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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-12
THE SOURCE INFORMATION MANAGEMENT COMPANY
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE SOURCE INFORMATION MANAGEMENT COMPANY
Two City Place Drive, Suite 380
St. Louis, Missouri 63141
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To the Shareholders of October 10, 2001
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 19, 2001 commencing at 10:00 a.m. Central
Standard Time at the offices of the Company at Two City Place Drive, Suite 380,
St. Louis, Missouri 63141, for the following purposes:
1. To elect two Class III directors to each serve a three-year term
until each director's successor has been elected and qualified;
2. To approve an amendment the Company's Articles of Incorporation to
change the name of the Company to Source InterLink Companies; and
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 October 2, 2001, 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, Two City Place
Drive, Suite 380, St. Louis, Missouri 63141, 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 2001 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.
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THE SOURCE INFORMATION MANAGEMENT COMPANY
Two City Place Drive, Suite 380
St. Louis, Missouri 63141
(314) 995-9040
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PROXY STATEMENT
FOR
2001 ANNUAL MEETING OF SHAREHOLDERS
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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 19, 2001 in the
offices of the Company at Two City Place Drive, Suite 380, St. Louis, Missouri
63141, commencing at 10:00 a.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 Two City Place Drive, Suite 380,
St. Louis, Missouri 63141, 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). All
shares entitled to vote and represented by properly executed proxies received
prior to the Annual Meeting, and not revoked, will be voted at the Annual
Meeting in accordance with the instructions indicated on those proxies. If no
instructions are indicated on a properly executed proxy, the shares represented
by that proxy will be voted as recommended by the Board of Directors. If any
other matters are properly presented for consideration at the Annual Meeting,
the persons named in the accompanying proxy and acting thereunder will have
discretion to vote on those matters in accordance with their best judgment. The
Company does not anticipate that any other matters will be raised at the annual
Meeting.
This Proxy Statement and form of proxy card, together with the Company's 2001
Annual Report to Shareholders, were first mailed to shareholders of the Company
on or around October 10, 2001. 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, telegraph 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 October 2, 2001, are
entitled to notice of, and to vote at, the Annual Meeting of Shareholders and
any adjournments thereof. On October 2, 2001 the Company had issued and
outstanding 18,231,299 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. Shareholders do not have the right to cumulate their votes in the
election of directors. 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. The Company intends to include
abstentions and broker non-votes as present or represented for purposes of
establishing a quorum for the transaction of business, but to exclude
abstentions and broker non-votes from the calculation of shares entitled to
vote. 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.
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PROPOSAL 1
ELECTION OF THREE CLASS III DIRECTORS
INFORMATION ABOUT THE NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Articles of Incorporation and Bylaws currently authorize a Board
of Directors consisting of not less than three (3) nor more than nine (9)
directors, and authorize the directors to increase or decrease the number of
directors comprising the Board of Directors by resolution adopted by the
affirmative vote of a majority of the Board of Directors. Currently the number
of directors has been fixed at seven. The Company's Articles of Incorporation
and Bylaws provide for three classes of directorships serving staggered three
year terms such that approximately one-third of the directors are elected at
each annual meeting of shareholders. Each member of the Board of Directors of
the Company serves 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 terms of the current Class I and Class II directors expire in 2002
and 2003, respectively. The Board of Directors has nominated S. Leslie Flegel
and Robert O. Aders who are currently Class III directors, for election to each
serve a three-year term expiring at the annual meeting of shareholders in 2004.
The following table sets forth certain information concerning Messrs. Flegel and
Aders, as well as those directors who are continuing in office.
NOMINEES FOR DIRECTOR - CLASS III
(TO BE ELECTED TO SERVE A THREE-YEAR TERM)
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
S. Leslie Flegel 64 Chairman and Chief Executive Officer 1995
Robert O. Aders 74 Director 1999
S. Leslie Flegel has been the Chairman of the Board of Directors and Chief
Executive Officer of The Source 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, a predecessor of The Source. S.
Leslie Flegel is the father of Jason S. Flegel, The Source's Executive Vice
President, Information Services. Mr. Flegel is a director of eRoomSystem
Technologies, Inc.
Robert O. Aders was appointed as a director in March 1999. He 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. 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. Mr. Aders is also a member of the Board
of Directors of Spar Group, Inc. and Telepanel Systems, Inc.
The Board of Directors recommends that shareholders vote "FOR" the election of
Messrs. Flegel and Aders to the Company's Board of Directors.
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DIRECTORS CONTINUING IN OFFICE - CLASS I
(TERMS EXPIRING IN 2002)
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
Aron Katzman 63 Director 1995
Randall S. Minix 51 Director 1999
James R. Gillis 48 President and Chief Operating Officer 2000
Aron Katzman has served as a director of The Source since it commenced
operations in May 1995. Mr. Katzman was a founder of Medicine Shoppe
International, Inc. (Nasdaq) and served on its Board of Directors until it was
purchased by Cardinal Health (NYSE) in 1994. Until its sale in May 1994, Mr.
Katzman served as the Chairman and Chief Executive Officer of Roman Company, a
manufacturer and distributor of fashion custom jewelry. Mr. Katzman is a member
of the board of directors of Foto, Inc. and Southern Internet, Inc. Presently,
Mr. Katzman is Chairman and Chief Executive Officer of Decorating Den of
Missouri.
Randall S. Minix has served as a director of The Source since it commenced
operations in May 1995. Mr. Minix was the managing partner of Minix, Morgan &
Company, L.L.P., an independent accounting firm headquartered in Greensboro,
North Carolina from December 1994 until February 2001. Presently, Mr. Minix is
the Chief Financial Officer of South Atlantic Lumber Industries.
James R. Gillis became President of The Source in December 1998, was appointed
as a director of The Source in March 2000 and became President and Chief
Operating Officer in August 2000. Prior thereto, he was President and Chief
Executive Officer of Brand Manufacturing Corporation.
DIRECTORS CONTINUING IN OFFICE - CLASS II
(TERMS EXPIRING IN 2003)
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
Harry L. "Terry" Franc, III 65 Director 1995
Kenneth F. Teasdale 66 Director 2000
Harry L. "Terry" Franc, III, has been a director of The Source since it
commenced operations in May 1995. Mr. Franc 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. Mr. Franc
has been Executive Vice President of BTC for more than 20 years and for more
than 20 years prior to 1995, served as a director and an Executive Vice
President of BIS. Mr. Franc is a member of the National Organization of
Investment Professionals. He is a director of TV House, Inc. and of the St.
Louis Community Foundation.
Kenneth F. Teasdale was appointed as a director of The Source in March 2000. Mr.
Teasdale has been the Chairman of Armstrong Teasdale LLP, a law firm, since 1993
and before that was Managing Partner from 1986 to 1993. He has been associated
with Armstrong Teasdale since 1964. Prior thereto, Mr. Teasdale served as
General Counsel to the Democratic Policy Committee of the United States Senate
beginning in 1962. In that position, he also served for three years as Legal
Assistant to the Majority Leader of the United States Senate. Mr. Teasdale is
Chairman of the Board of Regents for St. Louis University, Member of the Board
of Trustees for the St. Louis Science Center, member of the Board of
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Directors for the United Way of Greater St. Louis, member of the Board of
Trustees for St. Louis University and member of the Board of Trustees for the
St. Louis Art Museum.
During fiscal 2001, eight 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 2001 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 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. During fiscal 2001, each
committee held three meetings. The duties and members of each of these
committees are indicated below.
- The Audit Committee is comprised of three non-employee directors, presently
Messrs. Minix, Katzman and Franc 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 independent
auditors and meeting with the financial staff to review accounting
procedures and policies.
- The Compensation Committee is comprised of three non-employee directors,
presently Messrs. Katzman, Aders and Minix, and has been given the
responsibility of reviewing the Company's 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 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.
- The Acquisition Committee is comprised of four directors, presently Messrs.
Franc, Katzman, Aders and Minix, 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.
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
of Common Stock valued at 90% of the last reported sale price on the date of
grant as of the payment date. Directors also annually receive options to
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purchase 10,000 shares of Common Stock at an exercise price equal to the last
reported sale price 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.
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of August 31, 2001, 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 August 31, 2001,
there were 18,235,699 shares of Common Stock outstanding.
BENEFICIAL OWNERSHIP
NAME AND ADDRESS --------------------
OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT
------------------- ------------------- -------
Jonathan J. Ledecky 2,640,000 14.5%
800 Connecticut Avenue NW, Suite 1111
Washington, D.C. 20006
FMR Corporation 2,298,800(2) 12.6
82 Devonshire Street
Boston, Massachusetts, 02109
S. Leslie Flegel 1,888,576(3) 9.8
Two City Place Drive, Suite 380
St. Louis, Missouri 63141
James R. Gillis 342,501(3) 1.8
4905 South Lake Drive
Boynton Beach, Fl 33436
Monte Weiner 306,168(3) 1.7
10 East 40th Street, Suite 3110
New York, NY 10016
Aron Katzman 288,909(3) 1.6
10 Layton Terrace
St. Louis, Missouri 63124
Harry L. Franc, III 108,505(3) *
19 Briarcliff
St. Louis, Missouri 63124
Robert O. Aders 80,000(3) *
132 S. Delancey Place
Atlantic City, NJ 08401
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Kenneth F. Teasdale 68,771(3) *
33 Kingsbury Place
St. Louis, Missouri 63112
Randall S. Minix 67,974(3) *
5502 White Blossom Drive
Greensboro, North Carolina 27410
All directors and executive 3,472,324(4) 17.2
officers as a group (12 persons)
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*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
August 31, 2001 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) This amount, as of February 14, 2001, as reflected on correspondence
from FMR Corporation, consists of sole voting power with respect to -0-
shares, sole dispositive power with respect to 2,298,800 shares and no
shared voting or dispositive power.
(3) Includes exercisable options to acquire shares of Common Stock in the
following amounts per beneficial owner: S. Leslie Flegel - 1,003,006
shares; James R. Gillis - 334,000 shares; Monte Weiner - 250,000
shares; Aron Katzman - 40,000 shares; Harry L. Franc, III - 50,000
shares; Robert O. Aders - 50,000 shares; Kenneth F. Teasdale - 20,000
shares; and Randall S. Minix - 50,000 shares.
(4) Includes options and warrants to acquire 207,152 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, all executive
officers and directors of the Company timely filed with the Securities and
Exchange Commission all reports required by Section 16(a) of the Securities
Exchange Act of 1934 except that Messrs. Weiner and Bishop filed a Form 3,
Initial Statement of Beneficial Ownership of Securities, more than 10 days after
they became executive officers of the Company and Mr. Teasdale failed to timely
file a Form 4, Statement of Changes in Beneficial Ownership. All such reports
have since been filed.
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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
---- --- --------
Frank Bishop 50 Senior Vice President, Sales
Jason S. Flegel 36 Executive Vice President, Information Services
Elizabeth A. Pagano 29 Vice President, Human Resources
W. Brian Rodgers 36 Secretary and Chief Financial Officer
Monte Weiner 51 President and Chief Executive Officer - Source Display
FRANK BISHOP has served the Company since 1995, most recently as Senior
Vice-President of North American Sales. Prior to joining the Company, Mr. Bishop
served as The Director of Sales & Marketing for Triangle News Co., a wholesale
distributor of books and magazines.
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.
ELIZABETH A. PAGANO has served as Vice President, Human Resource since August
2001 and joined the Company in January 1999 as Director of Human Resources for
the IPD Division. Prior to her work with Company, Ms. Pagano consulted with
several companies to build their national human resources departments.
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.
MONTE WEINER has served as President and Chief Executive Officer - Source
Display since August 2000. Prior thereto, Mr. Weiner served as Executive Vice
President and Chief Executive Officer - Source Display from September 1999 until
May 2000. 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.
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SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
SECURITIES
NAME OF PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION(1)($)
-------------------- ----- ---------- ---------- ------------------ ------------------
S. Leslie Flegel 2001 $ 455,000 $ 359,217 -- $5,450
Chief Executive Officer 2000 330,000 140,000 525,000 5,450
1999 260,857 23,795 360,000 5,450
James R. Gillis 2001 $ 300,000 $ 250,000 200,000 $ 970
President 2000 250,000 250,000(2) -- 2,860
1999 21,308 -- 202,000 --
Monte Weiner 2001 $ 241,000 $ 250,000 200,000 --
Executive Vice President & 2000 150,000 100,000 25,000 --
CEO - Source Display 1999 -- -- 100,000 --
Dwight DeGolia (3) 2001 $ 225,000 $ 50,000 -- $8,009
Executive Vice President, 2000 210,000 30,000 30,000 7,105
Special Projects 1999 175,000 -- 40,000 3,553
Cameron Cloeter (4) 2001 $ 181,000 $ 37,712 50,000 $1,225
Executive Vice President, 2000 80,000 -- 100,000 101
Strategic Planning/New 1999 -- -- -- --
Business
----------
(1) In fiscal 2001, the estimated incremental cost to The Source of life
insurance premiums paid on behalf of Messrs. Flegel, Gillis, Weiner,
DeGolia and Cloeter was $5,450, $970, $0, $8,009 and $1,225,
respectively. In fiscal 2000, the estimated incremental cost to The
Source of life insurance premiums paid on behalf of Messrs. Flegel,
Gillis, Weiner, DeGolia and Cloeter was $5,450, $2,860, $0, $7,105 and
$101, respectively. In fiscal 1999, the estimated incremental cost to
The Source of life insurance premiums paid on behalf of Messrs. Flegel,
Gillis, Weiner, DeGolia and Cloeter was $5,450, $0, $0, $3,553 and $0.
(2) Includes $100,000 bonus accrued in fiscal year 2000, but paid in fiscal
year 2001, which was inadvertently not included in the proxy statement
dated September 22, 2000.
(3) Mr. DeGolia ceased to be an executive officer of the Company on
March 1, 2001.
(4) Mr. Cloeter ceased to be employed by the Company on May 4, 2001.
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OPTIONS GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
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Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation
Options Employees or Expiration for Option Term
Name Granted # in Fiscal Base Price Date -----------------------------------------
Year ($/Sh) 5% ($) 10% ($)
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James R. Gillis 200,000(1) 26% 7.84 08-02-10 986,107 2,498,988
Monte Weiner 200,000(1) 26% 7.84 08-02-10 986,107 2,498,988
Cameron Cloeter 50,000(2) 7% 7.84 08-02-10 246,527 624,747
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(1) Options were granted August 3, 2000 and are exercisable in three equal
annual installments.
(2) Options were granted August 3, 2000 and are exercisable in five annual
installments.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
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Value of Unexercised
Number of In-the-Money
Unexercised Options Options(2)/ at Fiscal
Shares at Fiscal Year End Year End ($)
Acquired on Value (#) Exercisable/ Exercisable/
Name Exercise (#) Realized ($)(1) Unexercisable Unexercisable
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S. Leslie Flegel 0 0 598,424 / 375,832 425,498 / 77,400
James R. Gillis 67,333 435,344 134,000 / 200,667 0 / 0
Monte Weiner 5,000 3,450 133,334 / 133,333 0 / 0
Dwight DeGolia 0 0 60,727 / 20,182 48,553 / 6,851
Cameron Cloeter 0 0 35,000 / 115,000 0 / 0
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(1) The "value realized" represents the difference between the exercise
price of the option shares and the market price of the option shares on
the date the option was exercised. The value was determined without
considering any taxes which may have been owed.
(2) "In-the-Money" options are options whose exercise price was less than
the market price of Common Stock at January 31, 2001.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
In February 2001, the Company entered into an employment agreement with S.
Leslie Flegel, which expires January 31, 2004. Under the agreement, Mr. Flegel
serves as the Chairman of the Board and Chief Executive Officer of The Source
for an initial annual base rate of compensation (the "Base Compensation") of
$425,000. For the fiscal years beginning February 1, 2002 and February 1, 2003,
the Base Compensation shall be increased to $500,000. Mr. Flegel will also be
entitled to receive a bonus ("Annual Bonus") each year of up to 100% of his Base
Compensation for such year if certain performance goals are met. The Company
will also grant to Mr. Flegel options to purchase an aggregate
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of 300,000 shares of our common stock (the "Option") at an exercise price of
$5.00. The Option will be exercisable as to 100,000 shares on the date of grant.
The Option will first become exercisable as to an additional 100,000 shares on
February 1, 2002. The Option will first become exercisable as to the final
100,000 shares on February 1, 2003. In the event the employment of Mr. Flegel
with The Source 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") following a "Hostile Change
of Control" (as defined in the employment agreement), Mr. Flegel will be
entitled to a Severance Bonus equal to the sum of (i) the aggregate of the Base
Compensation that would be earned by Mr. Flegel had he remained in The Source's
employ from the date of such termination until January 31, 2004 (the "Remaining
Term") and (ii) an amount equal to the aggregate Annual Bonus Mr. Flegel would
have earned for the Remaining Term if all criteria for payment of the Annual
Bonus were achieved at maximum levels for each of the periods within the
Remaining Term. Mr. Flegel also will agree to refrain from disclosing
information confidential to The Source or engaging, directly or indirectly, in
the rendering of services competitive with those offered by The Source during
the term of his employment and for one year thereafter, without the prior
written consent of The Source and will receive $250,000 in consideration.
In August 2000, the Company entered into an employment agreement with James R.
Gillis, which expires July 31, 2003 (subject to renewal). The employment
agreement provides that Mr. Gillis serves as President of The Source and
receives annual base compensation of $350,000. In addition, Mr. Gillis is
entitled to receive a guaranteed bonus of $250,000 for each of fiscal 2001, 2002
and 2003, as long as he is an employee of The Source at the agreed upon date of
payment. Mr. Gillis may also receive a discretionary bonus of $100,000 for each
of fiscal 2001, 2002 and 2003 at the discretion of the Compensation Committee of
the Board of Directors. The Company will also grant Mr. Gillis options to
purchase an aggregate of 200,000 shares of our common stock at an exercise price
of $7.84. The options shall vest as to 66,667 shares immediately upon the
granting of the options, another 66,666 shares on August 1, 2001, and as to
66,666 shares on August 1, 2002. 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. Mr. Gillis agreed to refrain from
disclosing information confidential to The Source 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 Source during the
term of his employment and for two years thereafter.
In August 2000, the Company entered into an employment agreement with Monte
Weiner, which expires July 31, 2003 (subject to renewal). The employment
agreement provides that Mr. Weiner serves as President/Chief Executive Officer
of Source Display and receives annual base compensation of $300,000. Also, as an
inducement to accept employment, Mr. Weiner received a signing bonus of $100,000
upon execution of his employment agreement. In addition, Mr. Weiner is entitled
to receive a guaranteed bonus of $150,000 for each of fiscal 2001, 2002 and
2003, as long as he is an employee of The Source at the agreed upon date of
payment. Mr. Weiner may also receive a discretionary bonus of $100,000 for each
of fiscal 2001, 2002 and 2003 at the discretion of the Compensation Committee of
the Board of Directors. The Company will also grant Mr. Weiner options to
purchase an aggregate of 200,000 shares of our common stock at an exercise price
of $7.84. The options shall vest as to 66,666 shares immediately upon the
granting of the options, another 66,666 shares on August 1, 2001, and as to
66,667 shares on August 1, 2002. In the event the employment of Mr. Weiner is
terminated for reasons other than cause, permanent disability or death, Mr.
Weiner will be entitled to receive the remainder of his base salary and benefits
for the balance of the term of the agreement. Mr. Weiner agreed to refrain from
disclosing information confidential to The Source during the term of the
employment agreement and agreed not to engage, directly or indirectly, in the
rendering of services competitive with those
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offered by The Source during the term of his employment and for two years
thereafter.
In August 1999, the Company entered into an employment agreement with Cameron J.
Cloeter, which was terminated effective May 4, 2001 under a Separation Agreement
and General Release between the Company and Mr. Cloeter. Under his agreement,
Mr. Cloeter served as Executive Vice President, Strategic Planning and Business
Development of the Company and received annual base compensation of $175,000,
plus an annual performance-based bonus not to exceed $65,700. Under specified
circumstances, the agreement entitled Mr. Cloeter to receive severance benefits
equal to his accrued but unpaid base salary, his base salary for the remainder
of the term of the employment agreement, immediate vesting of options granted to
Mr. Cloeter 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. The agreement also prohibited Mr. Cloeter from
disclosing information confidential to the Company or engaging, directly or
indirectly, in the rendering of services competitive with those offered by the
Company for two years after the cessation of his employment, without the prior
written consent of the Company. Under the separation agreement, the Company paid
Mr. Cloeter $120,000 and, on February 2, 2002, will pay him an additional
$61,000. In addition, Mr. Cloeter agreed to surrender for cancellation all stock
options issued to him by the Company and to continue to abide by the
confidentiality and non-competition provisions of the employment agreement.
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, Katzman and Minix.
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
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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 2002 to certain executive officers pursuant to the
recommendation of the Committee.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Flegel's salary and bonus for fiscal 2001 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 role in the
Company successfully completing significant strategic acquisitions. The
Committee believes that Mr. Flegel's compensation is competitive within the
industry and, when combined with Mr. Flegel's substantial ownership of the
Company's Common Stock, provides incentives for performance that are aligned
with the financial interests of the stockholders of the Company.
THE COMPENSATION COMMITTEE
ROBERT O. ADERS ARON KATZMAN RANDALL S. MINIX
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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.
[LINE GRAPH]
01/31/1996 01/31/1997 01/31/1998 01/31/1999 01/31/2000 01/31/2001
Nasdaq US $100 $131 $155 $242 $378 $265
Nasdaq Non-Financial Stocks $100 $130 $148 $241 $394 $268
The Source Information Management Company $100 $ 53 $131 $258 $390 $142
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, we and our predecessors have engaged in various transactions
with our directors, executive officers and other affiliated parties. No such
transactions have occurred since the beginning of our last fiscal year.
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PROPOSAL 2
AMENDMENT OF ARTICLE OF INCORPORATION
TO CHANGE NAME TO "SOURCE INTERLINK COMPANIES"
In May, 2001, the Board of directors approved by a unanimous vote a resolution
to amend and restate Article One of the Company's Articles of Incorporation to
change the Company's name to "Source Interlink Companies" and to submit the
proposed amendment for consideration by the company's shareholders. The
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock is required to approve the proposed amendment to change
the Company's name. If the name change is approved by the shareholders at the
Annual Meeting, the Company will file articles of amendment with the Secretary
of State of the State of Missouri to amend Article One effective as of the close
of business on the date of filing.
The Board of Directors believes that the Company's current name does not
adequately describe the breadth of the Company's operations and fails to
capitalize on the brand identity acquired in connection with the Company's
recent acquisition of The Interlink Companies, Inc. Accordingly, the Board of
Directors believes that by simplifying the company name and joining the "Source"
and "Interlink" names, the Company and its services will become more
recognizable to the company's customers.
The change of name, if approved, will not in any way affect the validity or
transferability of outstanding stock certificates or otherwise change the
capital structure of the Company. Shareholder should not return their existing
certificates to the Company or its transfer agent, but instead should retain
their certificates. If the name change is approved the Company will apply to the
Nasdaq National Market for the continued listing of the Common Stock under its
existing symbol "SORC."
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 at 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 2002 Annual Meeting of
Shareholders must be received by the Company by June 7, 2002 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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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 2002 Annual Meeting of Shareholders is advanced or delayed by
more than 30 calendar days from the date of the 2001 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.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of the Company serves as the
representative of the Board of Directors for general oversight of the Company's
financial accounting and reporting process, system of internal controls, audit
process and process for monitoring compliance with laws and regulations. Each of
the members of the Audit Committee is independent, as defined under the listing
standards of the Nasdaq National Market. The Audit Committee operates under a
written charter adopted by the Board of Directors, a copy of which is attached
hereto as Appendix A.
Management is responsible for the Company's internal controls and financial
reporting process. The independent public accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
The Audit Committee has discussed with the independent public accountants the
matters required to be discussed by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as
modified, Communication with Audit Committees, issued by the Auditing
Standards Board of the American Institute of Certified Public Accountants.
The Audit Committee has received and reviewed the written disclosures and the
letter from the independent public accountants required by Independence Standard
No. 1, Independence Discussions with Audit Committees, issued by the
Independence Standards Board, and has discussed with the independent public
accountants their independence from the Company. In addition, the Audit
Committee has considered whether the provision of the non-audit services that it
has approved is compatible with auditors independence.
Based on the above-mentioned review and discussions with management and the
independent public accountants, the Audit Committee recommended to the Board
that the Company's audited financial statements be included in its Annual Report
on Form 10-K for the fiscal year ended January 31, 2001, for filing with the
Securities and Exhcange Commissions.
THE AUDIT COMMITTEE
HARRY L. "TERRY" FRANC, III ARON KATZMAN RANDALL S. MINIX
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RELATIONSHIP WITH THE INDEPENDENT ACCOUNTANTS
BDO Seidman, LLP ("BDO Seidman") served as the independent public accountant for
the Company in fiscal 2001 and has served in such capacity since the Company's
inception. As of the date of this Proxy Statement, the process of selection of
the Company's independent public accountants for the current fiscal year ending
January 31, 2002 has not been completed. Representatives of BDO Seidman
will not be present at the annual meeting.
For the year ended January 31, 2001, the Company incurred professional fees and
out-of-pocket expenses to its auditors in the amount of $213,072, of which
$134,725 related to auditing services, none related to information technology
consulting and $78,347 related to all other services.
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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Appendix A
THE SOURCE INFORMATION MANAGEMENT COMPANY
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the compliance
by the Company with legal and regulatory requirements and (3) the independence
and performance of the Company's external auditors.
The members of the Audit Committee shall meet the independence and experience
requirements of the NASDAQ Stock Market, Inc. The members of the Audit Committee
shall be appointed by the Board.
The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make an annual report to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.
2. Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly affect
the Company's financial statements.
3. Review analyses, if any, prepared by management and the independent auditor
of significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Ensure that the Audit Committee Chairman reviews with the chief financial
officer the Company's quarterly financial statements.
5. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
6. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor and management.
7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence consistent with Independence Standards Board
Standard 1, discuss such reports with the auditor, and if so determined by
the Audit Committee, take or recommend that the full Board take appropriate
action to oversee the independence of the auditor.
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10. Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
11. Review any significant reports to management prepared by the chief
financial officer concerning accounting or internal control issues and
management's responses.
12. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
13. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
14. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
(a) Any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities
or access to required information.
(b) Any changes required in the planned scope of the audit.
15. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
16. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
17. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
18. Meet at least annually with the chief financial officer and the independent
auditor in separate executive sessions.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
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THE SOURCE INFORMATION MANAGEMENT COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 5, 2001 AT 10:00 A.M.
The undersigned shareholder 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 Shareholders of the
Company to be held at the offices of the Company at Two City Place Drive, Suite
380, St. Louis, Missouri 63141 at 10:00 A.M. Central Standard 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 October 5, 2001,
the Proxy Statement furnished herewith, and a copy of the Annual Report on Form
10-K for the year ended January 31, 2001 is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
ITEM 1. Election of S. Leslie Flegel and Robert O. Aders as Class III Directors
for a term of three years expiring in 2004 and until each director's successor
has been duly elected and qualified.
NOMINEES: S. LESLIE FLEGEL ROBERT O. ADERS
[ ] 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.)
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ITEM 2. An amendment to the Company's Articles of Incorporation to change the
name of the Company to Source Interlink Companies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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.
Dated: , 2001
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(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.