 150,000 --
and Treasurer 1995 125,000 50,007 1,331 --
</TABLE>
- -----------------------------
(1) Amounts earned in a year but deferred at the election of the Company to a
subsequent year have been included in the year in which the amounts were
paid. Amounts earned under the Company's Annual Management Incentive Plan
in each year presented are included for the relevant year.
(2) Mr. Maitland was elected as an Executive Vice President of the Company in
September 1997. Mr. Maitland agreed in November 1996 to become President
of the Company's telephone division and began serving as such in January
1997. During 1996, Mr. Maitland served as a consultant to the Company, for
which he was paid $88,125 in compensation.
(3) Mr. Maitland was awarded these options in November 1996 shares in
connection with his acceptance of full-time employment with the Company.
(4) Mr. Oliver was elected as an Executive Vice President of the Company in
September 1997. Mr. Oliver became employed by the Company in June 1996, as
President of its interactive television division.
No individual named above received perquisites or non-cash compensation
during any of the years indicated exceeding the lesser of $50,000 or an amount
equal to 10 percent of such person's annual salary and bonus.
-8-
<PAGE> 10
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth, with respect to all options granted
during the Company's 1997 fiscal year to each of the Company's named executive
officers: (i) the number of shares of Common Stock covered by such options, (ii)
the percent that such options represent of total options granted to all Company
employees during the 1997 fiscal year, (iii) the exercise price, (iv) expiration
date, and (v) the potential realized value at the assumed annual rates of stock
price appreciation of 5% and 10% compounded over the term of the option. To
date, the Company has granted no stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
POTENTIAL
PERCENT OF REALIZED VALUE AT
TOTAL ASSUMED ANNUAL
NUMBER OPTIONS RATES OF STOCK
OF SHARES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERMS (2)
OPTIONS IN 1997 PRICE EXPIRATION ------------------------
NAME GRANTED (1) FISCAL YEAR PER SHARE DATE 5% 10%
- ----------------- ----------- ----------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Timothy P. Peters 12,500 3.5% $ 6.41 05/21/03 $ 98,035 $203,566
John J. Reed 10,000 2.8% $ 6.41 05/21/03 $ 78,428 $162,852
25,000 7.1% $ 8.25 12/15/07 $150,071 $361,131
W. Scott Bedford 10,000 2.8% $ 6.41 05/21/03 $ 78,428 $162,852
Daniel D. Maitland 5,000 1.4% $ 11.00 11/21/07 $ 16,264 $ 58,476
W. Thomas Oliver 25,000 7.1% $ 8.25 12/15/07 $150,071 $361,131
Michael G. Pate (3) -- -- -- -- -- --
</TABLE>
(1) All options were granted at or above fair market value on the date of
grant.
(2) The assumed 5% and 10% rates of stock price appreciation are specified by
the proxy rules and do not reflect expected appreciation. The amount
shown represents the assumed value of the stock options (less exercise
price) at the end of the ten year period beginning on the date of grant
and ending on the option expiration date. For a ten-year period beginning
December 31, 1997, based on the closing price on The Nasdaq Stock
Market's National Market of the Common Stock of $8.75 on such date, a
share of the Common Stock would have a value on December 31, 2007 of
approximately $14.25 at an assumed appreciation rate of 5% and
approximately $22.70 at an assumed appreciation rate of 10%.
(3) Mr. Pate resigned effective November 21, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table sets forth for each of the named executive officers
of the Company: (i) the number of shares of Common Stock acquired upon exercise
of options during fiscal year 1997; (ii) the net aggregate dollar value realized
upon exercise; (iii) the total number of unexercised options held at the end of
fiscal year 1997; and (iv) the aggregate dollar value of in-the-money
unexercised options held at the end of fiscal year 1997. To date, the Company
has issued no SARs.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997
ACQUIRED VALUE -------------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
TIMOTHY P. PETERS -- -- 5,571 91,499 -- $64,500
JOHN J. REED -- -- 5,114 108,999 -- $68,800
W. SCOTT BEDFORD -- -- 5,114 83,999 -- $56,300
DANIEL D. MAITLAND -- -- 40,000 25,000 $16,000 $ 8,000
W. THOMAS OLIVER -- -- 75,000 175,000 -- $ 1,250
MICHAEL G. PATE (1) 32,943 $53,113 -- -- -- --
</TABLE>
- --------------------
(1) Mr. Pate resigned effective November 21, 1997.
-9-
<PAGE> 11
ITEM 12. SECURITY OWNERSHIP OF CERATIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tabulation sets forth information with respect to each
person as of April 1, 1998 who was known to the Company to be the beneficial
owner of more than 5% of the Common Stock. Except as noted, each person listed
below is believed to have sole voting power and sole investment power with
respect to such shares:
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------- ------------------ --------
<S> <C> <C>
Timothy P. Peters(1) ........................ 713,198 6.12%
5400 LBJ Freeway
Suite 680
Dallas, TX 75240
21st Century Communications Partners, L.P.(2) 929,290 7.60%
767 Fifth Avenue
New York, NY 10019.........................
Freedom Communications, Inc. (3) ............ 738,094 6.31%
17666 Fitch
Irvine, CA 92714 ..........................
Pecks Management Partners, Ltd. (4) ......... 1,250,000 9.74%
One Rockefeller Plaza, Suite 900
New York, NY 10020
</TABLE>
(1) Includes 68,071 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(2) Includes 635,949 shares of Common Stock issuable upon exercise of
exercisable warrants. See "Security Ownership of Management" for certain
information regarding Michael J. Marocco, a director of the Company and
limited partner of 21st Century Communications Partners, L.P.
(3) Includes 100,000 shares of Common Stock issuable upon exercise of
exercisable warrants.
(4) Consists of shares of Common Stock issuable upon exercise of exercisable
warrants. Beneficial ownership of such shares was reported in a Schedule
13G dated January 27, 1998 filed with the SEC by Pecks Management Partners,
Ltd. ("Pecks"). In its Schedule 13G, Pecks reports that the shares for
which it reports beneficial ownership are owned by four investment advisory
clients of Pecks, which clients receive dividends and the proceeds from the
sale of such shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following tabulation sets forth information with respect to the
beneficial ownership of Common Stock as of April 1, 1998 (except as noted for
Mr. Pate) by each director of the Company, each nominee for director of the
Company, each executive officer listed in the Summary Compensation Table
included elsewhere in this Report on Form 10-K and all executive officers and
current directors of the Company as a group.
-10-
<PAGE> 12
<TABLE>
<CAPTION>
NAME SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- ---- ------------------------- ----------------
<S> <C> <C>
Directors and Nominees for Director
Timothy P. Peters(1)(N) ................... 713,198 6.12%
John J. Reed(2)(N) ........................ 226,095 1.95%
W. Scott Bedford(3) ....................... 507,551 4.36%
James L. Greenwald(4)(N)(C) ............... 6,000 *
Michael J. Marocco(5)(N) .................. 1,398,366 11.15%
Robert H. Alter(6)(C) ..................... 3,000 *
Robert J. Cresci(7)(A) .................... 1,253,000 9.76%
Barry Rubenstein (8) ...................... 1,562,267 12.35%
Michael S. Willner ........................ -- *
Executive Officers (excluding any directors
named above)
Daniel D. Maitland(9) ..................... 65,000 *
W. Thomas Oliver (10) ..................... 90,000 *
Michael G. Pate(11) ....................... 33,424 *
All current directors and executive
officers as a group (12 persons) ........ 4,621,817 32.47%
</TABLE>
- ------------------------
(A) Member of the Audit Committee.
(C) Member of the Compensation Committee.
(N) Member of the Nominating Committee.
* Less than one percent
(1) Includes 68,071 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(2) Includes 30,114 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(3) Includes 40,114 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(4) Includes 6,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(5) Includes (i) 9,675 shares of Common Stock issuable upon exercise of
exercisable warrants and (ii) 6,000 shares of Common Stock issuable upon
exercise of options exercisable within 60 days. Through an affiliate, Mr.
Marocco is a general partner of Sandler Capital Management, which through
an affiliate is managing general partner of 21st Century Communications
Partners, L.P., 21st Century Communications T-E Partners, L.P. and 21st
Century Communications Foreign Partners, L.P. Accordingly, also includes
(iii) 293,341 shares of Common Stock, (iv) 635,949 shares of Common Stock
issuable upon exercise of exercisable warrants held by 21st Century
Communications Partners, L.P., (v) 99,772 shares of Common Stock and, (vi)
216,374 shares of Common Stock issuable upon exercise of exercisable
warrants held by 21st Century Communications T-E Partners, L.P., (vii)
39,527 shares of Common Stock, and (viii) 85,615 shares of Common Stock
issuable upon exercise of exercisable warrants held by 21st Century
Communications Foreign Partners, L.P.
(6) Includes 3,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(7) Includes 1,250,000 shares of Common Stock issuable upon the exercise of
exercisable warrants held by four funds for which Pecks serves as
investment advisor. Mr. Cresci is a Managing Director of Pecks, but
disclaims beneficial ownership in all such shares. Also includes 3,000
shares of Common Stock issuable upon exercise of options exercisable within
60 days.
(8) Includes (i) 16,125 shares of Common Stock issuable upon exercise of
exercisable warrants. Mr. Rubenstein is a general partner of Applewood
Associates, L.P. and Woodland Partners, L.P. Accordingly, also includes
(ii) 50,000 shares of Common Stock beneficially owned by Applewood
Associates, L.P. and (iii) 101,875 shares of Common Stock issuable upon
exercise of exercisable warrants held by Woodland Partners, L.P. as to
which he disclaims beneficial ownership except to the extent of his
pecuniary interest. Mr. Rubenstein is an officer and shareholder of
Infomedia Associates, Ltd. which is one of the general partners of 21st
Century Communications Partners, L.P., 21st Century Communications T-E
Partners, L.P. and 21st Century Communications Foreign Partners, L.P.
Accordingly, also includes (iv) 293,341 shares of Common Stock and (v)
635,949 shares of Common Stock issuable upon exercise of exercisable
warrants held by 21st Century Communications Partners, L.P., (vi) 99,772
shares of Common Stock and (vii) 216,374 shares of Common Stock issuable
upon exercise of exercisable warrants held by 21st Century Communications
T-E Partners, L.P., (viii) 39,527 shares of Common Stock, and (ix) 85,615
shares of Common Stock issuable upon exercise of exercisable warrants held
by 21st Century Communications Foreign Partners, L.P.
(9) Includes 65,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(10) Includes 90,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
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(11) Mr. Pate resigned effective November 21, 1997. Beneficial ownership shown
for Mr. Pate is as of November 21, 1997, the most recent date for which the
Company has such information.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1993, John Reed, President and a director of the Company, exercised
an option he had received in 1989 to purchase an aggregate of 70,546 shares of
common Stock at an aggregate price of $50,000, or approximately $0.71 per share.
Mr. Reed paid for the shares by delivering to the company a nonrecourse
promissory note in the original principal amount of $50,000, bearing interest at
a rate of 10% per annum with all principal and interest payable in May 1995.
This note was cancelled and replaced by a similar note dated December 1, 1993 in
the principal amount of $52,083, and the shares of Common Stock were reissued as
of such date. As of May 1995, the repayment date was extended to May 31, 1997.
Effective May 15, 1997, the repayment date was extended to May 31, 1999. On
February 20, 1998, the note was amended to prohibit prepayment and to add
certain other provisions. As of March 31, 1998, the aggregate principal and
accrued interest outstanding was $73,759.
Robert J. Cresci, a director of the Company, is a Managing Director of
Pecks Management Partners Ltd., investment advisor to four of the lenders to the
Company under the senior secured notes issued in April 1997. The outstanding
balance of the senior secured notes, including accrued interest, held by funds
managed by Pecks Management Partners Ltd. as of October 23, 1997 was $10.7
million. The Company used proceeds from its 12% Senior Secured Notes and 13 1/2%
Senior PIK Preferred Stock to repay those notes.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOURCE MEDIA, INC.
Date: April 30, 1998 By: /s/ Timothy P. Peters
--------------------------------------
Chairman of the Board and Chief
Executive Officer
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