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As filed with the Securities and Exchange Commission on June 29, 1998
REGISTRATION STATEMENT NO. 333-
----------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VDI MEDIA
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-4272619
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6920 Sunset Boulevard, Hollywood, California 90028
(213) 957-5500
(Address, including zip code and telephone number, including area code,
of Registrant's principal executive offices)
R. LUKE STEFANKO
VDI MEDIA
6920 SUNSET BOULEVARD, HOLLYWOOD, CALIFORNIA 90028
(213) 957-5500
(Name and address, including zip code and telephone number, including area
code of Registrant's principal executive offices)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SHARES AMOUNT TO OFFERING AGGREGATE AMOUNT OF
TO BE BE PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED PER SHARE (1) (1) FEE
<S> <C> <C> <C> <C>
Common Stock, 1,665,600
no par value.. shares $10.25 $17,072,400 $5,036.36(2)
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee, based
upon the average of the high and low prices of the Common Stock reported on the
NASDAQ National Market on June 19, 1998, in accordance with Rule 457 (c)
promulgated under the Securities Act of 1933, as amended.
(2) Previously Paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 29, 1998
PROSPECTUS
1,665,600 SHARES
VDI MEDIA
COMMON STOCK
This Prospectus relates to an aggregate of 1,665,600 shares (the "Shares")
of common stock, no par value (the "Common Stock"), of VDI Media, a California
corporation (the "Company"), all of which Shares may be offered for sale by the
holders thereof (collectively, the "Selling Shareholders"). The Company will
not receive any proceeds from the sale of the Shares.
The Common Stock is traded on the NASDAQ National Market ("NNM") under the
symbol "VDIM." On June 22, 1998, the closing sales price of the Common Stock
as reported on the NNM was $10.125 per share.
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER "RISK
FACTORS" ON PAGE 6
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Selling Shareholders, acting as principal for their own account,
directly or through agents, dealers, brokers, or underwriters to be designated
from time to time, may sell the Shares from time to time on terms to be
determined at the time of sale. To the extent required, the number of Shares to
be sold, the respective purchase price and public offering price, the name of
any agent, dealer, broker or underwriter and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each Selling
Shareholder reserves the sole right to accept or reject, in whole or in part,
any proposed purchases of the Shares.
The date of this Prospectus is __________, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional office
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov. The Company's Common Stock is listed on the NNM.
Such material can also be inspected at the offices of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Additional information regarding the Company and the Shares offered hereby
is contained in the Registration Statement on Form S-3 (of which this Prospectus
is a part) and the exhibits thereto filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information pertaining to the Company and the Shares
offered hereby, reference is hereby made to the Registration Statement
(including documents incorporated by reference therein) and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents
of any contract or other document are not necessarily complete, and in each
instance such statements are qualified in their entirety by reference to the
copy of such contract or other document filed as an exhibit to the Registration
Statement or incorporated by reference therein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference the following documents heretofore
filed with the Commission pursuant to the Exchange Act:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended by the Company's Form 10K/A filed on April 8,
1998;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
3. The Company's Proxy Statement filed on May 11, 1998 in connection with the
Company's Annual Meeting of Shareholders; and
4. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed on December 31, 1996 under Section 12
of the Exchange Act, including any amendment or report updating such
description.
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein, in any accompanying Prospectus Supplement or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
2
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Copies of all documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference herein) will be provided without charge to each person, including any
beneficial owner, who receives a copy of this Prospectus on the request of such
person made to VDI Media, 6920 Sunset Boulevard, Hollywood, California 90028,
Tel: (213) 957-5500, Attention: Donald Stine.
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THE COMPANY
The Company provides broadcast quality video duplication, distribution and
related value-added services, including distribution of national television spot
advertising, trailers and electronic press kits. The primary users of the
Company's videotape duplication and distribution services are those motion
picture companies and advertising agencies which generally outsource such
services. The Company has an active client list including the Columbia/Tri Star
Motion Picture Companies, Twentieth Century Fox, Universal Studios, Inc., The
Walt Disney Motion Picture Group, Warner Bros., Paramount Pictures Corporation,
Metro-Goldwyn-Mayer Film Group, TBWA/Chiat Day, Young & Rubicam and Saatchi &
Saatchi.
The Company's services include (i) the physical and electronic delivery of
broadcast quality advertising, including spots, trailers, electronic press kits
and infomercials, and syndicated television programming to television stations,
cable companies and other end-users nationwide and (ii) a broad range of video
services including the duplication of video in all formats, video and audio
editing, element storage, standards conversion, closed captioning and
transcription services, and video encoding for air play verification purposes.
The Company also provides post production and editing services.
The primary method of distribution by the Company, and by others in the
industry, continues to be the physical delivery of video to end-users. In 1994,
to enhance its competitive position, the Company created Broadcast
One-Registered Trademark-, a national distribution network which currently
employs fiber optic, ISDN and satellite technologies in combination with
physical distribution methods to deliver broadcast quality material throughout
the United States. The Company's use of electronic technologies provides rapid
and reliable transmission of video spots and other content with a high level of
quality, accountability and flexibility to both advertisers and broadcasters.
Through the Company's distribution hubs in Tulsa and Chicago, Broadcast
One-Registered Trademark- has enabled the Company to expand its presence in the
national advertising market, allowing for greater diversification of its
customer base. The Company currently derives a small percentage of its revenue
from electronic distributions and anticipates that this percentage will increase
as such technologies become more widely accepted. The Company intends to add new
methods of distribution as technologies become both standardized and
cost-effective.
The Company currently operates facilities in five locations in Los
Angeles and one location in each of San Francisco, Chicago, Tulsa and New
York. By capitalizing on Broadcast One's ability through electronic
technologies to link instantaneously all of the Company's facilities and by
leveraging the proximity of the Tulsa and Chicago hubs to the center of the
country, the Company is able to utilize the optimal delivery method to extend
its deadline for same or next-day delivery of time-sensitive material. As
the Company continues to develop and acquire facilities in new markets, the
Broadcast One-Registered Trademark- network enables it to maximize the usage
of its network-wide duplication capacity by instantaneously transmitting
video content to facilities with available capacity. The Company's Broadcast
One-Registered Trademark- network and facilities are designed to serve
cost-effectively the time-sensitive distribution needs of its clients.
Management believes that the Company's success is based on its strong
customer relationships which are maintained through the reliability, quality
and cost-effectiveness of its services, and its extended deadline for
processing customer orders.
The Company's strategy is to increase its market share within the video
duplication and distribution industry by (i) further penetrating the marketplace
by providing a broad array of high quality, reliable value-added services, (ii)
acquiring companies with strong customer relationships in businesses
complementary to the Company's operations, (iii) continuing to develop or
acquire value-added services such as audio encryption, electronic air play
verification, digital video disc authoring and high definition television
duplication and (iv) increasing the timeliness and efficiency of its operations
by exploiting new technologies as they become both standardized and
cost-effective.
The Company's principal offices are located at 6920 Sunset Boulevard,
Hollywood, California 90028, and its telephone number is (213) 957-5500.
RECENT DEVELOPMENT
On June 12, 1998 the Company closed an asset purchase agreement with
All Post, Inc. (the "Seller"), pursuant to which the Company purchased certain
assets of the Seller. The Seller provides technical media services primarily
to owners, independent producers and distributors of television programming,
feature films and other entertainment content, which business the Company
intends to continue.
The purchase price for the acquisition was $13,000,000. The Company may
be required to pay an earn-out if the acquired business achieves a specified
gross profit target, subject to certain limitations described in the
agreement. In addition the Company entered into lease agreements with the
Seller to occupy premises formerly used by All Post. The purchase price for
the All Post acquisition, which the Company paid in cash, was funded from the
Company's recently amended line of credit with Union Bank of California.
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RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus, in connection
with an investment in the Shares.
When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the Exchange
Act, regarding events, conditions and financial trends that may affect the
Company's future plans of operations, business strategy, results of operations
and financial position. Prospective investors are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Factors that could cause or contribute to such differences include,
but are not limited to, those described elsewhere in this Prospectus.
COMPETITION. The broadcast video duplication and distribution industry is
a highly competitive, service-oriented business. In general, the Company does
not have long-term or exclusive service agreements with its customers. Business
is acquired on a purchase order basis and is based primarily on customer
satisfaction with reliability, timeliness, quality and price.
The Company competes with a variety of duplication and distribution firms,
some of which have a national presence, certain post-production companies and,
to a lesser extent, the in-house duplication and distribution operations of
major motion picture studios and ad agencies. Some of these firms, and all of
the studios, have greater financial, distribution and marketing resources and
have achieved a higher level of brand recognition than the Company. There is no
assurance that the Company will be able to compete effectively against these
competitors merely on the basis of reliability, timeliness, quality and price or
otherwise.
The Company may face competition from companies in related markets which
could offer similar or superior services to those offered by the Company. For
example, telecommunications providers could enter the market as competitors with
materially lower electronic delivery transportation costs. The Company believes
that an increasingly competitive environment could lead to a loss of market
share or price reductions, which could have a material adverse effect on the
Company's financial condition, results of operations and prospects.
CUSTOMER AND INDUSTRY CONCENTRATION. Although the Company has an active
client list of over 1,300 customers, seven motion picture studios accounted for
approximately 29.5% of the Company's revenues during the year ended December 31,
1997. Viacom Inc. (which includes Paramount Pictures Corporation and
Worldvision Enterprises), accounted for approximately 11.9% of the Company's
revenues in such period. If one or more of these companies were to stop using
the Company's services, the business of the Company could be adversely affected.
Because the Company derives substantially all of its revenues from clients in
the entertainment and advertising industries, the financial condition, results
of operations and prospects of the Company could also be adversely affected by
an adverse change in conditions which impact those industries.
EXPANSION STRATEGY. The Company's growth strategy involves both internal
development and expansion through acquisitions. The Company currently has no
agreement or commitment to acquire any company or business. There is no
assurance that the Company will be able to continue to grow, or to identify and
reach mutually agreeable terms to purchase acquisition targets, or that the
Company will be able to profitably manage additional businesses or successfully
integrate such additional businesses into the Company without substantial costs,
delays or other problems. Certain of the businesses recently acquired by the
Company reported net losses for their most recent fiscal years prior to being
acquired, and the Company's future financial performance will in part depend on
its ability to implement operational improvements in, or exploit potential
synergies with, these acquired businesses. Acquisitions may involve a number of
special risks including: adverse effects on the Company's reported operating
results (including the amortization of acquired assets); diversion of
management's attention and unanticipated problems or legal liabilities. In
addition, the Company may require additional funding to finance its
5
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future acquisitions. There is no assurance that the Company will be able to
secure acquisition financing on acceptable terms or at all. The Company may use
working capital or equity, or raise financing through equity offerings or the
incurrence of debt, in connection with the funding of any acquisition. Some or
all of these risks could have a material adverse effect on the Company's
financial condition, results of operations and prospects or could result in
dilution to the Company's shareholders. In addition, to the extent that
consolidation becomes more prevalent in the industry, the prices for attractive
acquisition candidates could increase substantially. There is no assurance that
the Company will be able to effect any such transactions or that any such
transactions, if consummated, will prove to be profitable.
The geographic expansion of the Company's customer base may result in
increased demand for the Company's services in certain regions where it
currently does not have duplication and distribution facilities. To meet this
demand, the Company may subcontract an increased amount of work, which may lead
to a decrease in the Company's gross margins. The Company may develop or
acquire complementary businesses in these markets in order to decrease the
amount of work it subcontracts. However, the Company has not entered into any
formal negotiations or definitive agreements for this purpose. Furthermore,
there is no assurance that the Company will be able to effect such transactions
or that any such transactions will prove to be profitable.
MANAGEMENT OF GROWTH. Since its inception, the Company has experienced
rapid growth that has resulted in new and increased responsibilities for
management personnel and has placed and continues to place increased demands on
the Company's management, operational and financial systems and resources. To
accommodate this growth, compete effectively and manage future growth, the
Company will be required to continue to implement and improve its operational,
financial and management information systems, and to expand, train, motivate and
manage its work force. There is no assurance that the Company's personnel,
systems, procedures and controls will be adequate to support the Company's
future operations. Any failure to do so could have a material adverse effect on
the Company's financial condition, results of operations and prospects.
DEPENDENCE ON TECHNOLOGICAL DEVELOPMENTS. Although the Company intends to
utilize the most efficient and cost-effective technologies available for the
delivery of video content, including digital satellite transmission, as they
develop, there is no assurance that the Company will be able to adapt to such
standards in a timely fashion, or at all. The Company believes that its future
growth will depend, in part, on its ability to add these services and to add
customers in a timely and cost-effective manner. There is no assurance that the
Company will be successful in offering such services to existing customers or in
obtaining new customers for these services. The Company intends to rely on third
party vendors for the development of these technologies and there is no
assurance that such vendors will be able to develop such technologies in a
manner that meets the needs of the Company and its customers. Any material
interruption in the supply of such services could have a material adverse effect
on the Company's financial condition, results of operations and prospects.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts and
abilities of certain of its senior management, particularly those of R. Luke
Stefanko, Chairman of the Board of Directors and Chief Executive Officer. The
loss or interruption of the services of key members of management could have a
material adverse effect on the Company's financial condition, results of
operations and prospects if a suitable replacement is not promptly obtained. The
Company has obtained a $5.0 million "key man" life insurance policy on Mr.
Stefanko. Although the Company has employment agreements with Mr. Stefanko and
certain of the Company's other key executives, there is no assurance that such
executives will remain with the Company during or after the term of their
employment agreement. In addition, the Company's success depends to a
significant degree upon the continuing contributions of, and on its ability to
attract and retain, qualified management, sales, operations, marketing and
technical personnel. The competition for qualified personnel is intense and the
loss of any of such persons, as well as the failure to recruit additional key
personnel in a timely manner, could have a material adverse effect on the
Company's financial condition, results of operations and prospects. There is no
assurance that the Company will be able to continue to attract and retain
qualified management and other personnel for the development of its business.
ABILITY TO MAINTAIN AND IMPROVE SERVICE QUALITY. The Company's business is
dependent on its ability to meet the current and future demands of its
customers, which demands include reliability, timeliness, quality and price. Any
failure to do so, whether or not caused by factors within the control of the
Company, could result in
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losses to such clients. Although the Company disclaims any liability for such
losses, there is no assurance that claims would not be asserted or that
dissatisfied customers would refuse to make further deliveries through the
Company in the event of a significant occurrence of lost deliveries, either of
which could have a material adverse effect on the Company's financial condition,
results of operations and prospects. Although the Company maintains insurance
against business interruption, there is no assurance that such insurance will be
adequate to protect the Company from significant loss in these circumstances or
that a major catastrophe (such as an earthquake or other natural disaster) would
not result in a prolonged interruption of the Company's business. In addition,
the Company's ability to make deliveries within the time periods requested by
customers depends on a number of factors, some of which are outside of its
control, including equipment failure, work stoppages by package delivery vendors
or interruption in services by telephone or satellite service providers.
FLUCTUATING RESULTS; SEASONALITY. The Company's operating results have
varied in the past, and may vary in the future, depending on factors such as the
volume of advertising in response to seasonal buying patterns, the timing of new
product and service introductions, increased competition, the timing of
acquisitions, general economic factors, and other factors. As a result, the
Company believes that period to period comparisons of its results of operations
are not necessarily meaningful and should not be relied upon as an indication of
future performance. For example, the Company's operating results have
historically been significantly influenced by the volume of business from the
motion picture industry, which is an industry that is subject to seasonal and
cyclical downturns. In addition, as the Company's business from advertising
agencies tends to be seasonal, the Company's operating results may be subject to
increased seasonality as the percentage of its business from advertising
agencies increases. In any period, the Company's revenues and delivery costs
are subject to variation based on changes in the volume and mix of deliveries
performed during the period. It is possible that in some future quarter the
Company's operating results will be below the expectations of equity research
analysts and investors. In such event, the price of the Common Stock would
likely be materially adversely affected. Fluctuations in sales due to
seasonality may become more pronounced if the growth rate of the Company's sales
slows.
CONTROL BY PRINCIPAL SHAREHOLDER; POTENTIAL ISSUANCE OF PREFERRED STOCK;
ANTI-TAKEOVER PROVISIONS. Upon completion of this Offering (assuming that all
of Mr. Stefanko's Shares registered as part of the registration statement of
which this Prospectus is a part have been sold, and that no additional shares of
Common Stock are purchased or sold by Mr. Stefanko) R. Luke Stefanko will
beneficially own approximately 44.3% of the outstanding Common Stock. By virtue
of this stock ownership, Mr. Stefanko will be able to significantly influence
the outcome of substantially all matters required to be submitted to a vote of
shareholders, including (i) the election of the board of directors, (ii)
amendments to the Company's Restated Articles of Incorporation and (iii)
approval of mergers and other significant corporate transactions. The foregoing
may have the effect of discouraging, delaying or preventing certain types of
transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Common Stock might otherwise
receive a premium for their shares over current market prices. The Company's
Board of Directors has the authority to issue up to 5,000,000 shares of
preferred stock without par value (the "Preferred Stock") and to determine the
price, rights, preferences, privileges and restrictions thereof, including
voting rights, without any further vote or action by the Company's shareholders.
Although the Company has no current plans to issue any shares of Preferred
Stock, the rights of the holders of Common Stock would be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. Issuance of Preferred Stock could have the effect of
discouraging, delaying or preventing a change in control of the Company.
Furthermore, certain provisions of the Company's Restated Articles of
Incorporation and By-laws and of California law also could have the effect of
discouraging, delaying or preventing a change in control of the Company.
ABSENCE OF DIVIDENDS. The Company intends to retain its earnings, if any,
for use in its business and does not anticipate declaring or paying any cash
dividends in the foreseeable future.
LIMITED PUBLIC MARKET FOR COMMON STOCK; DETERMINATION OF OFFERING PRICE;
PRICE VOLATILITY. Prior to February 19, 1997, there was no public market for
the Common Stock, and there can be no assurance that an active trading market
will be sustained at any specific level. The trading price of the Company's
Common Stock may be subject to wide fluctuations in response to a number of
factors, including variations in operating results, changes in earnings
estimates by equity research analysts, announcements of extraordinary events
such as litigation
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or acquisitions, announcements of technological innovations or new products or
services by the Company or its competitors, as well as general trends in the
Company's industry and general economic, political and market conditions.
SHARES ELIGIBLE FOR FUTURE SALE. At May 26, 1998, the Company had a total
of 9,769,780 shares of Common Stock outstanding, of which 4,161,236 shares are
freely tradeable without restriction or registration under the Securities Act,
by persons other than "affiliates" (as defined under the Securities Act) of the
Company. An additional 5,683,544 shares of Common Stock (including the Shares
and shares of Common Stock subject to currently vested and exercisable options)
are "restricted securities," as that term is defined under Rule 144 ("Rule 144")
promulgated under the Securities Act, and must be sold pursuant to Rule 144 or
another exemption from registration under the Securities Act. Sales of a
substantial number of the restricted securities, either in the public market or
elsewhere, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the Shares pursuant
to this Prospectus.
SELLING SHAREHOLDERS
The following table sets forth the name and relationship to the Company
of each Selling Shareholder, the number of shares of Common Stock known by
the Company to be beneficially owned by him as of May 26, 1998, the number of
Shares covered by this Prospectus, and the number of shares of Common Stock
to be owned by, and the percentage beneficial ownership of, each Selling
Shareholder if such Selling Shareholder were to sell all of his Shares
covered by this Prospectus. Each of Messrs. Stefanko and Stine has advised
the Company that he has no current intention to sell his Shares. The Company
will not receive any of the proceeds from the sale of the Shares to the
public. See "Use of Proceeds."
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PERCENTAGE
SHARES SHARES COVERED BENEFICIALLY
NAME AND RELATIONSHIP BENEFICIALLY BY THIS OWNERSHIP AFTER OWNED AFTER
TO THE COMPANY OWNED PROSPECTUS OFFERING(1) OFFERING(1)
- --------------------------------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
R. Luke Stefanko
Chairman of the Board, Chief
Executive Officer, President
and Director. . . . . . . . . . . . 5,352,900(2) 1,000,000 4,352,900(2) 44.3%(2)
Donald R. Stine
Chief Financial Officer, Secretary
and Director. . . . . . . . . . . . 310,444 310,444 0 0
Robert Bajorek . . . . . . . . . . . . . 355,156 355,156 0 0
</TABLE>
(1) Assumes that all of the Shares registered as part of the registration
statement of which this Prospectus is a part have been sold, and that no
additional shares of Common Stock are purchased or sold by any Selling
Shareholder. Each of Messrs. Stefanko and Stine has advised the Company
that he has no current intention to sell his Shares.
(2) Includes 55,000 shares of Common Stock subject to options which are
currently exercisable.
8
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be offered by the Selling Shareholders commencing on the
date of this Prospectus.
Sale of the Common Stock offered hereby may be made on the NASDAQ National
Market System or the over-the-counter market or otherwise at prices and on terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. In addition, any Shares covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus. All expenses of registration incurred in
connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Shareholders will be borne by such
shareholder.
The Shares may be sold in (a) a block trade in which the broker or dealer
so engaged will attempt to sell the Shares as agent but may position and resell
a portion of the block as principal to facilitate the transaction,
(b) transactions in which a broker or dealer acts as principal and resells the
Shares for its account pursuant to this Prospectus, (c) an exchange distribution
in accordance with the rules of such exchange, and (d) ordinary brokerage
transactions and transactions in which the broker solicits purchases. In
effecting sales, brokers or dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from Selling Shareholders in amounts to be
negotiated immediately prior to sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any discounts
and commissions received by them and any profit realized by them on the resale
of the Shares may be deemed to be underwriting discounts and commissions under
the Securities Act. If any Selling Shareholder sells his Shares, or options
thereon, pursuant to this Prospectus at a fixed price or at a negotiated price
which is, in either case, other than the prevailing market price or in a block
transaction to a purchaser who resells, or if any Selling Shareholder pays
compensation to a broker-dealer that is other than the usual and customary
discounts, concessions or commissions, or if there are any arrangements either
individually or in the aggregate that would constitute a distribution of the
Shares held by a Selling Shareholder, to the extent required the number of
Shares to be sold, the respective purchase price and public offering price, the
name of any agent, dealer, broker or underwriter and any applicable commissions
or discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement.
The Company has informed the Selling Shareholders of the need for delivery
of a copy of this Prospectus. There is no assurance that any of the Selling
Shareholders will offer for sale or sell any or all of the Shares covered by
this Prospectus.
9
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock and 5,000,000 shares of Preferred Stock.
COMMON STOCK
As of May 26, 1998, there were 9,769,780 shares of Common Stock outstanding
held of record by 16 shareholders. Holders of Common Stock are entitled to one
vote per share on all matters to be voted upon by the shareholders. Subject to
preferences that may be applicable to any outstanding Preferred Stock (see
"Preferred Stock" below), the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefore. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior liquidation rights of
Preferred Stock, if any, then outstanding. The Common Stock has no preemptive
or conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable, and the shares of Common Stock to be
outstanding upon completion of the Offering contemplated by this Prospectus will
be fully paid and non-assessable.
PREFERRED STOCK
As of the date of this Prospectus, 5,000,000 shares of Preferred Stock are
authorized and no shares are outstanding. The Board of Directors has the
authority to issue the shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions granted to or imposed
upon any unissued shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series, without any further
vote or action by the shareholders. Although it presently has no intention to
do so, the Board of Directors, without shareholder approval, can issue Preferred
Stock with voting and conversion rights which could adversely affect the voting
power of the holders of Common Stock. The issuance of Preferred Stock may have
the effect of discouraging, delaying, or preventing a change in control of the
Company. The Company has no present plans to issue any of the Preferred Stock.
CERTAIN PROVISIONS OF THE COMPANY'S RESTATED ARTICLES OF INCORPORATION AND
BY-LAWS
Certain provisions of law could make the acquisition of the Company by
means of a proxy contest and the removal of incumbent officers and directors
more difficult. These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of the Company to first negotiate with the
Company.
The Company's Restated Articles of Incorporation also provide that so long
as the Company shall have a class of stock registered pursuant to the Exchange
Act, shareholder action can be taken only at an annual or special meeting of
shareholders and may not be taken by written consent. Shareholders do not have
the right to cumulate their votes.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
10
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Of the 9,769,780 shares of Common Stock outstanding, 4,161,236 shares will
be freely tradeable without restriction or registration under the Securities
Act, by persons other than "affiliates" (as defined under the Securities Act) of
the Company upon completion of the Offering. The remaining shares of Common
Stock are "restricted securities," as that term is defined under Rule 144 and
must be sold pursuant to Rule 144 or another exemption from registration under
the Securities Act. All of the restricted shares will be eligible for sale
after the Offering, subject to compliance with volume, holding period and other
limitations imposed by Rule 144.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the date of acquisition of beneficial ownership of restricted shares of
Common Stock from the Company or any affiliate, the acquiror or subsequent
holder thereof is entitled to sell within any three-month period a number of
such shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the same series of Common Stock or (ii) the reported
average weekly trading volume of the Common Stock on national securities
exchanges during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to certain provisions regarding the manner of sale, notice
requirements and the availability of current public information about the
Company. If two years have elapsed since the date of acquisition of restricted
shares of Common Stock from the Company or any affiliate and the acquiror or
subsequent holder is not deemed to have been an affiliate of the Company for at
least 90 days prior to a proposed transaction, such person would be entitled to
sell such shares under Rule 144 without regard to the limitations described
above.
The Company has filed a registration statement on Form S-8 under the
Securities Act covering 900,000 shares of Common Stock reserved for issuance
under the Company's 1996 Stock Incentive Plan (the "1996 Plan"). Shares of
Common Stock issued under the 1996 Plan are freely tradeable in the public
market and, in the case of sales by affiliates, subject to the amount, manner of
sale, notice and public information requirements of Rule 144.
Future sales of substantial amounts of Common Stock by the Company and
executive officers and directors both during and after the Offering (including
shares issued upon the exercise of stock options), or the perception that such
sales could occur, could adversely affect market prices prevailing from time to
time and the ability of the Company to raise equity capital in the future. No
prediction can be made as to the effect, if any, that future sales of shares, or
the availability of shares for future sale, will have on the market price of the
Common Stock. In addition, the Company has the authority to issue additional
shares of Common Stock and shares of one or more series of Preferred Stock (see
"Description of Capital Stock").
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K and Form 10-K/A for the year ended December
31, 1997, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
11
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information. . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference. . . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 9
Description of Capital Stock . . . . . . . . . . . . . . . . . . . .10
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . . . .11
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
</TABLE>
VDI MEDIA
1,665,600 SHARES
COMMON STOCK
-----------------
PROSPECTUS
-----------------
_____________, 1998
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth costs and expenses, other than underwriting
discounts and commissions, payable in connection with the sale and distribution
of the securities being registered. All amounts are estimates except Securities
and Exchange Commission registration fee.
<TABLE>
<S> <C> <C>
Securities and Exchange Commission registration fee. . . . . . .$ [ ]
NASD Listing Fee . . . . . . . . . . . . . . . . . . . . . . . .$ [ ]
Legal fees and expense . . . . . . . . . . . . . . . . . . . . .$ 10,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . $ [ ]
--------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .$
</TABLE>
None of the expenses of issuance and distribution of the Shares set forth
above are to be borne by the Selling Shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317(b) of the California Corporations Code (the "Corporations
Code") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any "proceeding" (as defined in
Section 317(a) of the Corporations Code), other than an action by or in the
right of the corporation to procure a judgment in its favor, by reason of the
fact that such person is or was a director, officer, employee or other agent of
the corporation (collectively, an "Agent"), against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if the Agent acted in good faith and in a manner the Agent
reasonably believed to be in the best interest of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct
was unlawful.
Section 317(c) of the Corporations Code provides that a corporation shall
have power to indemnify any agent who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was an Agent, against expenses actually and reasonably
incurred by the Agent in connection with the defense or settlement of such
action if the Agent acted in good faith and in a manner such Agent believed to
be in the best interest of the corporation and its shareholders.
Section 317(c) further provides that no indemnification may be made
thereunder for any of the following: (i) in respect of any matter as to which
an Agent shall have been adjudged to be liable to the corporation, unless the
court in which such proceeding is or was pending shall determine that such Agent
is fairly and reasonably entitled to indemnity for expenses; (ii) of amounts
paid in settling or otherwise disposing of a pending action without court
approval; and (iii) of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
Section 317(d) of the Corporations Code requires that an Agent be
indemnified against expenses actually and reasonably incurred to the extent the
Agent has been successful on the merits in the defense of proceedings referred
to in subdivisions (b) or (c) of Section 317.
Except as provided in Section 317(d), and pursuant to Section 317(e),
indemnification under Section 317 shall be made by the corporation only if
specifically authorized and upon a determination that indemnification is proper
in the circumstances because the Agent has met the applicable standard of
conduct, by any of the following: (i) a majority vote of a quorum consisting of
directors who are not parties to the proceeding; (ii) if such a quorum of
directors is not obtainable, by independent legal counsel in a written opinion;
(iii) approval of the shareholders,
II-1
<PAGE>
provided that any shares owned by the Agent may not vote thereon; or (iv) the
court in which such proceeding is or was pending.
Pursuant to Section 317(f) of the Corporations Code, the corporation may
advance expenses incurred in defending any proceeding upon receipt of an
undertaking by the Agent to repay such amount if it is ultimately determined
that the Agent is not entitled to be indemnified.
Section 317(h) provides, with certain exceptions, that no indemnification
shall be made under Section 317 in such case where it appears that it would be
inconsistent with a provision of the corporation's articles, bylaws, a
shareholder resolution or any agreement which prohibits or otherwise limits
indemnification, or in such case where it would be inconsistent with any
condition expressly imposed by a court in approving a settlement.
Section 317(i) authorizes a corporation to purchase and maintain insurance
on behalf of an Agent for liabilities arising by reason of the Agent's status,
whether or not the corporation would have the power to indemnify the Agent
against such liability under the provisions of Section 317.
Article III of the Restated Articles of Incorporation of the Registrant
provides for the indemnification of the agents of the Registrant to the fullest
extent permissible under California law.
In addition, Article IV of the Bylaws of the Registrant authorizes the
Registrant to enter into agreements with agents of the Registrant providing for
or permitting indemnification in excess of that permitted under Section 317 of
the Corporations Code, to the extent permissible under California law, and to
purchase and maintain insurance to the extent provided by Section 3.17(i).
The Company has entered into indemnification agreements with each of its
current directors and officers, which provide for indemnification of, and
advancement of expenses to, such persons to the greatest extent permitted by
California law, including by reason of action or inaction occurring in the past
and circumstances in which indemnification and advances of expenses are
discretionary under California law. The Company has also purchased a directors'
and officers' liability policy insuring directors and officers of the Company.
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Specimen Certificate for Common Stock (incorporated by reference to the
same numbered Exhibit to the Company's Amendment No. 1 to the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
May 17, 1996, filed with the Securities and Exchange Commission on
December 31, 1996 ("Amendment No. 1").
4.2 1996 Stock Incentive Plan of the Company (incorporated by reference to the
same numbered Exhibit to the Company's Amendment No. 1).
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP with respect to
legality.
23.1* Consent of Independent Accountants
24.* Power of Attorney (included on page II-5)
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
II-2
<PAGE>
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by
the undersigned, hereunto duly authorized, in the City of Los Angeles, State
of California, on June 29, 1998.
VDI MEDIA
By: /s/ Donald R. Stine
----------------------------
Donald R. Stine
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the registration statement has been signed by the
following persons in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
*
- ------------------------------ Chairman of the Board, Chief Executive June 29, 1998
R. Luke Stefanko Officer, President and Director
/s/ Donald R. Stine
- ------------------------------ Chief Financial Officer, Treasurer June 29, 1998
Donald R. Stine (principal financial and accounting officer),
Director
*
- ------------------------------ Director June 29, 1998
Tom Ennis
- ------------------------------ Director June , 1998
Edward Philip
- ------------------------------ Director June , 1998
Steven Schoch
* By /s/ Donald R. Stine
--------------------------
Donald R. Stine
Under Power of Attorney
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Specimen Certificate for Common Stock (incorporated by reference to the
same numbered Exhibit to the Company's Amendment No. 1 to the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
May 17, 1996, filed with the Securities and Exchange Commission on
December 31, 1996 ("Amendment No. 1").
4.2 1996 Stock Incentive Plan of the Company (incorporated by reference to the
same numbered Exhibit to the Company's Amendment No. 1).
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP with respect to
legality.
23.1* Consent of Independent Accountants
24.* Power of Attorney (included on page II-5)
* Previously filed.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD]
June 29, 1998
VDI Media
6920 Sunset Boulevard
Hollywood, California 90028
Re: Shares of Common Stock of VDI Media
Gentlemen:
We have acted as special counsel to VDI Media, a California corporation
(the "Company"), in connection with its Registration Statement on Form S-3,
as amended (the "Registration Statement"), filed pursuant to the Securities
Act of 1933, as amended (the "Act"), relating to the proposed offering by
certain shareholders of an aggregate of up to 1,665,600 shares (the "Shares")
of the Company's Common Stock, no par value (the "Common Stock").
In that connection, we have reviewed the Restated Articles of
Incorporation of the Company, its By-Laws, as amended, resolutions of its
Board of Directors and such other documents and records as we have deemed
appropriate.
On the basis of such review and having regard to legal considerations
that we deemed relevant, it is our opinion that the Shares, when issued by
the Company, were duly authorized, validly issued, fully paid and
nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement. In giving this opinion, we do not thereby admit that
we are within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission.
Very truly yours,
/s/ Kaye, Scholer, Fierman,
Hays & Handler, LLP
