AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON November 13, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
The Source Company
(Exact name of registrant as specified in its charter)
Missouri 43-1710906
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11644 Lilburn Park Road
St. Louis, Missouri 63146
(Address of Principal Executive Offices) (Zip Code)
The Source Company Stock Award Plan
The Source Company 1995 Incentive Stock Option Plan
(Full title of each of the Plans)
S. Leslie Flegel
Chairman and Chief Executive Officer
The Source Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
(Name and address of agent for service)
(314) 995-9040
(Telephone number, including area
code, of agent for service)
Copies of all correspondence to:
Douglas J. Bates, Esq.
Gallop, Johnson & Neuman, L.C.
Interco Corporate Tower
101 South Hanley Road
St. Louis, Missouri 63105
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Proposed
Title of maximum
securities Amount Offering aggregate Amount of
to be to be price offering registra-
registered registered(1) per share(2) price tion fee
- ---------- ---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Common Stock 680,000 $2.9375 $1,997,500 $605.30
$.01 par
<FN>
(1) Represents maximum number of shares (50,000) available for issuance
under The Source Company Stock Award Plan, and the maximum number of
shares (630,000) available for issuance under The Source Company
Incentive Stock Option Plan.
(2) Estimated solely for the purpose of calculating the registration fee.
Such estimate has been calculated in accordance with Rule 457(h) under
the Securities Act of 1933 and is based upon the average of the bid and
asked price per share of the Registrant's Common Stock as reported on
the Nasdaq Small-Cap Market on November 11, 1996.
</FN>
</TABLE>
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed by The Source Company (the "Company")
with the Securities and Exchange Commission are incorporated herein by
reference:
(a) The Company's annual report on Form 10-KSB for the fiscal year ended
January 31, 1996 pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act");
(b) The Company's quarterly reports on Form 10-QSB for the quarters ended
April 30, 1996 and July 31, 1996; and
(c) The description of the Company's common stock which is contained in
the Form 10-SB filed by the Company under the Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including any amendment
or report filed for the purpose of updating such description.
All documents subsequently filed pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all such securities then remaining unsold, shall be deemed to be
incorporated by reference in this registration statement and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated by reference herein and filed prior to the filing hereof shall be
deemed to be modified or superseded for purposes of this registration statement
to the extent that a statement contained herein modifies or supersedes such
statement, and any statement contained herein or in any other document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this registration statement to the extent that a statement
contained in any other subsequently filed document which also is incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this registration statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Sections 351.355(1) and (2) of The General and Business Corporation Law
of the State of Missouri (the "Missouri Law") provide that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
II-1
<PAGE>
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
except that, in the case of an action or suit by or in the right of the
corporation, the corporation may not indemnify such persons against judgments
and fines and no person shall be indemnified as to any claim, issue or matter as
to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation, unless and only to
the extent that the court in which the action or suit was brought determines
upon application that such person is fairly and reasonably entitled to indemnity
for proper expenses.
Section 351.355(3) of the Missouri Law provides that, to the extent that
a director, officer, employee or agent of the corporation has been successful in
the defense of any such action, suit or proceeding or any claim, issue or matter
therein, he shall be indemnified against expenses, including attorney's fees,
actually and reasonably incurred in connection with such action, suit or
proceeding.
Section 351.355(7) of the Missouri Law provides that a corporation may
provide additional indemnification to any person indemnifiable under subsection
(1) or (2) of Section 351.355(7), provided such additional indemnification is
authorized by the corporation's articles of incorporation or an amendment
thereto or by a shareholder-approved bylaw or agreement, and provided further
that no person shall thereby be indemnified against conduct which was finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct or which involve an accounting for profits pursuant to Section 16(b)
of the Securities Act of 1934.
Paragraph 9 of the Articles of Incorporation of the Company permits the
Company to enter into agreements with its directors, officers, employees and
agents providing such indemnification as deemed appropriate. Paragraph 9 also
provides that the Company shall extend to its directors and executive officers
the indemnification specified in Sections 351.355(1) and (2) and the additional
indemnification authorized by Section 351.355(7) of the Missouri Law and that it
may extend to other officers, employees and agents such indemnification and
additional indemnification.
The Company has procured and intends to maintain a policy of insurance
under which the directors and officers of the Company will be insured, subject
to the limits of the policy, against certain losses arising from claims made
against such directors and officers by reason of any acts or omissions covered
under such policy in their respective capacities as directors or officers.
In addition, the Company has entered into indemnification agreements
with certain of its directors and executive officers. The form of indemnity
agreement provides that the directors and executive officers will be indemnified
to the full extent permitted by applicable law against all expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in settlement of
any threatened, pending or completed action, suit or proceeding, on account of
their services as a director or officer of the Company or any other company or
enterprise in which they are serving as an officer or director or other capacity
at the request of the Company, or as a guarantor of any debt of the Company. To
the extent the indemnification provided under the agreements exceed that
permitted by applicable law, such indemnification provisions may be
unenforceable or may be limited to the extent they are found by a court of
competent jurisdiction to be contrary to public policy.
Item 7. Exemption from Registration Claimed
Not Applicable.
II-2
<PAGE>
Item 8. Exhibits
See Exhibit Index.
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration statement
(or the most recent post-effective amendment hereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such information
in this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c)-(g) Not Applicable.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(i) Not Applicable.
(j) Not Applicable.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the County of St. Louis, State of Missouri, on November 13,
1996.
THE SOURCE COMPANY
By: /s/ S. Leslie Flegel
S. Leslie Flegel
Chairman and Chief Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and directors of The Source Company, Inc.,
hereby severally and individually constitute and appoint S. Leslie Flegel and W.
Brian Rodgers and each of them, the true and lawful attorneys and agents of each
of us to execute in the name, place and stead of each of us (individually and in
any capacity stated below) any and all amendments to this Registration Statement
on Form S-8 and all instruments necessary or advisable in connection therewith
and to file the same with the Securities and Exchange Commission, each of said
attorneys and agents to have the power to act with or without the other and to
have full power and authority to do and perform in the name and on behalf of
each of the undersigned every act whatsoever necessary or advisable to be done
in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys and agents and each of
them to any and all such amendments and instruments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
/s/ S. Leslie Flegel Chairman, Chief Executive
S. Leslie Flegel Officer and Director November 13, 1996
/s/ William H. Lee President, Chief Operating
William H. Lee Officer and Director November 13, 1996
/s/ W. Brian Rodgers Chief Financial Officer
W. Brian Rodgers (Principal Financial and
Accounting Officer) November 13, 1996
/s/ Timothy A. Braswell Director November 13, 1996
Timothy A. Braswell
/s/ Harry L. "Terry" Franc, III Director November 13, 1996
Harry L. "Terry" Franc, III
/s/ Aron Katzman Director November 13, 1996
Aron Katzman
/s/ Randall S. Minix Director November 13, 1996
Randall S. Minix
II-5
<PAGE>
FORM S-8
THE SOURCE COMPANY
EXHIBIT INDEX
Exhibit
Number Description Page
4.4 The Source Company Stock Award Plan
4.5 The Source Company 1995 Incentive Stock Option Plan
5.1 Opinion of Gallop, Johnson & Neuman, L.C.
23.1 Consent of BDO Seidman LLP
23.2 Consent of Gallop, Johnson & Neuman, L.C. (included
in Exhibit 5.1)
24.1 Power of Attorney (included on signature page of the
registration statement)
II-6
THE SOURCE COMPANY
STOCK AWARD PLAN
1. Purpose of Plan
The Source Company Stock Award Plan (the "Plan") is intended to provide
a means whereby The Source Company, a Missouri corporation (the "Company"), may
attract highly competent persons to remain in and enter the employ of the
Company and its subsidiaries, by providing them with opportunities to acquire
common stock of the Company, par value $0.01 per share ("Common Stock") pursuant
to awards ("Awards") described herein.
2. Administration of the Plan
The Plan will be administered by a Stock Award Committee ("Award
Committee") appointed by the Board of Directors of the Company ("Board"), to be
comprised of not less than two (2) members. Each member of the Award Committee
shall be: (i) a member of the Board; (ii) not eligible to receive any Awards
under this Plan; and (iii) a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934 or any successor rule or
regulation. Each member of the Award Committee shall serve at the pleasure of
the Board. Any vacancy occurring in the membership of the Award Committee shall
be filled by appointment by the Board. If the Board has a Compensation Committee
and its members meet the above requirements, at the discretion of the Board, the
Compensation Committee may concomitantly be the Award Committee.
The Award Committee shall have the sole power:
(A) subject to the provisions of the Plan, to determine the
terms and conditions of all Awards; to construe and interpret the Plan
and Awards granted under it; to determine provisions, if any, for the
forfeiture of and restriction on the sale, resale or other disposition
of shares acquired under any Award and waive or accelerate the lapse of
any such provisions; to establish, amend and revoke rules and
regulations relating to the Plan and its administration; and to correct
any defect, supply any omission, or reconcile any inconsistency in the
Plan, or in any Award Agreement, in a manner and to the extent it shall
deem necessary, all of which determinations and interpretations made by
the Award Committee shall be conclusive and binding on all Participants
(as that term is defined in Paragraph 3 below) and on their legal
representatives and beneficiaries; and
(B) to determine all questions of policy and expediency that
may arise in the administration of the Plan and generally exercise such
powers and perform such acts as are deemed necessary or expedient to
promote the best interests of the Company.
Any determination of the Award Committee under the Plan may be made
without notice or meeting of the Award Committee by a writing signed by a
majority of the Award Committee members.
<PAGE>
3. Persons Eligible for Awards
All employees (including officers) of the Company who are not members
of the Award Committee shall be eligible to receive Awards under the Plan. The
Award Committee shall determine the employees to whom Awards shall be granted,
but shall seek information, advice and recommendations from management to assist
the Award Committee in its independent determination as to the employees to whom
Awards shall be granted. An employee who has been granted an Award
("Participant"), if he or she is otherwise eligible, may be granted additional
Awards or other benefits under this or other plans of the Company.
4. Awards
Awards will consist of Common Stock transferred to Participants as a
bonus for service rendered to the Company without other payment therefor.
5. Shares Reserved Under the Plan
There is hereby reserved for issuance as Awards under the Plan an
aggregate of 50,000 shares of Common Stock, which may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and required by
the Company.
Any shares subject to Awards may thereafter be subject to new Awards
under this Plan if shares of Common Stock are issued under such Awards and are
thereafter reacquired by the Company pursuant to rights reserved by the Company
upon issuance thereof.
6. Adjustment Provisions
If the Company shall at any time change the number of issued shares of
Common Stock without new considerations to the Company (by stock dividends,
stock splits, or similar transactions), the total number of shares reserved for
issuance under the Plan shall be appropriately adjusted.
7. Other Provisions
Any Award under the Plan may also be subject to such other provisions
(whether or not applicable to the Award to any other Participant) as the Award
Committee determines appropriate, including without limitation, provisions for
the forfeiture of and restriction on the sale, resale or other disposition of
shares acquired under any Award, provisions giving the Company the right to
repurchase shares acquired under any Award, provisions to comply with federal
and state securities laws, restrictions on transferability or understandings or
conditions as to the Participant's employment in addition to those specifically
provided for under the Plan.
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<PAGE>
8. Continuance of Employment
Nothing contained in the Plan or in any Award granted under the Plan
shall confer upon any Participant any rights with respect to the continuation of
employment by the Company or interfere in any way with the right of the Company
(subject to the terms of any separate employment agreement to the contrary) at
any time to terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
granting of any Award.
9. Amendment and Termination
The terms and conditions applicable to any Award granted hereunder may
be amended or modified by mutual agreement between the Company and the
Participant or such other persons as may then have an interest therein. Also, by
mutual agreement between the Company and a Participant, or under any future plan
of the Company, Awards may be granted to such Participant in substitution and
exchange for, and in cancellation of any Awards previously granted such
Participant under this Plan, or any benefit previously or thereafter granted to
such Participant under any future plan of the Company. The Board may amend the
Plan from time to time or terminate the Plan at any time. However, no action
authorized by this paragraph shall reduce the amount of any existing Award or
change the terms or conditions thereof without the Participant's consent.
10. Effective Date of Plan
The Plan shall become effective upon adoption by the Board.
11. Term of Plan
No Award shall be granted under the Plan after ten (10) years after the
date of adoption of the Plan by the Board.
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THE SOURCE COMPANY
1995 INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan
The Source Company 1995 Incentive Stock Option Plan ("Plan") is
intended to provide additional incentive to certain valued and trusted employees
of The Source Company, a Missouri corporation (the "Company"), by encouraging
them to acquire shares of the $.01 par value common stock of the Company (the
"Stock") through options to purchase Stock granted under the Plan ("Options").
The purpose for granting such Options and making the purchase of the Stock
possible is to increase the proprietary interest of such employees in the
business of the Company and provide them with an increased personal interest in
the continued success and progress of the Company. The intended result is to
promote the interests of both the Company and its shareholders.
Options granted under the Plan are intended to qualify as "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). Each employee granted an Option
will receive and be required to accept a Stock Option Agreement with the Company
(the "Option Agreement"), which sets forth the terms and conditions of the
Option, in accordance with this Plan.
2. Administration of Plan
The Plan will be administered by a Stock Option Committee ("Option
Committee") appointed by the Board of Directors of the Company ("Board"), to be
composed of not less than three (3) members. Each member of the Option Committee
shall be: (i) a member of the Board; (ii) not eligible to receive any Options
under this Plan; and (iii) a "disinterested person" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934 or any successor rule or
regulation. Each member of the Option Committee shall serve at the pleasure of
the Board. Any vacancy occurring in the membership of the Option Committee shall
be filled by appointment by the Board. If the Board has a Compensation Committee
and its members meet the above requirements, at the discretion of the Board, the
Compensation Committee may concomitantly be the Option Committee.
The Option Committee shall have the sole power:
(a) subject to the provisions of the Plan, to determine the terms and
conditions of all Options; to construe and interpret the Plan and Options
granted under it; to determine the time or times an Option may be exercised, the
number of shares as to which an Option may be exercised at any one time, and
when an Option may terminate; to establish, amend and revoke rules and
regulations relating to the Plan and its administration; and to correct any
defect, supply any omission, or reconcile any inconsistency in the Plan, or in
any Option Agreement, in a manner and to the extent it shall deem necessary, all
of which determinations and interpretations made by the Committee shall be
conclusive and binding on all Optionees and on their legal representatives and
beneficiaries; and
<PAGE>
(b) to determine all questions of policy and expediency that may arise
in the administration of the Plan and generally exercise such powers and perform
such acts as are deemed necessary or expedient to promote the best interests of
the Company.
3. Shares Subject to the Plan
Subject to the provisions of paragraph 13, the Stock that may be issued
pursuant to Options granted under the Plan shall not exceed in the aggregate Six
Hundred Thirty Thousand (630,000) shares of $.01 par value common stock of the
Company. If any Options granted under the Plan terminate, expire or are
surrendered without having been exercised in full, the number of shares of Stock
not purchased under such Options shall be available again for the purpose of the
Plan. The Stock to be offered for purchase upon the grant of an Option may be
authorized but unissued Stock or Stock previously issued and outstanding and
reacquired by the Company.
4. Persons Eligible for Options
All employees of the Company who are not members of the Option
Committee shall be eligible to receive the grant of Options under the Plan. The
Option Committee shall determine the employees to whom Options shall be granted,
the time or times such Options shall be granted, the number of shares to be
subject to each Option and the times when each Option may be exercised. The
Option Committee shall seek information, advice and recommendations from
management to assist the Option Committee in its independent determination as to
the employees to whom Options shall be granted. An employee who has been granted
an Option (an "Optionee"), if he or she is otherwise eligible, may be granted
additional Options.
5. Purchase Price
The purchase price of each share of Stock covered by each Option
("Purchase Price") shall not be less than one hundred percent (100%) of the Fair
Market Value Per Share (as defined below) of the Stock on the date the Option is
granted. However, if and when an Option is granted the Optionee receiving the
Option owns or will be considered to own, by reason of Section 424(d) of the
Code, more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, the purchase price of the Stock covered by the
Option shall not be less than one hundred and ten percent (110%) of the Fair
Market Value Per Share of the Stock on the date the Option is granted.
"Fair Market Value Per Share" of the Stock shall mean: (i) if the Stock
is traded only otherwise than on a securities exchange and is quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), the closing quoted selling price of the Stock on the date of grant
of the Option, as reported by the Wall Street Journal; (ii) if the Stock is
admitted to trading on a securities exchange, the closing quoted selling price
of the Stock on the date of grant of the Option, as reported in the Wall Street
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<PAGE>
Journal; or (iii) if the Stock is traded only otherwise than on a securities
exchange and is not quoted on NASDAQ, the closing quoted selling price of the
Stock on the date of grant of the Option as quoted in the "pink sheets"
published by the National Daily Quotation Bureau. In any case, if there were no
sales of the Stock on the date of the grant of an Option, the Fair Market Value
Per Share shall be determined by the Option Committee in accordance with Section
20.2031-2 of the Federal Estate Tax Regulations.
6. Duration of Options
Any outstanding Option and all unexercised rights thereunder shall
expire and terminate automatically upon the earliest of: (i) the cessation of
the employment or engagement of the Optionee by the Company for any reason other
than retirement (under normal Company policies), death or disability; (ii) the
date which is three months following the effective date of the Optionee's
retirement from the Company's service; (iii) the date which is one year
following the date on which the Optionee's service with the Company ceases due
to death or disability; (iv) the date of expiration of the Option determined by
the Option Committee at the time the Option is granted and specified in such
Option; or (v) the tenth (10th) annual anniversary date of the granting of the
Option, or, if when an Option is granted the Optionee owns (or would be
considered to own by reason of Section 424(d) of the Code) more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
then on the fifth (5th) such anniversary. However, the Committee shall have the
right, but not the obligation, to extend the expiration of the Options held by
an Optionee whose service with the Company has ceased for any reason to the end
of their original terms, notwithstanding that such Options may no longer qualify
as ISOs under the Code.
7. Exercise of Options
(a) An Option may be exercisable in installments or otherwise upon such
terms as the Committee shall determine when the Option is granted.
(b) No Option will be exercisable (and any attempted exercise will be
deemed null and void) if such exercise would create a right of recovery for
"short-swing profits" under Section 16(b) of the Securities Exchange Act of
1934.
(c) No Option will become exercisable if the exercisability of such
Option would cause the aggregate fair market value (as determined at the time of
grant in accordance with the provisions of paragraph 5 hereof) of the Stock with
respect to which Option issued by the Company are first exercisable during such
calendar year to exceed $100,000. If the grant of an Option hereunder would
cause a violation of the foregoing limitation, the exercisability of the portion
of the Option granted hereunder shall be reduced to the extent necessary such
that no violation of the foregoing limitation will occur. Any Option with
respect to which exercisability has been deferred shall become first exercisable
on the first day of the calendar year in which such exercisability would not
cause a violation of the limitations
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<PAGE>
contained in Section 422(b)(7) of the Code; provided, however, if the
exercisability is required to be deferred beyond the expiration of such Option,
the grant of such Option shall be null and void.
8. Method of Exercise
(a) When the right to purchase shares accrues, Options may be exercised
by giving written notice to the Company stating the number of shares for which
the Option is being exercised, accompanied by payment in full by cash or its
equivalent, as is acceptable to the Company, of the purchase price for the
shares being purchased. The Company shall issue a separate certificate or
certificates of Stock for each Option exercised by an Optionee.
(b) In the Committee's discretion, determined at the time an Option is
granted, payment of the purchase price for shares may be made in whole or in
part with other shares of Stock of the Company which are free and clear of all
liens and encumbrances. The value of the shares of Stock tendered in payment for
the shares being purchased shall be the Fair Market Value Per Share on the date
of the Optionee's notice of exercise.
(c) Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of any shares for such period as may be required
for the Company, with reasonable diligence, to comply with any applicable
listing requirements of any national securities exchange or the National
Association of Securities Dealers, Inc. or any Federal, state or local law. If
the Optionee, or other person entitled to exercise an Option, fails to timely
accept delivery of and pay for the shares specified in such notice, the Option
Committee shall have the right to terminate the Option and the exercise thereof
with respect to such shares.
9. Nontransferability of Options
No Option granted under the Plan shall be assignable or transferable by
the Optionee, either voluntarily or by operation of law, other than by will or
the laws of descent and distribution, and, during the lifetime of the Optionee,
shall be exercisable only by the Optionee.
10. Continuance of Employment
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any rights with respect to the continuation of
employment by the Company or interfere in any way with the right of the Company
(subject to the terms of any separate employment agreement to the contrary) at
any time to terminate such employment or to increase or decrease the
compensation of the Optionee from the rate in existence at the time of the
granting of any Option.
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<PAGE>
11. Restrictions on Shares
If the Company shall be advised by counsel that certain requirements
under Federal or state securities laws must be met before Stock may be issued
under the Plan, the Company shall notify all persons who have been issued
Options, and the Company shall have no liability for the failure to issue Stock
under any exercise of Options because of any delay while such requirements are
being met or the inability of the Company to comply with such requirements.
12. Privilege of Stock Ownership
No person entitled to exercise any Option granted under the Plan shall
have the rights or privileges of a stockholder of the Company for any shares of
Stock issuable upon exercise of such Option until such person has become the
holder of record of such shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date on which such person
becomes the holder of record, except as provided in paragraph 13.
13. Adjustment
(a) If the number of outstanding shares of Stock are increased or
decreased, or such shares are exchanged for a different number or kind of shares
or securities of the Company, through reorganization, merger, recapitalization,
reclassification, stock dividend, stock split, combination of shares, or other
similar transaction, the aggregate number of shares of Stock subject to the
Plan, as provided in paragraph 3, and the shares of Stock subject to issued and
outstanding Options under the Plan shall be appropriately and proportionately
adjusted by the Committee. Any such adjustment in an outstanding Option shall be
made without change in the aggregate purchase price applicable to the
unexercised portion of the Option but with an appropriate adjustment in the
price for each share or other unit of any security covered by the Option.
(b) Notwithstanding paragraph (a), upon: (i) the dissolution or
liquidation of the Company, (ii) a reorganization, merger or consolidation of
the Company with one or more corporations in which the Company is not the
surviving corporation, (iii) a sale of substantially all of the assets of the
Company or (iv) the transfer of more than 80% of the then outstanding Stock of
the Company to another entity or person, in a single transaction or series of
transactions, the Board shall accelerate the time in which any outstanding
Options granted under the Plan may be exercised to a time prior to the
consummation of the transaction, and the Plan shall terminate upon such
consummation of the transaction. However, the acceleration of the time of
exercise of such Options and the termination of the Plan shall not occur if
provision is made in writing in connection with the transaction, in a manner
acceptable to the Board, for: (A) the continuance of the Plan and assumption of
outstanding Options, or (B) the substitution for such Options of new options to
purchase the stock of a successor corporation (or parent or subsidiary thereof),
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with appropriate adjustments as to number and kind of shares and option price.
The Board of Directors shall have the authority to amend this paragraph to
provide for a requirement that a successor corporation assume any outstanding
Options.
(c) Adjustments under this paragraph 13 shall be made by the Option
Committee, whose determination as to what adjustments shall be made, and the
extent thereof shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the Plan or in connection with any such adjustment.
14. Investment Purpose
Each Option granted hereunder may be issued on the condition that any
purchase of Stock by the exercise of an Option which is not the subject of a
registration statement permitting the sale or other distribution thereof shall
be for investment purposes and not with a view to resale or distribution (the
"Restricted Stock"). If requested by the Company, each Optionee must agree, at
the time of the purchase of any Restricted Stock, to execute an "investment
letter" setting forth such investment intent in the form acceptable to the
Company and must consent to any stock certificate issued to him thereunder
bearing a restrictive legend setting forth the restrictions applicable to the
further resale, transfer or other conveyance thereof without registration under
the Securities Act of 1933, as amended, and under the applicable securities or
blue sky laws of any other jurisdiction (together, the "Securities Laws"), or
the availability of exemptions from registration thereunder and to the placing
of transfer restrictions on the records of the transfer agent for such stock. No
Restricted Stock may thereafter be resold, transferred or otherwise conveyed
unless:
(1) an opinion of the Optionee's counsel is received, in
form and substance satisfactory to counsel for the Company, that
registration under the Securities Laws is not required; or
(2) such Stock is registered under the applicable Securities
Laws; or
(3) A "no action" letter is received from the staff of the
Securities and Exchange Commission and from the administrative
agencies administering all other applicable securities or blue
sky laws, based on an opinion of counsel for Optionee in form and
substance reasonably satisfactory to counsel for the Company,
advising that registration under the Securities Laws is not
required.
15. Amendment and Termination of Plan
(a) The Board of Directors of the Company may, from time to time, with
respect to any shares at the time not subject to Options, suspend or terminate
the Plan or amend or revise the terms of the Plan; provided that any amendment
to the Plan shall be approved by a majority of the shareholders of the Company
if the amendment would (i) materially increase the benefits accruing to
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participants under the Plan; (ii) increase the number of shares of Stock which
may be issued under the Plan, except as provided under the provisions of
paragraph 13; or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) Subject to the provisions of paragraph 13, the Plan shall terminate
ten (10) years from the earlier of the adoption of the Plan by the Board of
Directors or its approval by the shareholders.
(c) Subject to the provisions of paragraph 13, no amendment, suspension
or termination of this Plan shall, without the consent of each Optionee, alter
or impair any rights or obligations under any Option granted to such Optionee
under the Plan.
16. Effective Date of Plan
The Plan shall become effective upon adoption by the Board of Directors
of the Company and approval by the Company's shareholders; provided, however,
that prior to approval of the Plan by the Company's shareholders but after
adoption by the Board of Directors, Options may be granted under the Plan
subject to obtaining such approval.
17. Term of Plan
No Option shall be granted under the Plan after ten (10) years from the
earlier of the date of adoption of the Plan by the Board of Directors of the
Company or the date of approval by the Company's shareholders.
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November 13, 1996
Board of Directors
The Source Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
Re: Registration Statement on Form S-8
Gentlemen:
We have served as counsel to The Source Company (the "Company") in
connection with the various legal matters relating to the filing of a
registration statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended, and the Rules and Regulations promulgated
thereunder, relating to 680,000 shares of common stock of the Company, par value
$0.01 per share (the "Shares"), reserved for issuance in accordance with The
Source Company Stock Award Plan and The Source Company 1995 Incentive Stock
Option Plan (the "Plans").
We have examined such corporate records of the Company, such laws and
such other information as we have deemed relevant, including the Company's
Articles of Incorporation, as amended, Bylaws, certain resolutions adopted by
the Board of Directors of the Company relating to the Plans and certificates
received from state officials and from officers of the Company. In delivering
this opinion, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
the originals of all documents submitted to us as certified, photostatic or
conformed copies, and the correctness of all statements submitted to us by
officers of the Company.
Based upon the foregoing, the undersigned is of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Missouri.
2. The Common Stock being offered by the Company, if issued
in accordance with the Plans, will be validly issued and
outstanding and will be fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name in the Registration Statement. We also
consent to your filing copies of this opinion as an exhibit to the Registration
Statement with agencies of such states as you deem necessary in the course of
complying with the laws of such states regarding the issuance of the Shares
pursuant to the Plans.
Very truly yours,
/s/ Gallop, Johnson & Neuman, L.C.
BDO Seidman, LLP
720 Olive Street, Suite 2300
St. Louis, Missouri 63101-2387
Consent of Independent
Certified Public Accountants
The Source Company
St. Louis, Missouri
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated May 10,
1996 relating to the consolidated financial statements of The Source Company
appearing in the Company's Annual Report on Form 10-KSB for the year ended
January 31, 1996.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
St. Louis, Missouri
November 8, 1996
