SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[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 Section 240.14a-11(c) or
Section 240.14a-12
The Source Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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 to each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
THE SOURCE COMPANY
11644 Lilburn Park Road
St. Louis, Missouri 63146
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of June 13, 1997
The Source Company: St. Louis, Missouri
The Annual Meeting of the Shareholders of The Source Company will be held on
July 1, 1997 at 10:00 a.m Central Daylight Savings Time. Central Time in the
offices of the Company at 11644 Lilburn Park Road, St. Louis, Missouri 63146,
for the following purposes:
1. To elect two class II directors to each serve a three-year term and
until each director's successor has been elected and qualified;
2. To consider and vote upon a proposal to amend the Company's Articles
of Incorporation to decrease the number of authorized shares, reduce
the Company's stated capital and effect a 1-for-1.21 reverse stock
split of the Company's Common Stock;
3. To consider and vote upon a proposal to amend the Company's Articles
of Incorporation to change the Company's name.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on May 9, 1997, will be
entitled to vote at the meeting. A list of all shareholders entitled to vote at
the annual meeting, arranged in alphabetical order and showing the address of
and number of shares held by each shareholder, will be open at the principal
office of The Source Company, 11644 Lilburn Park Road, St. Louis, Missouri
63146, during usual business hours, to the examination of any shareholder for
any purpose germane to the annual meeting for 10 days prior to the date thereof.
The list of shareholders will also be available at the meeting for examination
at any time during the meeting.
A copy of the Company's Annual Report for fiscal year 1997 accompanies this
notice.
By Order of the Board of Directors
/s/ Alan G. Johnson
Alan G. Johnson
Secretary
Whether or not you intend to be present at the meeting, please mark, sign, date,
and return the accompanying proxy promptly. A return addressed envelope is
enclosed for your convenience.
<PAGE>
The Source Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
(314) 995-9040
PROXY STATEMENT
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of The Source Company,
a Missouri corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on July 1, 1997 in the offices of the Company at 11644
Lilburn Park Road, St. Louis, Missouri 63146, at 10:00 a.m. Central Daylight
Savings Time and at any adjournments thereof. Whether or not you expect to
attend the meeting in person, please return your executed proxy in the enclosed
envelope and the shares represented thereby will be voted in accordance with
your wishes. This proxy statement and the accompanying proxy card will be first
mailed to shareholders on or about June 13, 1997. All costs of solicitation of
proxies will be borne by the Company. In addition to solicitations by mail, the
Company's directors, officers and regular employees, without additional
remuneration, may solicit proxies by telephone, telegraph, telecopy and personal
interviews. Brokers, custodians and fiduciaries will be requested to forward
proxy soliciting material to the owners of stock held in their names and the
Company will reimburse them for their out-of-pocket expenses incurred in
connection with the distribution of proxy materials.
REVOCABILITY OF PROXY
If, after sending in your proxy, you decide to vote in person or desire to
revoke your proxy for any other reason, you may do so by notifying the Secretary
of the Company, or the presiding officer at the meeting, in writing of such
revocation at any time prior to the voting of the proxy, by attending the
meeting and voting in person, or by submitting a new proxy bearing a later date.
RECORD DATE
Only shareholders of record at the close of business on May 9, 1997, will be
entitled to vote at the meeting.
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<PAGE>
ACTION TO BE TAKEN UNDER PROXY
All properly executed proxies received by the Board of Directors pursuant to
this solicitation will be voted by S. Leslie Flegel and William H. Lee, or the
one of them who acts, in accordance with the directions specified in the proxy.
If no such directions have been specified by marking the appropriate squares in
the accompanying proxy card, the shares will be voted as follows:
(1) FOR the election of Timothy A. Braswell and Harry L. "Terry"
Franc III named herein as nominees for directors of the
Company to hold office for a term of three years expiring in
2000 and until each director's successor has been duly elected
and qualified;
(2) FOR an amendment of the Articles of Incorporation to decrease
the number of authorized shares of common stock, reduce the
Company's stated capital and effect a 1-for-1.21 reverse stock
split;
(3) FOR an amendment of the Articles of Incorporation to change
the name of the Company to Source Information Network, Inc.;
and
(4) According to their judgment, on the transaction of such other
business as may properly come before the meeting or any
adjournments thereof.
Should the nominee named herein for election as a director become unavailable
for any reason, it is intended that the persons named in the proxy will vote for
the election of such other person in his stead as may be designated by the Board
of Directors. The Board of Directors is not aware of any reason that might cause
the nominee to be unavailable.
VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF
AND CUMULATIVE VOTING RIGHTS
On May 9, 1997, there were 7,049,199 shares of Common Stock, par value $.01 per
share ("Common Stock"), outstanding, which constitute all of the outstanding
voting capital stock of the Company. Each shareholder is entitled to cast one
vote for each share of record on all matters to be voted on by the shareholders,
including the election of directors.
A majority of the outstanding shares present or represented by proxy will
constitute a quorum at the meeting. Votes that are withheld in the election of
directors, abstentions on all other matters properly brought before the meeting
and the proxies relating to "street name" shares which are not voted by brokers
on one or more, but less than all, matters (so-called "broker non-votes") will
be considered as shares present for purposes of determining a quorum. Under
applicable state law and the Company's Articles of Incorporation, an affirmative
vote of a majority of the shares present in person or represented by proxy at
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<PAGE>
the meeting is required for the election of directors and for approval of all
other matters that may be submitted to a vote of the shareholders at the 1997
Annual Meeting. With regard to the election of directors, votes that are
withheld will be excluded entirely from the vote and will have no effect. With
regard to other matters, abstentions (including proxies which deny discretionary
authority on any other matters properly brought before the meeting) will be
counted as shares present and entitled to vote and will have the same effect as
a vote against any such matters. Broker non-votes will not be treated as shares
represented at the meeting as to such matter(s) not voted on and therefore will
have no effect.
The following table sets forth as of May 9, 1997, the beneficial ownership of
each current director (including the nominees for election as directors), each
of the executive officers named in the Summary Compensation Table set forth
herein, the executive officers and directors as a group, and each other
shareholder known to the Company to own beneficially more than 5% of the
outstanding Common Stock. Unless otherwise indicated, the Company believes that
the beneficial owners set forth in the table have sole voting and investment
power.
Beneficial Ownership
--------------------
Name and Address
of Beneficial Owner Number of Shares Percent
- ------------------- ---------------- -------
S. Leslie Flegel 1,739,600 24.7
11644 Lilburn Park Road
St. Louis, Missouri 63146
William H. Lee 1,325,695 18.8
711 Gallimore Dairy Road
High Point, North Carolina 27265
Timothy A. Braswell 572,201 8.1
711 Gallimore Dairy Road
High Point, North Carolina 27265
Cameron Capital Ltd 440,713(a) 6.2
10 Cavendish Rd
Hamilton Hm 19
Bermuda
Robert B. Dixon 301,000 4.3
907 Park Drive
Flossmoor, Illinois 60422
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<PAGE>
Dwight L. DeGolia 178,400 2.5
11644 Lilburn Park Road
St. Louis, Missouri 63146
Jason S. Flegel 177,400 2.5
711 Gallimore Dairy Road
High Point, North Carolina 27265
Aron Katzman 131,643 1.9
10 Layton Terrace
St. Louis, Missouri 63124
Robert G. Shupe 44,727 *
4109 Pheasant Run
Greensboro, North Carolina 27408
John P. Watkins 40,000(b) *
711 Gallimore Dairy Road
High Point, North Carolina 27265
Harry L. Franc, III 31,398 *
19 Briarcliff
St. Louis, Missouri 63124
Randall S. Minix 7,000 *
5502 White Blossom Drive
Greensboro, North Carolina 27410
All directors and executive 4,549,064 64.5
officers as a group (11 persons)
- ------------------------
* Less than 1%
(a) Includes 142,857 shares of Common Stock which are or may become issuable to
Cameron Capital Ltd. upon conversion of 5,000 shares of Preferred Stock
calculated based on the Market Value (as defined) of the Common Stock as of
March 31, 1997.
(b) Includes exercisable options to acquire 40,000 shares of Common Stock at an
exercise price of $4.63 per share.
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<PAGE>
PROPOSAL 1 - ELECTION OF TWO CLASS II DIRECTORS
INFORMATION ABOUT THE NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Articles of Incorporation and Bylaws currently provide for three
classes of directors, each class serving for a three-year term expiring one year
after the term of the preceding class, so that the term of one class will expire
each year. The terms of the current Class III and Class I directors expire in
1998 and 1999, respectively. The Board of Directors has nominated Timothy A.
Braswell and Harry L. "Terry" Franc, III, who are currently Class II directors,
for re-election to each serve a three-year term expiring at the annual meeting
of shareholders in 2000. The following table sets forth certain information
concerning Mr. Braswell and Mr. Franc and those directors who are continuing in
office.
<TABLE>
NOMINEES FOR DIRECTOR - CLASS II
(to be elected to serve a three-year term)
<CAPTION>
Director
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
Timothy A. Braswell 68 Consultant to Wholesale Magazine Industry 1995
Harry L. "Terry" Franc, III 61 Senior Executive Officer of Bridge Information 1995
Systems, Inc. and Vice-President of Bridge Trading
Company
</TABLE>
Timothy A. Braswell has been a director of the Company since it commenced
operations in May 1995. He established Braswell Investment Company, a consultant
and broker of wholesale magazine businesses in 1994 and is its owner. For more
than five years prior thereto, Mr. Braswell was the principal owner and chief
executive officer of City News Co. and Dixie News Co., each of which is a
wholesale periodical company.
Harry L. "Terry" Franc, III, has been a director of the Company since it
commenced operations in May 1995. For more than 20 years, Mr. Franc has served
as a director and senior executive officer of Bridge Information Systems, Inc.,
a St. Louis, Missouri, based provider of information services to the securities
industry. In addition, Mr. Franc has served as executive vice president of
Bridge Trading Company, a registered broker-dealer and member of the New York
Stock Exchange. Bridge Trading Company is a subsidiary of Bridge Information
Systems, Inc.
<TABLE>
DIRECTORS CONTINUING IN OFFICE - CLASS III
(terms expiring in 1998)
<CAPTION>
Director
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
S. Leslie Flegel 59 Chairman and Chief Executive Officer of the Company 1995
William H. Lee 46 President and Chief Operating Officer of the Company 1995
</TABLE>
S. Leslie Flegel has been a director, Chairman and Chief Executive Officer of
the Company since its inception in April 1995. For more than 14 years prior
thereto, Mr. Flegel was the principal owner and chief executive officer of
Display Information Systems Company ("DISC"), a predecessor of the Company. From
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<PAGE>
January 1992 to June 1993, Mr. Flegel also served as the chief executive officer
of NationsMart Corporation, an operator and franchisor of dry cleaning, laundry,
shoe repair and formal wear service centers, prior to its December 1993 initial
public offering of securities.
William H. Lee has been a director, President and Chief Operating Officer of the
Company since its inception in April 1995. For approximately 14 years prior
thereto, Mr. Lee was the principal owner and chief executive officer of
Periodical Marketing and Management, Inc. ("PMM"), a predecessor of the Company.
DIRECTORS CONTINUING IN OFFICE - CLASS I
(terms expiring in 1999)
Director
Name Age Position Since
---- --- -------- -----
Aron Katzman 59 President, New Legends, Inc. 1995
Randall Minix 47 Managing Partner, Minix, 1995
Morgan & Company, L.L.P.
Aron Katzman has served as a director of the Company since it commenced
operations in May 1995. Mr. Katzman is the President of New Legends, Inc., one
of St. Louis' leading country club/residential communities. For more than five
years prior to April 1994, when it was sold, Mr. Katzman served as the chairman
and chief executive officer of Roman Company, a manufacturer and distributor of
fashion custom jewelry. Mr. Katzman currently serves as a member of the Board of
Directors of Phonetel, Inc.
Randall S. Minix has served as a director of the Company since it commenced
operations in May 1995. For more than five years, Mr. Minix has been the
managing partner of Minix, Morgan & Company, L.L.P., an independent accounting
firm headquartered in Greensboro, North Carolina, and its predecessors.
The Board of Directors of the Company consists of six members, each of whom
serve in such capacity for a three-year term or until a successor has been
elected and qualified, subject to earlier resignation, removal or death. The
number of directors comprising the Board of Directors may be increased or
decreased by resolution adopted by the affirmative vote of a majority of the
Board of Directors. The Company's Articles of Incorporation and Bylaws provide
for three classes of directorships serving staggered three year terms such that
one-third of the directors are elected at each annual meeting of shareholders.
During fiscal 1997, six meetings of the Board of Directors were held. Except for
Mr. Braswell, each director attended 75 percent or more of the aggregate of (i)
the total number of meetings held during fiscal year 1997 and (ii) the total
number of meetings held during such period by all committees of the Board of
Directors on which he served.
The Board of Directors of the Company has established an Audit Committee, a
Compensation Committee, a Finance Committee and an Acquisition Committee. The
Audit Committee is comprised of two non-employee directors, presently Messrs.
Minix and Katzman, and has the responsibility of recommending the firm that will
serve as the Company's independent auditors, reviewing the scope and results of
the audit and services provided by the Company's independent accountants, and
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<PAGE>
meeting with the financial staff of the Company to review accounting procedures
and policies. During fiscal 1997, the Audit committee held six meetings. The
Compensation Committee is comprised of three non-employee directors, presently
Messrs. Katzman, Braswell and Franc, and has been given the responsibility of
reviewing the financial records of the Company to determine overall compensation
and benefits for executive officers of the Company and to establish and
administer the policies which govern employee salaries and benefit plans. During
fiscal 1997, the Compensation committee held six meetings. The Finance Committee
is to be comprised of two directors. Presently, Mr. Franc serves as one member
and the other position is vacant. The Finance Committee has been given the
responsibility of monitoring the Company's capital structure, reviewing
available alternatives to satisfy the Company's liquidity and capital
requirements and recommending the firm or firms which will provide investment
banking and financial advisory services to the Company. During fiscal 1997, the
Finance committee did not meet. The Company's Acquisition Committee is comprised
of three directors, presently Messrs. Franc, Braswell and Katzman, and has been
given the responsibility of monitoring the Company's search for attractive
acquisition opportunities, consulting with members of management to review plans
and strategies for the achievement of the Company's external growth objectives
and recommending the firm or firms that will serve as advisors to the Company in
connection with the evaluation of potential business combinations. During fiscal
1997, the Acquistion committee did not meet.
The Board of Directors evaluates and nominates qualified nominees for election
or appointment as Directors and qualified persons for selection as Senior
Officers. The Board of Directors will give appropriate consideration to a
written recommendation by a shareholder for the nomination of a qualified person
to serve as a Director of the Company, provided that such recommendation
contains sufficient information regarding the proposed nominee for the Board of
Directors to properly evaluate such nominee's qualifications to serve as
Director.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year and Form 5 and amendments
thereto, or written representations that no Form 5 is required, furnished to the
Company, two persons, Messrs. Jason S. Flegel and W. Brian Rodgers, each failed
to timely file a Form 3, Initial Statement of Beneficial Ownership of
Securities.
Director Compensation
Under the Company's present policy, each director of the Company who is not also
an employee of the Company will receive $1,000 payable in Common Stock of the
Company, with the exception of Mr. Minix who will be paid in cash, for each
meeting of the Board of Directors attended. Directors are also entitled to be
reimbursed for expenses incurred by them in attending meetings of the Board of
Directors and its committees.
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<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company who are not also directors of the Company:
Name Age Position
- ---- --- --------
John P. Watkins 41 Chief Administration Officer
Dwight L. DeGolia 52 Executive Vice President
Robert B. Dixon 46 Executive Vice President and President-
Periodical Information Management
W. Brian Rodgers 31 Assistant Secretary and Chief Financial
Officer
Jason S. Flegel 31 Senior Vice President of RDA Operations
Robert G. Shupe 50 Senior Vice President and President -
Display Group
John P. Watkins has served as President - Retail Service Group and Chief
Administration Officer since February 1, 1996. For more than 16 year prior
thereto, Mr. Watkins served in several senior management positions with Food
Lion, Inc., a seven billion dollar retail grocery chain. From September, 1992 to
July 1995, Mr. Watkins served as Senior Vice President and Chief Operating
Officer and a member of the Board of Directors of Food Lion, Inc.
Dwight L. DeGolia has served as Executive Vice President of the Company since
its commencement of operations in May 1995. For more than 10 years prior
thereto, Mr. DeGolia served as executive vice president of sales and marketing
for DISC. From 1986 to 1993, Mr. DeGolia also served as a director of Advanced
Marketing Services, a leading supplier of books to wholesale clubs.
Robert B. Dixon became Executive Vice President and President - Periodical
Rebate Group in June 1995. For more than 13 years prior thereto, Mr. Dixon
served as President and was the principal shareholder of Dixon's Modern
Marketing Concepts, Inc. and related entities.
W. Brian Rodgers has served as Assistant Secretary of the Company and Chief
Financial Officer since October 1996. Prior to joining the Company, Mr. Rodgers
practiced for seven years as a certified public accountant with BDO Seidman,
LLP.
-8-
<PAGE>
Jason S. Flegel has served as Senior Vice President of RDA Operations since June
1996. Prior thereto, and since the Company's inception in April 1995, Mr. Flegel
served as Vice President - Western Region. Mr. Flegel was an owner and chief
financial officer of DISC, a predecessor of the Company. Mr. Flegel is the son
of S. Leslie Flegel.
Robert G. Shupe has served as Senior Vice President since February 1996 and as
President-Display Group of the Company since commencement of its operations in
May 1995. From February 1985 to January 1995, Mr. Shupe held the position of
Executive Vice President-Sales for PMM. Prior to joining PMM, Mr. Shupe was
employed in the marketing division of McCall's Magazine.
Certain Relationships and Related Transactions
From time to time, the Company has engaged in various transactions with its
directors, executive officers and other affiliated parties. The following
paragraphs summarize certain information concerning such transactions and
relationships which have occurred during the past two fiscal years or which are
presently proposed.
S. Leslie Flegel, Chairman and Chief Executive Officer of the Company and Dwight
L. DeGolia, Executive Vice President of the Company, have from time to time
received cash advances from the Company. The largest aggregate amount of such
indebtedness outstanding at any time since February 1, 1995 was $270,675 and
$14,618, respectively. All such advances are evidenced by promissory notes in
favor of the Company. Such notes bear interest at the rate of 7.34% per annum,
and are payable in five equal annual installments.
The Company incurred a debt to Timothy A. Braswell on March 1, 1991 in the
amount of $300,000, which accrued interest at the rate of 10% per annum. The
indebtedness matured on January 1, 1996 and was paid in full on the maturity
date.
711 Gallimore Partnership, a North Carolina general partnership in which William
H. Lee and Robert G. Shupe are partners, provides the Company with certain
office space in Greensboro, North Carolina under the terms of a written lease
dated June 28, 1991. The lease, as amended in January 1996, provides for annual
rent of $150,300 and expires in 2012. In fiscal 1996 and 1997, the Company paid
711 Gallimore Partnership $147,275 and $157,498, respectively, in rent.
2532 Investments, Inc., a North Carolina corporation in which William H. Lee is
a shareholder, had occasionally provided the Company with the use of an
airplane. In fiscal 1996, the Company paid 2532 Investments $57,926 in
consideration for the use of the airplane.
Data-Pros, Inc. ("Data-Pros"), a corporation in which William H. Lee and Robert
G. Shupe are shareholders, provided the Company with data processing services.
In fiscal 1996 and 1997, the Company paid Data-Pros $306,751 and $274,893,
respectively, for such services. On January 1, 1997 the Company purchased the
assets of Data-Pros for $45,000.
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<PAGE>
On June 15, 1995, the Company acquired all of the business and assets of Dixon's
Modern Marketing Concepts, Inc. and Tri-State Stores, Inc. in exchange for the
issuance of an aggregate of 300,000 shares of Common Stock. Robert B. Dixon was
the President and principal shareholder of each of these corporations.
Robert B. Dixon, Executive Vice President and President-Periodical Information
Management, provided the Company with office space in Chicago Heights, Illinois
under the terms of a written lease dated January 1, 1993. The lease provided for
annual rent of $36,000 and expired on December 31, 1996. Currently, the space is
leased on a month-to-month basis. In fiscal 1996 and 1997, the Company paid Mr.
Dixon $36,000 and $36,000, respectively, in rent.
From time to time, the Company has been engaged by Specialty Marketing Co.,
Inc., a corporation in which Robert B. Dixon is the principal shareholder, to
provide consulting services. In fiscal 1996, Specialty Marketing Co., Inc. paid
the Company $85,611 in consideration for the Company's services.
FMG, Inc., a North Carolina corporation in which William H. Lee and Robert G.
Shupe are shareholders, has from time to time received cash advances from the
Company. There were no such outstanding advances at January 31, 1997.
On March 11, 1996, the Company sold an aggregate of 5,000 shares of its
Preferred Stock in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended, to Messrs. Braswell, Franc and Katzman.
Messrs. Braswell, Franc and Katzman purchased 2,250, 500 and 2,250 shares,
respectively. The Company received payment for the shares from each of the
purchasers in the amount of $100 per share. During the year Messrs. Braswell,
Franc and Katzman converted their Preferred Stock to 64,285, 13,698 and 64,643
shares of common stock, respectively.
Executive Compensation
The following table summarizes information concerning cash and non-cash
compensation paid to or accrued for the benefit of the named executive officers
for all services rendered in all capacities to the Company and its predecessors
in fiscal years 1995, 1996 and 1997.
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name of Principal Annual Compensation Other Annual
Position Year Salary Bonus Compensation(a)
-------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
S. Leslie Flegel 1997 $227,500 $176,398 $30,624
Chairman and Chief Executive 1996 $200,000 $26,543 $30,995
Officer 1995 $171,875 --- $22,425
William H. Lee 1997 $224,830 $30,000 $13,944
President and Chief Operating 1996 $192,646 --- $19,006
Officer 1995 $145,000 $60,000 $25,937
Dwight L. DeGolia 1997 $140,000 $4,773 $11,223
Executive Vice President 1996 $134,884 --- $16,739
1995 $97,358 --- $9,790
John P. Watkins 1997 $150,000 --- $11,891
Chief Administration Officer 1996 --- --- ---
1995 --- --- ---
Robert B. Dixon 1997 $150,000 --- $13,907
Executive Vice President and 1996 $114,000 $50,000 $5,458
President - Periodical 1995 $36,000 $128,500 $26,982
Information Management
- ------------------------
<FN>
(a) Reflects personal benefits derived by Messrs. Flegel, Lee, DeGolia, Watkins
and Dixon primarily in connection with personal use of Company automobiles,
country club membership dues and life insurance premiums. In fiscal 1997, the
estimated incremental cost to the Company of the use by Messrs. Flegel, Lee,
DeGolia, Watkins and Dixon of Company automobiles was $10,339, $8,650, $6,090,
$7,800 and $8,597, respectively. In fiscal 1996, such cost was $11,444, $6,234,
$6,360, $0 and $3,158, respectively. In fiscal 1995, such cost was $10,417,
$8,753, $5,728, $0 and $0, respectively.
</FN>
</TABLE>
In fiscal 1997, the estimated incremental cost to the Company of the
membership dues paid on behalf of Messrs. Flegel, Lee, DeGolia, Watkins and
Dixon was $11,192, $2,239, $5,133, $3,330 and $5,310, respectively. In fiscal
1996, such cost was $11,503, $4,738, $4,751, $0 and $2,300, respectively. In
fiscal 1995, such cost was $8,212, $4,356, $4,751, $0 and $2,300, respectively.
In fiscal 1997, the estimated incremental cost to the Company of life
insurance premiums paid on behalf of Messrs. Flegel, Lee, DeGolia, Watkins and
Dixon was $9,093, $3,056, $0, $761 and $0, respectively. In fiscal 1996, such
cost was $8,048, $8,033, $5,628, $0 and $0, respectively. No life insurance
premiums were paid on behalf of the officers in fiscal 1995.
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<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<CAPTION>
Number of % of Total
Securities Options/SARS
Underlying Granted to Exercise or
Options/SARS Employees in Base Price Expiration
Name Granted #(1) Fiscal Year ($/Sh) Date
---- ------------ ----------- ------ ----
<S> <C> <C> <C>
S. Leslie Flegel 0 0 0 -
William H. Lee 0 0 0 -
Dwight L. DeGolia 0 0 0 -
John P. Watkins 100,000 44% $4.63 2-01-01
Robert B. Dixon 0 0 0 -
- ----------------------------
<FN>
(1) Options were granted February 1, 1996 and are exercisable 20% a year,
cumulatively, for a period of five years.
</FN>
</TABLE>
<TABLE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FYE OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the Money
Option/SARs at Options/SARs at
Shares Fiscal Year End (#) Fiscal Year End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
S. Leslie Flegel 0 0 0/0 0/0
William H. Lee 0 0 0/0 0/0
Dwight L. DeGolia 0 0 0/0 0/0
John P. Watkins 0 0 40,000/60,000 0/0
Robert B. Dixon 0 0 0/0 0/0
</TABLE>
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PROPOSAL 2 - AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO AUTHORIZE A 1-FOR-1.21 REVERSE STOCK SPLIT
The Board of Directors proposes and recommends that the shareholders authorize
an amendment of the Company's Articles of Incorporation to effect a 1-for-1.21
reverse stock split of all of the authorized shares of Common Stock of the
Company (the "Reverse Stock Split Amendment").
As of May 9, 1997, the Company had authorized 20,000,000 shares of Common Stock,
$0.01 par value and 2,000,000 shares of Preferred Stock, $0.01 par value. As of
that date, there were issued and outstanding 7,049,199 shares of Common Stock
and 5,600 shares of Preferred Stock. Except for the receipt of cash in lieu of
fractional interests, the Reverse Stock Split Amendment will not affect any
shareholders' proportionate equity interest in the Company. The reverse stock
split will be effected through an amendment to the Company's Articles of
Incorporation, the form of which is set forth in Exhibit A hereto.
The Reverse Stock Split Amendment will not have any material impact upon the
aggregate capital represented by the shares of capital stock for financial
statement purposes. However, the par value of the Common Stock will remain $0.01
after the reverse stock split, thus, there will be a reduction in the Company's
stated capital. Adoption of the Reverse Stock Split Amendment will reduce the
presently authorized and outstanding shares of Common Stock as indicated on the
table below. In connection with the reverse stock split, the shareholders of
record on the effective date of the Reverse Stock Split Amendment will receive
one share of Common Stock, or cash for any resulting fractional share, or both,
in exchange for 1.21 shares of Common Stock then outstanding in their name.
<TABLE>
<CAPTION>
Before Split After Split
----------------------------- -----------------------------------
Class of
Stock Authorized Issued Par Value Authorized Issued Par Value
- -------- ---------- ------ --------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Common Stock 20,000,000 7,049,199 $0.01 16,528,925 5,825,784(1) $0.01
<FN>
(1) Does not reflect the reduction resulting from the elimination of fractional
shares.
</FN>
</TABLE>
Reasons for the Reverse Stock Split
The Board of Directors believes that the current per share price level of the
Company's Common Stock has reduced the attractiveness of the shares to potential
investors and created a reluctance in many brokerage firms to recommend the
Common Stock to their clients. In addition, a variety of brokerage house
policies and practices tend to discourage individual brokers within those firm
from dealing in low price stock. Some of those policies and practices pertain to
the payment of brokers commissions and to time consuming procedures that
function to make the handling of shares, like those of the Company, unattractive
to brokers from an economic standpoint. In addition, continued listing of the
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Company's shares on the Nasdaq SmallCap Market, is conditioned on, among other
things, a minimum bid price for the Company's shares equal or exceeding $1.00
per share. On May 13, 1997, the closing bid price of the Company's shares of
Common Stock was $1.00. Accordingly, there is a continuing risk that the
Company's shares may be delisted from the Nasdaq SmallCap Market. If the
Company's shares cease to be listed and traded on the Nasdaq SmallCap Market,
the shares would likely be quoted on the Nasdaq OTC Bulletin Board or the "pink
sheets" maintained by National Quotation Bureau, Inc., resulting in an increase
in the spread between the bid and ask price of the shares and shareholders may
experience a greater degree of difficulty in engaging in trades of Common Stock.
The decrease in the number of shares of Common Stock outstanding as a
consequence of the proposed reverse stock split should increase the per share
bid price of the Common Stock, which may encourage greater interest in the
Common Stock and possibly promote greater liquidity for the Company's
shareholders. However, the increase in the per share bid price of the Common
Stock as a consequence of the reverse stock split may be proportionately less
than the decrease in the number of shares outstanding. In addition, any
increased liquidity due to any increased per share bid price could be partially
or entirely offset by the reduced number of shares outstanding after the reverse
stock split. While the Board of Directors believes that the reverse stock split
will result in a per share bid price that adequately compensates for the adverse
impact of the market factors noted above, there can be no assurance that the
favorable effects described above will occur, or that any increase in per share
bid price of the Common Stock resulting from the proposed reverse stock split
will be maintained for any period of time.
The effective date of an Amendment of the Company's Articles of Incorporation
effecting the reverse stock split will be determined by the management of the
Company based upon their evaluation as to when such action will be most
advantageous to the Company and its shareholders. The reverse stock split will
become effective on the date that the Reverse Stock Split Amendment is filed
with the Secretary of State of the State of Missouri (the "Effective Date"). At
the Effective Date, each share of the Common Stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
changed into 0.82645 of a share of the Company's Common Stock, par value $0.01
per share (the "New Common Stock"). Shortly after the Effective Date, the
Company will send transmittal forms to the holders of the Old Common Stock to be
used in forwarding their certificates representing shares of Old Common Stock to
the Company's Transfer Agent for surrender in exchange for certificates
representing whole shares of the New Common Stock and reflecting the reduction
in the number of shares authorized by the Company.
Certain shareholders may be entitled to receive a fractional interest of a share
of Common Stock after the reverse stock split. For example, a shareholder owning
100 shares of Common Stock before the reverse stock split will be entitled to
receive 82.645 shares of Common Stock after the reverse stock split. The Company
will not issue scrip or fractional shares of Common Stock. Instead, as soon as
practicable after the Effective Date, the Company will pay in cash the
fractional interest based on the closing bid price of the Company's Common Stock
on the Effective Date, as reported by the Nasdaq SmallCap Market, as adjusted
for the reverse stock split. Based on the previous example, and assuming that
the closing bid price for the Company's Common Stock on the Effective Date is
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<PAGE>
$1.50, the shareholder will be entitled to receive 82 shares of the Company's
Common Stock and $1.17 in cash (the closing bid price, adjusted for the reverse
split, $1.815 ($1.50 x 1.21) multiplied by the fractional interest of 0.645).
The reverse stock split may result in some shareholders owning "odd-lots" of
less than 100 shares of Common Stock. Brokerage commissions and other costs of
transactions in odd-lots are generally somewhat higher than costs of
transactions in "round-lots" of the even multiples of 100 shares.
PROPOSAL 3 - AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO AUTHORIZE A CHANGE IN THE COMPANY'S NAME
The Board of Directors proposes and recommends that the shareholders authorize
an amendment to the Company's Articles of Incorporation to change the name of
the Company from The Source Company to Source Information Network, Inc. Such
amendment will, subject to shareholder approval, take effect as soon as
practicable after the Annual Meeting.
The Board believes that the Company's current name is nondescript and has little
name recognition or identification among the investing public or in the
investment community. The Board believes that the name, Source Information
Network, Inc. would better reflect the Company's current and proposed business
operations and that the new name would be more attractive to a broader spectrum
of investors and, therefore, should benefit both the Company and its
shareholders.
If the proposed name change is approved by the shareholders, the Company will
apply to the NASDAQ Small Cap market for the continued listing of its stock
under the new name. The change of the Company's name will be effected through an
amendment to Article 1 of the Company's Articles of Incorporation, the form of
which is set forth in Exhibit B hereto.
OTHER BUSINESS
Management does not know of any other matters which may come before the Meeting.
However, if any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of the shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its principal office
in St. Louis, Missouri not later than February 21 , 1998 for inclusion in the
proxy statement for that meeting.
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<PAGE>
RELATIONSHIP WITH THE INDEPENDENT ACCOUNTANTS
BDO Seidman, LLP ("BDO Seidman") served as the independent public accountant for
the Company in fiscal 1997. The Company's independent public accountant for
fiscal 1998 will be selected by the Board at a regular Board meeting to be held
in fiscal 1998. Representatives of BDO Seidman will be present at the annual
meeting with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
By Order of the Board of Directors
/s/ Alan G. Johnson
Alan G. Johnson, Secretary
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR
STOCK PERSONALLY BY DELIVERING A WRITTEN REVOCATION OF YOUR PROXY TO THE
SECRETARY OF THE COMPANY.
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<PAGE>
EXHIBIT A
Proposed Amendment to Article 4 of Company's
Articles of Incorporation to Affect the Reverse Stock Split
RESOLVED, that section (a) of Article 4 of the Company's Articles of
Incorporation is hereby deleted in its entirety and replaced as follows:
(a) The aggregate number of shares of capital stock which the
corporation shall have authority to issue is eighteen million five
hundred twenty eight thousand nine hundred twenty-five (18,528,925),
each having a par value of One Cent ($0.01) per share. Of such
authorized shares, sixteen million five hundred twenty-eight thousand
nine hundred twenty-five (16,528,925) shares are hereby classified and
designated as common stock and two million (2,000,000) shares are
hereby classified and designated as preferred stock.
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<PAGE>
EXHIBIT B
Proposed Amendment to Article 1 of the Company's
Articles of Incorporation to Change the Corporation's Name
RESOLVED, that Article 1 of the Company's Articles of Incorporation is
hereby deleted in its entirety and replaced as follows:
"The name of the Corporation is SOURCE INFORMATION NETWORK, INC."
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<PAGE>
THE SOURCE COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, JUNE 24, 1997 AT 10:00 A.M.
The undersigned stockholder of The Source Company (the "Company")
hereby appoints S. Leslie Flegel and William H. Lee and each of them as
attorneys and proxies, each with power of substitution and revocation, to
represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held in the offices of the Company at 11644 Lilburn Park Road, St. Louis,
Missouri 63146 on June 24, 1997, at 10:00 A.M. Central Time, and at any
adjournment or postponement thereof, with authority to vote all shares held or
owned by the undersigned in accordance with the directions indicated herein.
Receipt of the Notice of Annual Meeting of Stockholders dated June 13,
1997, the Proxy Statement furnished herewith, and a copy of the Annual Report on
Form 10-KSB for the year ended January 31, 1997 is hereby acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2 AND 3 AND PURSUANT TO ITEM 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3
Item 1. Election of Timothy A. Braswell and Harry L. "Terry" Franc, III as Class
II Directors for a term of three years expiring in 2000 and until each
director's successor has been duly elected and qualified.
Timothy A. Braswell
|_| FOR |_| AGAINST |_| WITHHOLD
Harry L. Franc, III
|_| FOR |_| AGAINST |_| WITHHOLD
Item 2. A decrease in the number of authorized shares, a reduction in the
Company's stated capital and a 1-for-1.21 reverse stock split of the Company's
Common Stock.
|_| FOR |_| AGAINST |_| WITHHOLD
Item 3. A change of the name of the Company to The Source Information Network,
Inc.
|_| FOR |_| AGAINST |_| WITHHOLD
Item 4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
Dated: ___________, 1997 __________________________________________
(Signature)
__________________________________________
(Signature if held jointly)
The signature should agree with the name on
your stock certificate. If acting as
attorney, executor, administrator, trustee,
guardian, etc., you should so indicate when
signing. If the signer is a corporation,
please sign the full corporate name by duly
authorized officer. If shares are held
jointly, each shareholder should
sign.
