<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
The Source Information Management Company
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
THE SOURCE INFORMATION MANAGEMENT COMPANY
11644 Lilburn Park Road
St. Louis, Missouri 63146
- - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- - --------------------------------------------------------------------------------
To the Shareholders of October 22, 1999
The Source Information Management Company: St.Louis, Missouri
The Annual Meeting of the Shareholders of The Source Information Management
Company will be held on November 22, 1999 at 4:00 p.m. Central Standard Time at
The St. Louis Club (16th floor), 7701 Forsyth, St. Louis, Missouri 63105, for
the following purposes:
1. To elect two class I directors to each serve a three-year term and
until each director's successor has been elected and qualified;
2. To approve an amendment to the Company's 1995 Incentive Stock Option
Plan to increase the number of shares of Common Stock available under
the Stock Plan from 1,520,661 to 2,520,661;
3. 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 September 15, 1999, 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 available at the
principal office of The Source Information Management Company, 11644 Lilburn
Park Road, St. Louis, Missouri 63146, during usual business hours, for
examination by 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 1999 accompanies this
notice.
By Order of the Board of Directors
/s/ W. Brian Rodgers
W. Brian Rodgers
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> 3
The Source Information Management Company
11644 Lilburn Park Road
St. Louis, Missouri 63146
(314) 995-9040
- - --------------------------------------------------------------------------------
PROXY STATEMENT
- - --------------------------------------------------------------------------------
The enclosed form of proxy is solicited by and on behalf of the Board of
Directors of The Source Information Management Company (the "Company"), for use
at the Annual Meeting of Shareholders to be held on November 22, 1999 The St.
Louis Club (16th floor), 7701 Forsyth, St. Louis, Missouri 63105, at 4:00 p.m.
Central Standard Time and at any adjournments thereof. Each shareholder giving
the proxy has the power to revoke it any time before it is exercised by notice
in writing to the Secretary of the Company at the Company's principal executive
offices at 11644 Lilburn Park Road, St. Louis, Missouri 63146, by properly
submitting to the Company a duly executed proxy bearing a later date, or by
attending the meeting and voting in person (attendance at the meeting will not,
in and of itself, revoke the proxy). The proxy will be voted as specified by the
shareholder in the spaces provided or, if no specification is made, it will be
voted for Proposals 1 and 2.
This Proxy Statement and form of proxy are first being mailed to shareholders of
the Company on or around October 22, 1999. The solicitation of proxies is being
made primarily by the use of the mail. The cost of preparing and mailing this
Proxy Statement and accompanying materials, and the cost of any supplementary
solicitations, which may be made by mail, telephone, telegragh or personally by
officers and employees of the Company and its subsidiaries, will be borne by the
Company.
Only shareholders of record at the close of business on September 15, 1999, are
entitled to notice of, and to vote at, the Annual Meeting of Shareholders and
any adjournments thereof. On September 15, 1999 the Company had issued and
outstanding 16,874,345 shares of Common Stock. Each outstanding share is
entitled to one vote on each matter to be voted on at the Annual Meeting of
Shareholders. A majority of the outstanding shares of Common Stock present in
person or by proxy will constitute a quorum for the transaction of business at
the Annual Meeting of Shareholders. Votes cast by proxy or in person at the
Annual Meeting of shareholders will be tabulated by the inspectors of election
appointed by the Board for the meeting.
Shares which are entitled to vote but which are not voted at the direction of
the beneficial owner ("abstentions") will be counted for the purpose of
determining whether there is a quorum for the transaction of business at the
Annual Meeting. Abstentions may be specified on each of Proposals 1 and 2.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting is required for the election of directors
and for approval of an amendment to the Company's 1995 Incentive Stock Option
Plan (the "Stock Plan"). Votes withheld by brokers in the absence of
instructions ("broker non-votes") will not be counted with respect to, and will
have no effect on, whether the shareholders approve these proposals.
Abstentions, however, are counted in determining whether the shareholders have
approved these proposals and, thus, have the effect of a vote against the
proposals.
-2-
<PAGE> 4
PROPOSAL 1 - ELECTION OF TWO CLASS I 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 II and Class III directors expire in
2000 and 2001, respectively. The Board of Directors has nominated Aron Katzman
and Randall S. Minix, who are currently Class I directors, for re-election to
each serve a three-year term expiring at the annual meeting of shareholders in
2002. The following table sets forth certain information concerning Mr. Katzman
and Mr. Minix and those directors who are continuing in office.
NOMINEES FOR DIRECTOR - CLASS I
(TO BE ELECTED TO SERVE A THREE-YEAR TERM)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Aron Katzman 60 Director 1995
Randall S. Minix 48 Director 1995
</TABLE>
ARON KATZMAN served as the chairman and chief executive officer of Roman
Company, a manufacturer and distributor of fashion custom jewelry, for more than
five years prior to May 1994 when it was sold. Mr. Katzman currently serves as a
member of the Board of Directors of Phonetel, Inc. and Southern Internet, Inc.
RANDALL S. MINIX has been the managing partner for more than six years of Minix,
Morgan & Company, L.L.P., an independent accounting firm headquartered in
Greensboro, North Carolina.
DIRECTORS CONTINUING IN OFFICE - CLASS II
(TERMS EXPIRING IN 2000)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Harry L. "Terry" Franc, III 62 Director 1995
Richard A. Jacobsen 43 Vice-Chairman and Chief Operating Officer of the Company 1999
</TABLE>
HARRY L. "TERRY" FRANC, III is one of the founders of Bridge Information
Systems, Inc. ("BIS"), a global provider of information services to the
securities industry and of BIS's subsidiary, Bridge Trading Company ("BTC"), a
registered broker-dealer and member of the New York Stock Exchange. For more
than 20 years, Mr. Franc served as a director and an Executive Vice President of
BIS and an Executive Vice President of BTC.
RICHARD A. JACOBSEN was appointed Director in March 1999 and became Vice
Chairman and Chief Operating Officer in April 1999. Prior thereto, he was
President of Time Distribution Services from 1995 until April 1999; he served
Time Distribution Services in various executive capacities since 1981. He is a
member of the Board of Directors of the International Periodical Distributors
Association, Chairman of the Magazine Publishers Association Retail Advisory
Council and a member of the American Magazine Conference Planning Committee.
-3-
<PAGE> 5
DIRECTORS CONTINUING IN OFFICE - CLASS III
(TERMS EXPIRING IN 2001)
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
S. Leslie Flegel 61 Chairman and Chief Executive Officer of the Company 1995
William H. Lee 47 President and Chief Administrative Officer of the Company 1995
Robert O. Aders 71 Director 1999
</TABLE>
S. LESLIE FLEGEL has been a director, Chairman and Chief Executive Officer of
the Company since its inception in March 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.
WILLIAM H. LEE has been a director and an officer of the Company since its
inception in March 1995. Since March 1999 he has served as Chairman of the
Executive Committee and Chief Administrative Officer of the Company. From
December 1998 to March 1999 he served as Chief Operating Officer and from March
of 1995 to December of 1998 he served as President and Chief Operating Officer.
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.
ROBERT O. ADERS is Chairman and Chief Executive Officer of the Advisory Board,
Inc. (an international consulting organization) and a member of the Board of
Directors of Food Marketing Institute, where he served from its founding in 1976
until his retirement in 1993. He is also counsel to Collier, Shannon, Rill &
Scott (a Washington, D.C. law firm). Mr. Aders was the Acting Secretary of Labor
in the Ford administration, is a former advisor to the White House Office of
Emergency Preparedness and has served on the U.S. Wage and Price Commission and
as a Vice Chairman of the National Business Council for Consumer Affairs. From
1970 to 1974, Mr. Aders was Chairman of the Board of the Kroger Company, where
he served in various executive positions beginning in 1957. He is currently a
trustee of the National Urban League. He also is a director of Association
International Distribution Alimentares (Belgium), the Association of Latin
American Supermarkets, a Fellow of the Institute of Grocery Distribution (U.K.)
and a member of the International Self Service Organization (Germany). In
addition, he is a director of Checkpoint Systems, Inc., a company listed on the
New York Stock Exchange, Coinstar, a company listed on Nasdaq and Telepanel, a
company listed on Nasdaq.
The Board of Directors of the Company consists of seven 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 1999, four meetings of the Board of Directors were held. Each
director attended 75 percent or more of the aggregate of (i) the total number of
meetings held during fiscal year 1999 and (ii) the total number of meetings held
during such period by all committees of the Board of Directors on which he
served.
-4-
<PAGE> 6
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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established an Audit Committee, a Compensation Committee, a
Finance Committee and an Acquisition Committee. The duties and members of each
of these committees are indicated below.
- - - 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 our independent auditors, reviewing the scope and
results of the audit and services provided by our independent accountants
and meeting with our financial staff to review accounting procedures and
policies.
- - - The Compensation Committee is comprised of three non-employee directors,
presently Messrs. Katzman, Aders and Franc, and has been given the
responsibility of reviewing our financial records to determine overall
compensation and benefits for executive officers and to establish and
administer the policies which govern employee salaries and benefit plans.
- - - The Finance Committee is comprised of two directors, Messrs. Franc and
Katzman. The Finance Committee has been given the responsibility of
monitoring our capital structure, reviewing available alternatives to
satisfy our liquidity and capital requirements and recommending the firm or
firms which will provide investment banking and financial advisory services
to us.
- - - The Acquisition Committee is comprised of two directors, presently Messrs.
Franc and Katzman, and has been given the responsibility of monitoring our
search for attractive acquisition opportunities, consulting with members of
management to review plans and strategies for the achievement of our
external growth objectives and recommending the firm or firms that will
serve as advisors to us in connection with the evaluation of potential
business combinations.
DIRECTOR COMPENSATION
Under the Company's present policy, each director of the Company who is
not also an employee receives $15,000 annually payable quarterly in either cash
or shares Common Stock valued at 90% of market on the date of grant as of the
payment date. Directors also annually receive options to purchase 10,000 shares
of Common Stock at an exercise price equal to market on the date of grant.
Directors are also entitled to be reimbursed for expenses incurred by them in
attending meetings of the Board and its committees.
-5-
<PAGE> 7
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 30, 1999, certain information
concerning the ownership of common stock (1) by each person who is known to the
Company to own beneficially 5.0% or more of the outstanding common stock, (2) by
each director and current executive officer named in the compensation table and
(3) by all directors and executive officers as a group. As of September 30,
1999, there were 17,007,105 shares of common stock outstanding.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT
- - ------------------- ---------------- -------
<S> <C> <C>
Jonathon J. Ledecky 2,640,000(2) 15.5%
800 Connecticut Avenue NW, Suite 1111
Washington, D.C. 20006
S. Leslie Flegel 1,207,107(2)(3) 7.0
11644 Lilburn Park Road
St. Louis, Missouri 63146
William H. Lee 423,986(3) 2.5
711 Gallimore Dairy Road
High Point, North Carolina 27265
Aron Katzman 226,217(3)(4) 1.3
10 Layton Terrace
St. Louis, Missouri 63124
Jason S. Flegel 133,224(3) *
711 Gallimore Dairy Road
High Point, North Carolina 27265
Dwight L. DeGolia 109,649(3) *
11644 Lilburn Park Road
St. Louis, Missouri 63146
Harry L. Franc, III 60,913(3)(4) *
19 Briarcliff
St. Louis, Missouri 63124
Randall S. Minix 22,719(3) *
5502 White Blossom Drive
Greensboro, North Carolina 27410
Robert O. Aders 15,000(3) *
132 S. Delancey Place
Atlantic City, NJ 08401
</TABLE>
-6-
<PAGE> 8
<TABLE>
<S> <C> <C>
Richard A. Jacobsen - *
10 Mountain View
Upper Saddle River, NJ 07458
All directors and executive 2,389,028(2)(5) 13.6
officers as a group (13 persons)
- - ------------------------
</TABLE>
*Less than 1%
(1) Under the rules of the Commission, the shares of the Company's common
stock which a person has the right to acquire within 60 days after
September 30, 1999 in connection with the exercise of stock options and
warrants are deemed to be outstanding for the purpose of computing
beneficial ownership and the percentage of ownership of that person.
(2) S. Leslie Flegel and Jonathan J. Ledecky entered into a Voting
Agreement on January 7, 1999, under which Mr. Ledecky granted a proxy
to Mr. Flegel to vote his shares of common stock with regard to certain
corporate matters. The number of shares shown for Mr. Flegel in the
table does not include Mr. Ledecky's shares.
(3) Includes exercisable options to acquire shares of common stock in the
following amounts per beneficial owner: S. Leslie Flegel - 314,087
shares; William H. Lee - 32,727 shares; Aron Katzman - 10,308 shares;
Jason S. Flegel - 19,455 shares; Dwight L. DeGolia - 42,545 shares;
Harry L. Franc, III - 10,308 shares; Randall S. Minix - 10,308 shares;
and Robert O. Aders - 10,000 shares.
(4) Includes exercisable warrants to acquire shares of common stock in the
following amounts per beneficial owner: Aron Katzman - 40,180 shares;
Harry L. Franc, III - 8,929 shares.
(5) Includes options and warrants to acquire 74,212 shares of common
stock, excluded in the names indicated in the footnotes above.
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, two persons,
Messrs. Gillis and Aders, failed to timely file a Form 3, Initial Statement of
Beneficial Ownership of Securities. Three persons, Messrs. Katzman, Watkins and
Franc, failed to timely file Form 4, Statement of Changes in Beneficial
Ownership. Six persons, Messrs. Leslie Flegel, Lee, Watkins, DeGolia, Rodgers
and Jason Flegel failed to timely file a Form 5, Annual Statement of Changes in
Beneficial Ownership. All such reports have since been filed.
-7-
<PAGE> 9
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company who are not also directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
Cameron Cloeter 44 Executive Vice President, Sales and Marketing
Dwight L. DeGolia 54 Executive Vice President, Special Projects
Jason S. Flegel 34 Executive Vice President, Information Services
James R. Gillis 46 President
W. Brian Rodgers 34 Secretary and Chief Financial Officer
Monte Weiner 49 Executive Vice President and Chief Executive Officer - Source Display
</TABLE>
CAMERON CLOETER has served as Executive Vice President, Sales and Marketing
since August 1999. For five years prior thereto, Mr. Cloeter was Senior Vice
President of Sales at Time-Warner Inc.'s Time Distribution Services. Prior to
joining Time Distribution Services, Mr. Cloeter worked for M&M Mars for 15 years
where his last position was Director of Sales for the Eastern United States.
DWIGHT L. DEGOLIA has served as Executive Vice President, Special Projects since
its commencement of operations in May 1995. For more than ten 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.
JASON S. FLEGEL has served as Executive Vice President, Information Services
since June 1996. Prior thereto, and since the Company's inception in March
1995, Mr. Flegel served as Vice President - Western Region. For more than two
years prior thereto, Mr. Flegel was an owner and the Chief Financial Officer of
DISC. Jason S. Flegel is the son of S. Leslie Flegel.
JAMES R. GILLIS has served as President since December 1998. Prior thereto, he
served as the President of Brand Manufacturing Corporation from September 1995.
Prior to joining Brand, Mr. Gillis was a partner in the Aders-Wilcox-Gillis
Group, which advised supplier companies on industry retailers worldwide. Mr.
Gillis is a member of the Board of Directors of Broadband Sports, Inc.
W. BRIAN RODGERS has served as Secretary 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> 10
MONTE WEINER has served as Executive Vice President and Chief Executive Officer
- - - Source Display since September 1999. For more than 15 years prior thereto, Mr.
Weiner served as President of TCE Corporation and Secretary and Treasurer of
Brand Manufacturing Corporation.
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,
in the fiscal years indicated, for all services rendered in all capacities to
the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
SECURITIES
NAME OF PRINCIPAL FISCAL UNDERLYING OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION($) COMPENSATION(1)($)
- - -------------------- ----- ---------- ---------- ------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
S. Leslie Flegel 1999 $260,857 $ 23,795 360,000 $ 16,188 $5,450
Chief Executive 1998 255,000 96,300 89,256 16,550 9,093
Officer 1997 227,500 176,398 -- 21,531 9,093
William H. Lee 1999 $246,430 $ 23,795 -- $ 12,109 $3,056
Chief Administrative 1998 245,494 70,382 49,091 9,573 3,056
Officer 1997 224,830 30,000 -- 10,888 3,056
Dwight L. DeGolia 1999 $175,000 $ -- 40,000 $ 11,699 $3,553
Executive Vice 1998 150,000 29,200 10,909 10,777 --
President, 1997 140,000 4,773 -- 11,223 --
Special Projects
Stephen E. Borjes(2) 1999 $140,000 $ -- 40,000 $ 6,790 --
President-- Display 1998 26,667 8,333 -- 2,000 --
Group 1997 -- -- -- -- --
Jason S. Flegel 1999 $112,500 $ -- 10,000 $ 7,005 $ 381
Executive Vice 1998 100,000 9,600 9,091 6,205 381
President, 1997 90,000 -- -- 5,266 381
Information
Services
- - ----------
</TABLE>
(1) In fiscal 1999, the estimated incremental cost to the Company of life
insurance premiums paid on behalf of Messrs. S. Leslie Flegel, Lee
DeGolia, Borjes and Jason Flegel was $5,450, $3,056, $3,553, $0 and
$381. In fiscal 1998, the estimated incremental cost to the Company of
life insurance premiums paid on behalf of Messrs. S. Leslie Flegel,
Lee, DeGolia, Borjes and Jason Flegel was $9,093, $3,056, $0, $0 and
$381, respectively. In fiscal 1997, such cost to the Company was
$9,093, $3,056, $0, $0 and $381, respectively.
(2) Since February 1999, Mr. Borjes has been Vice President, Database
Operations of the Company.
-9-
<PAGE> 11
<TABLE>
<CAPTION>
OPTIONS GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- - ---------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of
Number of % of Total Stock Price Appreciation
Securities Options for Option Term
Underlying Granted to Exercise or
Options Employees in Base Price Expiration --------------------------------------------
Name Granted # Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- - ----------------------- -------------- --------------- -------------- -------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
S. Leslie Flegel 360,000(1) 35 5.13 02-01-08 1,162,800 2,944,800
William H. Lee - - - - - -
Dwight L. DeGolia 10,000(2) 1 5.13 02-01-08 32,300 81,800
Dwight L. DeGolia 30,000(3) 3 5.00 10-07-08 94,200 239,100
Stephen E. Borjes 20,000(3) 2 5.00 10-07-08 62,800 159,400
Stephen E. Borjes 20,000(4) 2 6.63 04-30-08 83,400 211,400
Jason S. Flegel 10,000(5) 1 5.00 10-07-98 31,400 79,700
- - ----------------------- -------------- --------------- -------------- -------------- --------------------- ----------------------
</TABLE>
(1) Options were granted February 2, 1998 and vest in four equal annual
installments.
(2) Options were granted February 2, 1998 and are exercisable immediately.
(3) Options were granted October 8, 1998 and vest in three equal annual
installments.
(4) Options were granted May 1, 1998 and vest in five equal annual installments
(5) Options were granted October 8, 1998 and vest in five equal annual
installments.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- - -------------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Unexercised In-the Money Options
Shares Options at Fiscal Year at Fiscal Year End
Acquired on Value End Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
(#) ($) (#) ($)
- - --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
S. Leslie Flegel 0 0 29,752 / 419,504 251,851 / 2,301,901
William H. Lee 0 0 16,364 / 32,727 122,157 / 244,307
Dwight L. DeGolia 0 0 24,364 / 26,545 134,825 / 152,929
Stephen E. Borjes 0 0 10,666 / 29,334 48,143 / 124,257
Jason S. Flegel 0 0 5,636 / 13,455 38,265 / 83,031
- - --------------------------- ------------------------ ------------------------ ------------------------ ------------------------
</TABLE>
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
In October 1997, the Company entered into separate employment agreements with S.
Leslie Flegel, William H. Lee and W. Brian Rodgers, each of which expires
January 31, 2000 and are subject to annual renewal thereafter. Under the
employment agreements, Mr. Flegel serves as the Chairman of the Board and Chief
Executive Officer of the Company in exchange for annual base compensation of
$255,000, Mr. Lee serves as Chairman of the Executive Committee and Chief
Administrative Officer of the Company in exchange for annual base compensation
of $240,573, and W. Brian Rodgers serves as Chief Financial Officer of the
Company and receives annual base compensation of $100,000, subject to annual
adjustment by the Compensation Committee of the Board (the "Base
-10-
<PAGE> 12
Compensation"). In the event the employment of any such person with the Company
is terminated for reasons other than for cause, permanent disability or death or
there occurs a significant reduction in the position, duties or responsibilities
thereof (a "Termination") within two years following a "Change of Control" (as
defined in the employment agreement), the discharged person will be entitled to
an additional bonus of 300% of his then current annual Base Compensation. Such
person also will agree to refrain from disclosing information confidential to
the Company or engaging, directly or indirectly, in the rendering of services
competitive with those offered by the Company during the term of his employment
and for two years thereafter, without the prior written consent of the Company.
In December 1998, the Company entered into an employment agreement with James R.
Gillis, which expires January 31, 2001 (subject to renewal). The employment
agreement provides that Mr. Gillis will serve as President of the Company and
receive annual base compensation of $250,000, subject to annual adjustment by
the Board. In addition, Mr. Gillis is entitled to receive an annual bonus of
$50,000 for each of fiscal 2000, 2001 and 2002 if certain performance goals are
met. The annual bonus amounts may increase if the performance of the Company's
front-end display rack manufacturers exceed certain thresholds. However, under
his employment agreement, Mr. Gillis is not entitled to an annual bonus of more
than $250,000. In the event the employment of Mr. Gillis is terminated for
reasons other than cause, permanent disability or death, Mr. Gillis will be
entitled to receive the remainder of his base salary and benefits for the
balance of the term of the agreement and a pro rata portion of his annual bonus
for the year of termination. Mr. Gillis agreed to refrain from disclosing
information confidential to the Company during the term of the employment
agreement and agreed not to engage, directly or indirectly, in the rendering of
services competitive with those offered by the Company during the term of his
employment and for two years thereafter.
In March 1999, the Company entered into an employment agreement with Richard A.
Jacobsen, which expires January 31, 2004 (subject to renewal). Under his
agreement, Mr. Jacobsen serves as Vice Chairman and Chief Operating Officer of
the Company and receives annual base compensation of $235,000 for fiscal 2000,
$255,000 for fiscal 2001 and $275,000 for fiscal 2002. For fiscal 2003 and 2004,
Mr. Jacobsen's salary will be determined by the Board, but it may not be less
than $275,000. Mr. Jacobsen will also be entitled to receive an annual bonus
equal to a percentage of the Company's net income before taxes ranging from
0.69% to 2.7% if certain performance goals are met. Mr. Jacobsen will not be
entitled to a bonus if the Company's pre-tax net income is not at least 82% of
the budgeted pre-tax net income. In connection with his employment by the
Company, the Company made two loans to Mr. Jacobsen in the amounts of $600,000
("Loan 1") and $375,000 ("Loan 2"). Loan 1, including interest, will be forgiven
over a 5-year term and Loan 2, including interest, will be forgiven over a
7-year term provided, in each case, that Mr. Jacobsen remains an employee of the
Company. Under this employment agreement, Mr. Jacobsen also is entitled to
receive payments compensating him for his annual tax liabilities in connection
with forgiveness of the loans. In the event (1) the employment of Mr. Jacobsen
is terminated for reasons other than for cause, permanent disability or death,
(2) there occurs an assignment of duties or responsibilities inconsistent with
Mr. Jacobsen's appointed positions or (3) there is a "Change of Control" (as
defined in his employment agreement) (each of the foregoing being a
"Termination"), Mr. Jacobsen will be entitled to receive his accrued but unpaid
base salary, his base salary for the remainder of the term of the employment
agreement, forgiveness of Loan 1 and Loan 2, immediate vesting of options
granted to Mr. Jacobsen under the employment agreement and payment of a bonus in
an amount equal to the greater of the annual bonus due in the year of
termination or the annual bonus for the prior year. Under the agreement, Mr.
Jacobsen agreed to refrain from disclosing information confidential to the
Company or engaging, directly or indirectly, in the rendering of services
competitive with those offered by the Company during the term of his employment
and for two years thereafter, without the prior written consent of the Company.
In August 1999, the Company entered into an employment agreement with Cameron
Cloeter, which expires July 31, 2004 (subject to renewal). Under his agreement,
Mr. Cloeter serves as Executive Vice President, Sales and Marketing of the
Company and receives annual base compensation of $175,000. Mr. Cloeter will also
be entitled to receive an annual bonus based upon the percentage that the
Company's net income before taxes represents of the budgeted income before
taxes. Mr. Cloeter will not be entitled to a bonus if the Company's net income
before taxes is not at least 82% of
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<PAGE> 13
the budgeted income before taxes and the maximum annual bonus shall not exceed
$98,550. Under the agreement, Mr. Cloeter agreed to refrain from disclosing
information confidential to the Company or engaging, directly or indirectly, in
the rendering of services competitive with those offered by the Company during
the term of his employment and for two years thereafter, without the prior
written consent of the Company.
Under the terms of a written agreement with the Company, Dwight L. DeGolia has
agreed to refrain from disclosing information confidential to the Company or
engaging directly or indirectly, in any activity which is competitive with the
Company's business during the term of his employment and for two years
thereafter.
REPORT OF THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Committee") which is composed of
Messrs. Aders, Franc and Katzman.
The Company's executive compensation policy is designed and administered to
provide a competitive compensation program that will enable the Company to
attract, motivate, reward and retain executives who have the skills, education,
experience and capabilities required to discharge their duties in a competent
and efficient manner. The Company's compensation policy is based on the
principle that the financial rewards to the executives should be aligned with
the financial interests of the stockholders by striving to create a suitable
long-term return on their investment through earnings from operations and
prudent management of the Company's business and operations.
The Company's executive compensation strategy consists of salary and incentive
compensation. The following is a summary of the policies underlying each
element.
ANNUAL COMPENSATION
The annual compensation salary for individual executive officers of the Company
is based upon the level and scope of the responsibility of the office, the pay
levels of similarly positioned executive officers among companies competing for
the services of such executives and a consideration of the level of experience
and performance profile of the particular executive officer. Based upon its
review and evaluation, the Committee makes a recommendation to the Board of
Directors of the salary to be paid to each executive officer.
LONG TERM INCENTIVE COMPENSATION
The Committee believes that long-term incentive compensation is the most
effective way of tying executive compensation to increases in stockholder value.
The Committee utilizes both cash- and stock-based awards, thereby providing a
means through which executive officers will be given incentives to continue high
quality performance with the Company over a long period of time while allowing
such executive officers to build a meaningful investment in the Company's Common
Stock.
In 1995, the Company adopted its 1995 Employee Stock Option Plan (the "Plan").
Under the Plan, the participating executive officers each received an initial
grant of stock options. Additional options in addition to cash bonuses were
granted in fiscal 1999 to certain executive officers in recognition of
significant growth in the Company's revenues and net income in the 1998 and 1999
fiscal years, and satisfactory performance evaluations from the Committee.
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<PAGE> 14
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Flegel's salary, bonus and substantial stock options for fiscal 1999 were
determined by the Committee in the same manner as is used by the Committee for
executive officers generally. In addition, the Committee considered Mr. Flegel's
significant role in the Company successfully completing several strategic
acquisitions. The Committee believes that Mr. Flegel's compensation is
competitive within the industry and, when combined with Mr. Flegel's significant
ownership of the Company's Common Stock, provides incentives for performance
which are aligned with the financial interests of the stockholders of the
Company.
THE COMPENSATION COMMITTEE
ROBERT O. ADERS ARON KATZMAN HARRY L. FRANC, III
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<PAGE> 15
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on The Source
Information Management Company's Common Stock against the cumulative total
return of companies listed on The Nasdaq Stock Market (US) and the Nasdaq
Non-Financial Stocks Index. The graph is based on the market price of common
stock for all companies at January 31 each year and assumes that $100 was
invested on January 31, 1996 in The Source Information Management Company Common
Stock and the common stock of all companies and that dividends were reinvested
for all companies.
[PERFORMANCE GRAPH]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, the Company and its predecessors have engaged in various
transactions with its directors, executive officers and other affiliated
parties. The following paragraphs summarize certain information concerning such
transactions and relationships to the extent that they occurred since January
31, 1998.
Dwight L. DeGolia has from time to time received cash advances from the Company
and one of its predecessors. The largest aggregate amount of advances
outstanding at any time was $22,093. All outstanding advances have been repaid
in full.
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<PAGE> 16
On June 28, 1991, a predecessor of the Company entered into a lease with 711
Gallimore Partnership in which William H. Lee, is a partner. Under the terms of
the lease, 711 Gallimore Partnership leased office space to the Company in High
Point, North Carolina. In fiscal 1999 the Company paid 711 Gallimore Partnership
$247,584 in rent. In June 1999, the Company purchased the property that it had
leased from 711 Gallimore Partnership for $1.8 million in cash. The Board
appointed Timothy Braswell, an independent director who has since resigned from
the Board, to negotiate this transaction on the Company's behalf and, based on
Mr. Braswell's recommendation, the Board determined that the terms of the
purchase were fair to the Company.
2532 Partnership, a North Carolina partnership in which Mr. Lee is a partner,
has occasionally provided the Company with the use of an airplane. In fiscal
1999 the Company paid 2532 Partnership $1,800 for use of the airplane.
The terms of the foregoing transactions were not negotiated on an arm's-length
basis, but were ratified by a majority of the independent and disinterested
outside directors who had access, at the Company's expense, to the Company's
legal counsel. All future transactions between the Company and its officers,
directors, principal stockholders and affiliates will be approved by a majority
of the independent and disinterested outside directors who will have access, at
the Company's expense, to the Company's legal counsel.
For a description of certain loans made to Richard Jacobsen, see "Employment
Agreements with Named Executive Officers."
PROPOSAL 2 - AMENDMENT TO THE COMPANY'S 1995 INCENTIVE STOCK OPTION PLAN
On July 7, 1999, the Board of Directors of the Company adopted an amendment to
the Stock Plan and directed that the Stock Plan as amended be submitted to the
shareholders for their approval. The amendment provides for an increase in the
number of shares of the Company's Common Stock available under the Stock Plan by
1,000,000 shares. The amendment will become effective upon approval by the
holders of at least a majority of the shares of the Common Stock voting at the
Annual Meeting. The Stock Plan as amended is attached as Exhibit A to this Proxy
Statement.
GENERAL
The purpose of the Stock Plan is to motivate employees of the Company and its
subsidiaries through incentives inherent in stock ownership by providing the
opportunity to obtain or increase proprietary interest in the Company on a
favorable basis through options to purchase stock granted under the Stock Plan.
The purpose of the proposed amendment to the Stock Plan is to increase the
number of available shares so as to enable the Company to continue the Stock
Plan in future years. The Stock Plan became effective on August 23, 1995. The
maximum number of shares that may be issued under the Stock Plan is now
1,520,661 shares of Common Stock of which all shares have been issued or
reserved for issuance. In the event there is a lapse, expiration, termination,
or cancellation of any benefit awarded under the Stock Plan and the shares
represented by such benefit either are not issued or are subsequently reacquired
by the Company, such shares may be again available to be used in connection with
the Stock Plan without being charged against the limitation of the number of
authorized shares under the Stock Plan. The shares currently authorized have
been and, if Proposal 2 is approved, the additional shares will be registered
under the Securities Act of 1933, as amended. The closing price of the Company's
Common Stock on September 30, 1999 on the Nasdaq National Market was $14.1875
per share.
The Compensation Committee of the Board of Directors serves as the Administrator
of the Stock Plan (the "Administrator") and has the exclusive authority to
determine the type of options awarded (incentive stock options ("ISO") or
non-qualified stock options ("NQSO")); to determine the terms and conditions of
all options; to construe and interpret the Stock Plan and the 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 Stock Plan and its administration; and to correct any defect,
supply any omission, or reconcile any inconsistency in the Stock Plan or any
option agreement.
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<PAGE> 17
During the current fiscal year, the Company has consummated the acquisitions of
five manufacturers of front-end display units and one company engaged in the
business of submitting and collecting claims for rebates from magazine
publishers on behalf of retailers. These acquisitions have substantially
increased the Company's size and complexity, and have resulted in the Company's
retention of a number of new executive officers and other key employees. Options
granted to attract, motivate and retain these new employees, together with
options granted to the Company's continuing key employees, have exhausted the
number of shares of Common Stock currently authorized for issuance under the
Stock Plan. The Board of Directors believes that the availability of the
proposed additional authorized shares of Common Stock under the Stock Plan will
enable it to continue to attract, motivate and retain key employees for the
Company. As further discussed below, the Compensation Committee has, subject to
shareholder approval of the proposed amendment, granted options to purchase an
additional 438,500 shares of Common Stock under the Stock Plan.
OPTIONS
All employees of the Company who are not members of the Compensation Committee
are eligible to receive options under the Stock Plan. The Compensation Committee
determines the employees to whom options are granted, the time or times such
options are granted, the number of shares to be subject to each option and the
terms when each option may be exercised.
Options entitle a participant to purchase shares of Common Stock at a price per
share equal to the market value of the Common Stock on the date the option is
granted. However, if an ISO is granted and the participant receiving the ISO
owns more than 10% of the total combined voting power of all classes of stock of
the Company, the purchase price shall not be less than one hundred and ten
percent of the market value of the Common Stock on the date the ISO is granted.
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 participant by the Company for any reason other
than retirement (under normal Company policies), death or disability; (ii) the
date which is 3 months following the effective date of the participant's
retirement from the Company's service; (iii) the date which is 1 year following
the date on which the participant's service with the Company ceases due to death
or disability; (iv) the date of expiration of the option determined by the
Administrator at the time the option is granted and specified in such option; or
(v) the 10th annual anniversary date of the granting of the option, or, if and
when an ISO is granted participant owns more than 10% of the total combined
voting power of all classes of stock of the Company, then on the 5th such
anniversary.
Options are exercisable on the terms determined by the Administrator at the time
of the grant. The option price is payable in full upon exercise of an option and
may be paid in cash or, if permitted by the Administrator, by tendering shares
of Common Stock of the Company already owned by the participant. Options granted
under the Stock Plan are nontransferable and nonassignable by a participant
other than by will or by the laws of descent and distribution, and are
exercisable during the participant's lifetime only by the participant.
CHANGE OF CONTROL
The Stock Plan provides for the accelerated exercisability of options in the
event of a merger, consolidation, acquisition, sale or transfer of assets,
tender, or exchange offer or other reorganization in which the Company does not
survive as an independent company.
AMENDMENT; TERMINATION
The Board of Directors may amend the Stock Plan at any time, except that the
Board may not, without the approval of the shareholders, materially increase the
benefits accruing to participants under the Stock Plan, increase the number of
shares of Common Stock in the aggregate which may be issued under the Stock
Plan, except as provided by the Stock Plan, or materially modify the
requirements as to eligibility for participation in the Stock Plan.
The Board of Directors may terminate or suspend the Stock Plan at any time. The
Stock Plan currently will terminate automatically on August 23, 2005. No
benefits may be awarded under the Stock Plan after its termination. Except as
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<PAGE> 18
provided by the Stock Plan, amendment, suspension or termination of the Stock
Plan will not alter or impair any rights or obligations under options previously
granted under the Stock Plan.
FEDERAL TAX CONSEQUENCES
Incentive Stock Options. A participant who exercises an ISO while employed by
the Company or within the 3 month (1 year for disability) period after
termination of employment, will not recognize any ordinary income at that time.
If the shares acquired upon the exercise are not disposed of until more than 1
year after the date of the exercise, and more than 2 years after the date the
ISOs were granted, the excess of the sale proceeds over the aggregate option
price of such shares will be treated as long-term capital gain to the
participant. If the shares acquired on exercise of the ISOs are disposed of
prior to such dates (a "disqualifying disposition"), the excess of the fair
market value of the shares at the time of exercise over the aggregate option
price (but not more than the gain on the disposition if the disposition is a
transaction on which a loss, if realized, would be recognized) will be ordinary
income to the participant at the time of such disqualifying disposition. The
Company will be entitled to a federal tax deduction in a like amount, subject to
the limitation on deductions discussed below. If an ISO is exercised more than 3
months (1 year for disability) after termination of employment, the participant
will recognize ordinary income equal to the difference between the option price
and the fair market value of the stock received on the date of exercise. The
Company would be allowed a deduction for a like amount in such case, subject to
the limitation on deductions discussed below.
For purpose of the alternative minimum tax on individuals, on exercise of an
ISO, the difference between the fair market value of the stock on the date of
exercise and the amount paid for the stock will be treated as taxable.
A participant does not recognize any taxable income on the grant for exercise of
an ISO. However, if there is a disqualifying disposition of stock received on
the exercise of an ISO, the Company may deduct from income in the year of the
disqualifying disposition an amount equal to the amount that the participant
recognizes as ordinary income due to the disqualifying disposition, subject to
the limitation on deductions discussed below.
Nonqualified Stock Options. A participant will not realize any income at the
time an NQSO is granted, nor will the Company be entitled to a deduction at that
time. Upon exercise of an NQSO, the participant will recognize ordinary income
(whether the NQSO price is paid in cash or by the surrender of previously owned
common stock) in an amount equal to the difference between the option price and
the fair market value of the shares to which the NQSO pertains. The Company will
be entitled to a tax deduction in an amount equal to the amount of ordinary
income realized by the participant, subject to the limitation on deductions
discussed below.
Limitation on Deductions. Section 162(m) of the Internal Revenue Code of 1986,
as amended, limits to $1 million per year the federal income tax deduction
available to a public company for compensation paid to its chief executive
officer or any of its other four highest paid officers unless certain
requirements are met. The Stock Plan does not meet the requirements of Section
162(m) and it is possible that certain compensation paid under the Stock Plan
would not be deductible in the future. However, the Company currently believes
that all amounts under the Stock Plan will be deductible because the
compensation of the officers will either not exceed the limit under Section
162(m) or part of the compensation will be paid under the Performance Plan for
Executives which does meet the requirements of Section 162(m).
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<PAGE> 19
The following sets forth information with respect to the ISOs granted by the
Administrator (i) during the Company's fiscal year ended January 31, 1999 and
(ii) during fiscal 2000, subject to shareholder approval of proposed amendment.
All of the ISOs expire 10 years from the date of grant.
<TABLE>
<CAPTION>
Grants in Fiscal 2000 Subject to
Grants in Fiscal 1999 Shareholder Approval
----------------------------------------------- -------------------------------------------
Name and Position Exercise Price Per Exercise Price Per
----------------- ------------------ ------------------
Share Number of Shares Share Number of Shares
----- ---------------- ----- ----------------
<S> <C> <C> <C> <C>
S. Leslie Flegel, CEO and - - - -
Chairman
William H. Lee, CAO - - - -
Dwight L. DeGolia $ 5.00 30,000(a) $13.25 30,000(l)
Executive Vice President, $ 5.13 10,000(b)
Special Projects
Jason S. Flegel, Executive $ 5.00 10,000(c) $13.25 50,000(l)
Vice President, Information
Services
Stephen E. Borjes, Vice $ 5.00 20,000(a) $13.25 5,000(l)
President, Database Operations $ 6.63 20,000(d)
All executive officers as a $ 5.00 70,000(a) $12.44 100,000(m)
group $ 5.13 10,000(b) $13.25 140,000(l)
$ 5.00 10,000(c)
$ 6.63 20,000(d)
$ 7.81 202,000(e)
All directors who are not - - - -
executive officers as a group
All employees who are not $ 5.00 40,000(c) $13.25 190,000(l)
executive officers as a group $ 5.00 63,000(f) $13.88 1,000(n)
$ 6.13 910(g) $14.00 1,000(o)
$ 6.63 910(h) $14.94 5,000(p)
$ 7.38 5,000(i) $15.00 1,500(q)
$ 10.88 155,000(j)
$ 10.88 100,000(k)
- - -------------------------------- --------------------- --------------------- --------------------- ----------------------
</TABLE>
(a) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, October 8, 1998.
(b) All of the ISOs are exercisable on the first anniversary of the date of
grant, February 2, 1998.
(c) One-fifth of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-fifth on each of the
first four anniversaries of the date of the grant, October 8, 1998.
(d) One-fifth of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-fifth on each of the
first four anniversaries of the date of the grant, May 1, 1998.
(e) One-third of the ISOs are exercisable on January 1, 2001, with the
remainder exercisable in cumulative installments of one-third on each
of January 1, 2001 and January 1, 2002. The ISOs were granted on
December 14, 1998.
(f) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, October 8, 1998.
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<PAGE> 20
(g) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, June 24, 1998.
(h) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, May 1, 1998.
(i) One-fifth of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-fifth on each of the
first four anniversaries of the date of the grant, November 30, 1998.
(j) One-fifth of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-fifth on each of the
first four anniversaries of the date of the grant, January 7, 1999.
(k) One-third of the ISOs are exercisable on January 1, 2001, with the
remainder exercisable in cumulative installments of one-third on each
of January 1, 2001 and January 1, 2002. The ISOs were granted on
January 7, 1999.
(l) One-fifth of the ISO's are exercisable immediately, with the remainder
exercisable in cumulative installments of one-fifth on each of the
first four anniversaries of the date of grant, August 23, 1999.
(m) One-fourth of the ISO's are exercisable on the first anniversary of the
date of grant, August 4, 1999, with the remainder exercisable in
cumulative installments of one-fourth on each of the following three
anniversaries of the date of grant.
(n) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, August 18, 1999.
(o) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, September 8, 1999.
(p) One-fifth of the ISO's are exercisable immediately, with the remainder
exercisable in cumulative installments of one-fifth on each of the
first four anniversaries of the date of grant, July 19, 1999.
(q) One-third of the ISOs are exercisable immediately, with the remainder
exercisable in cumulative installments of one-third on each of the
first two anniversaries of the date of the grant, September 13, 1999.
Mr. Ledecky has given Mr. Flegel his irrevocable proxy to vote in favor of
Proposal 2. Messrs. Ledecky and Flegel own an aggregate of 3,533,050 shares
(22.5%) eligible to vote for Proposal 2.
The Board of Directors recommends that the shareholders vote "FOR" the proposed
amendment.
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.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2000 Annual Meeting of
Shareholders must be received by the Company by June 24, 2000 for inclusion in
the Company's proxy statement and proxy relating to that meeting. Upon receipt
of any such proposal, the Company will determine whether or not to include such
proposal in the proxy statement and proxy in accordance with regulations
governing the solicitation of proxies.
In order for a Shareholder to bring other business before a Shareholder meeting,
timely notice must be given to the Company within the time limits set forth
above. Such notice must include a description of the proposed business, the
reasons therefor and other matters specified in the Company's Bylaws. The Board
or the presiding officer at the Annual Meeting may reject any such proposals
that are not made in accordance with these procedures or that are not a proper
subject for Shareholder action in accordance with applicable law. These
requirements are separate from the procedural requirements a Shareholder must
meet to have a proposal included in the Company's proxy statement.
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<PAGE> 21
In each case the notice must be provided to the Company at its principal office
in St. Louis, Missouri. Shareholders desiring a copy of the Company's Bylaws
will be furnished a copy without charge upon the submission of a written request
to the Company.
If the date of the 2000 Annual Meeting of Shareholders is advanced or delayed by
more than 30 calendar days from the date of the 1999 Annual Meeting of
Shareholders the Company will make a timely disclosure of such date change and
the impact of such date change on the submission deadlines set forth above in
its first quarterly report on Form 10-Q following such date change, or, if
impracticable any means reasonably calculated to inform shareholders.
RELATIONSHIP WITH THE INDEPENDENT ACCOUNTANTS
BDO Seidman, LLP ("BDO Seidman") served as the independent public accountant for
the Company in fiscal 1999. The Company's independent public accountant for
fiscal 2000 will be selected by the Board at a regular Board meeting to be held
in fiscal 2000. 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/ W. Brian Rodgers
W. Brian Rodgers, 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> 22
EXHIBIT A
THE SOURCE INFORMATION MANAGEMENT COMPANY
AMENDED AND RESTATED 1995 INCENTIVE STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The Source Information Management Company 1995 Incentive Stock Option
Plan ("Plan") is intended to provide additional incentive to certain valued and
trusted employees of The Source Information Management 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 may be either Options 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"), or nonqualified
stock options ("NQSOs"). 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 the Compensation Committee (the
"Committee") of the Board of Directors of the Company ("Board"), to be composed
of at least two (2) members. Each member of the Committee shall be a
"non-employee director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or
regulation. Each member of the Committee shall serve at the pleasure of the
Board. Any vacancy occurring in the membership of the Committee shall be filled
by appointment by the Board. If there are less than two members of the Board who
qualify as "non-employee directors" within the meaning of Rule 16b-3 under the
Exchange Act, then the full Board shall be deemed to be the administrators of
the Plan and shall be endowed with all of the rights and responsibilities
attributed to the Committee herein:
The Committee shall have the sole power:
(a) subject to the provisions of the Plan, to grant Options; to
determine the type of Option (NQSO or ISO); 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
(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.
The day-to-day administration of the Plan may be carried out by such
officers and employees of the Company as shall be designated from time to time
by the Committee. All expenses and liabilities incurred by the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and the Committee, the Board, the Company and the
officers and employees of the Company shall be entitled to rely upon the advice,
opinions or
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<PAGE> 23
valuations of any such persons. The interpretation and construction
by the Committee of any provision of the Plan and any determination by the
Committee under any provision of the Plan shall be final and conclusive for all
purposes. Neither the Committee nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including attorneys' fees) arising therefrom to the
fullest extent permitted by law.
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 Two
Million Five Hundred Twenty Thousand Six Hundred Sixty-One (2,520,661) 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 Committee shall
be eligible to receive the grant of Options under the Plan. The 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 Committee shall seek
information, advice and recommendations from management to assist the 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 ISO is granted the Optionee receiving the ISO
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 ISO 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 ISO 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
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 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
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<PAGE> 24
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 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 and when an ISO 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 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
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.
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<PAGE> 25
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.
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),
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
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.
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<PAGE> 26
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
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.
Adopted by the Board of Directors as of August 23, 1995, amended as of
June 26, 1997, further amended as of October 7, 1998, and further amended as of
July 7, 1999.
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<PAGE> 27
THE SOURCE INFORMATION MANAGEMENT COMPANY
By:
-----------------------------------------
S. Leslie Flegel, Chairman of the Board
and Chief Executive Officer
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<PAGE> 28
THE SOURCE INFORMATION MANAGEMENT COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS,
NOVEMBER 22, 1999 AT 4:00 P.M.
The undersigned stockholder of The Source Information Management
Company (the "Company") hereby appoints S. Leslie Flegel and W. Brian Rodgers
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 at The St. Louis Club, 16th Floor, 7701 Forsyth, St.
Louis, Missouri 63105 on November 22, 1999 at 4:00 P.M. Central Standard, 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 October
22, 1999, the Proxy Statement furnished herewith, and a copy of the Annual
Report on Form 10-KSB for the year ended January 31, 1999 is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION OF VOTE IS MADE, THIS PROXY WILL
BE VOTED FOR ITEMS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2
ITEM 1. Election of Aron Katzman and Randall S. Minix as Class I Directors for a
term of three years expiring in 2002 and until each director's successor has
been duly elected and qualified.
NOMINEES: ARON KATZMAN RANDALL S. MINIX
| | FOR all nominees | | WITHHOLD AUTHORITY
(except as marked to vote for all nominees
to the contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEES' NAME ON THE SPACE PROVIDED BELOW.)
- - -----------------------------------
ITEM 2. An amendment to the Company's 1995 Incentive Stock Option Plan to
increase the number of shares of common stock available under the plan from
1,520,661 to 2,520,661.
| | FOR | | AGAINST | | ABSTAIN
Dated: ______________, 1999 ________________________________
(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.
