<PAGE> 1
NATIONAL MEDIA CORPORATION
1700 Walnut Street
Philadelphia, PA 19103
July __, 1995
DEAR STOCKHOLDER:
You are cordially invited to attend the annual meeting of the stockholders
(the "Annual Meeting") of National Media Corporation (the "Company") to be held
on August 15, 1995, at 10:00 a.m., local time, at The Pennsylvania Convention
Center, 1101 Arch Street, Philadelphia, Pennsylvania.
The proposals for the Annual Meeting relate to: (i) the election of ten
(10) directors; (ii) approval of a Telemarketing, Production and Post-Production
Agreement (the "Telemarketing Agreement") between the Company and ValueVision
International, Inc. ("ValueVision") and the issuance, by the Company to
ValueVision, of warrants to purchase up to 500,000 shares of the Company's
Common Stock; and (iii) approval of the issuance of warrants to purchase an
aggregate of 500,000 shares of Common Stock to cetain persons who were holders
of certain of the Company's debt.
We look forward to seeing you at the Annual Meeting. Whether or not you
are planning to attend, I urge you to return the enclosed proxy at your
earliest convenience if you own shares of Common Stock.
Sincerely,
-----------------------------------------
Mark P. Hershhorn
President and Chief Executive Officer
<PAGE> 2
NATIONAL MEDIA CORPORATION
1700 Walnut Street
Philadelphia, PA 19103
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On August 15, 1995
-------------------------
TO THE STOCKHOLDERS OF NATIONAL MEDIA CORPORATION:
The annual meeting of stockholders (the "Meeting") of National Media
Corporation (the "Company") will be held at The Pennsylvania Convention Center,
1101 Arch Street, Philadelphia, Pennsylvania 19107 at 10:00 a.m. on Tuesday,
August 15, 1995, for the following purposes:
1. To elect ten (10) directors to hold office until the
Company's next annual meeting of stockholders;
2. To consider and vote upon a proposal (a) to approve a
Telemarketing, Production and Post-Production Agreement (the
"Telemarketing Agreement"), dated April 13, 1995, by and
between the Company and ValueVision International, Inc.
("ValueVision"); and (b) to approve an issuance, pursuant to
the Telemarketing Agreement, by the Company to ValueVision of
warrants to purchase up to 500,000 shares of the Company's
common stock, par value $.01 per share (the "Common Stock"),
at a price of $8.865 per share;
3. To consider and vote upon a proposal to approve the issuance
of warrants to purchase an aggregate of 500,000 shares of
Common Stock at a price of $10.00 per share to certain persons
who were holders of certain of the Company's debt; and
4. To transact such other business as may properly come before
the annual meeting.
The close of business on July 6, 1995 has been fixed as the record date
for the Meeting. Only stockholders of the Company of record at that time are
entitled to notice of and to vote at the Meeting or any adjournment(s) or
postponement(s) thereof.
All stockholders of the Company are cordially invited to attend the
Meeting. Proxies for the Meeting are being solicited by the Board of Directors
of the Company. Reference is made to the attached proxy for further information
with respect to the business to be transacted at the Meeting. The Board of
Directors urges you to date, sign and return the enclosed proxy card to give
voting instructions with respect to your shares of Common Stock and/or Preferred
Stock (as hereinafter defined) in the enclosed postage pre-paid envelope.
By order of the Board of Directors
MARSHALL A. FLEISHER, Secretary
July ___, 1995
Philadelphia, Pennsylvania
<PAGE> 3
NATIONAL MEDIA CORPORATION
1700 Walnut Street
Philadelphia, Pennsylvania 19103
-------------------------
PROXY STATEMENT
-------------------------
The enclosed proxy is solicited by the Board of Directors of National
Media Corporation (the "Company"), a Delaware corporation, for use at the annual
meeting of stockholders of the Company (the "Meeting") to be held at The
Pennsylvania Convention Center, 1101 Arch Street, Philadelphia, Pennsylvania
19107 at 10:00 a.m. on Tuesday, August 15, 1995, or any adjournment(s) or
postponements) thereof. This Proxy Statement and accompanying proxy are first
being mailed to stockholders on or about July ___, 1995.
VOTING AT THE ANNUAL MEETING
The record date for determining the stockholders entitled to notice of
and to vote at the Meeting has been fixed at the close of business on July 6,
1995 (the "Record Date"). As of such date the Company had approximately
___________ shares of common stock, par value $.01 per share ("Common Stock")
outstanding, each of which is entitled to one (1) vote as to the election of
eight (8) of the ten (10) directors to be elected at the Meeting and as to all
other non-election matters to be acted upon at the Meeting; and 255,796 shares
of its Series B Convertible Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock") outstanding, each of which is entitled to one (1)
vote per share as to the election of two (2) of the ten (10) directors to be
elected at the Meeting and ten (10) votes per share as to all other matters to
be voted upon at the Meeting, except the election of the remaining eight (8)
directors as to which the holders of the Series B Preferred Stock shall have no
voting rights. The total number of votes entitled to be cast at the Meeting as
to non-election matters is _____________.
Only stockholders of record at the close of business on the Record Date
will be entitled to vote at the Meeting or any adjournment(s) or postponement(s)
thereof. The presence, in person or by proxy, of holders entitled to cast at
least a majority of the votes that all stockholders are entitled to cast on each
matter to be acted upon at the Meeting will constitute a quorum at the Meeting.
Except with respect to the election of directors, on all matters
presented to the Company's stockholders for a vote at the Meeting, the Common
Stock and the Series B Preferred Stock will vote as a single class. Neither the
holders of Common Stock nor the holders of Series B Preferred Stock have
cumulative voting rights in connection with the election of directors.
The Board of Directors does not intend to bring any matter before the
Meeting other than the matters specifically referred to in the notice of the
Meeting, nor does the Board of Directors know of any matter which anyone else
proposes to present for action at the Meeting. However, if any other matter
properly comes before the Meeting, the persons named in the accompanying proxy
or their duly constituted substitutes acting at the Meeting will be deemed
authorized to vote or otherwise act thereon in accordance with their judgment on
such matter.
WHITE proxy card(s) for use by holders of the Company's Common Stock
and/or WHITE proxy card(s) with a GREEN STRIPE for use by the holders of the
Series B Preferred Stock are enclosed herewith. Properly executed proxies will
be voted in accordance with the instructions therein. In the absence of
instruction, the shares of Common Stock or Series B Preferred Stock represented
at the Meeting by the enclosed proxy will be voted (i) FOR the election of each
of the nominees of the Board of Directors in the election of directors, (ii) FOR
-1-
<PAGE> 4
the proposal to approve the Telemarketing Agreement (as defined below) and, in
connection therewith, the issuance to ValueVision International, Inc.
("ValueVision") of warrants to purchase an aggregate of 500,000 shares of Common
Stock at a price of $8.865 per share, and (iii) FOR the proposal to approve the
issuance of warrants to purchase an aggregate of 500,000 shares of Common Stock
at a price of $10.00 per share to certain holders of certain of the Company's
debt. Any stockholder giving a proxy may revoke it any time prior to its use at
the Meeting by (i) giving written notice of revocation to the Secretary of the
Company or (ii) executing and delivering to the Company a later dated proxy.
Mere attendance at the Meeting, without submitting such written notice of
revocation, will not revoke the proxy.
FOR ADDITIONAL INFORMATION
Questions concerning the voting of your shares should be directed to
the toll-free number established at the Company's request by Georgeson & Company
Inc. (1-800-223-2064), which you may call between the hours of 9:00 a.m. and
8:00 p.m. (Daylight Savings Time) Monday through Friday.
SOLICITATION OF PROXIES
The expense of the solicitation of proxies will be borne by the
Company. The Company has engaged Georgeson & Company Inc. to assist in the
solicitation of proxies from stockholders for an estimated fee of $6,500.
Solicitations may also be made by certain members of senior management of the
Company without additional compensation. Proxies will be solicited by use of the
mails and may also be solicited personally or by telephone, telegraph, telegram,
cablegram, facsimile or other electronic transmission. Bankers, brokers and
others holding stock in their names or in the names of nominees will be
reimbursed for out-of-pocket expenses incurred in forwarding proxies and proxy
materials to the beneficial owners of such shares.
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<PAGE> 5
PROPOSAL I
ELECTION OF DIRECTORS
Election
The by-laws of the Company provide that the Board of Directors shall be
composed of three (3) to eleven (11) directors, with such number to be fixed by
the Board of Directors. Currently, the number of directors of the Company, as
fixed by the Board of Directors, is nine (9) directors and the Company is
nominating for election at the Meeting ten (10) directors. Of such number of
directors, eight (8) will be elected by holders of the Common Stock and two (2)
will be elected by holders of the Series B Preferred Stock.
Set forth below is certain information with respect to the persons
nominated by the Board of Directors. With respect to each such person, such
information includes his age, the period during which he has served as a
director of the Company and his principal occupation and employment during the
past five years. All nominees (other than Albert R. Dowden), including those
proposed to be elected by the holders of the Series B Preferred Stock, are
currently directors of the Company. Unless otherwise specified on the enclosed
proxy card, each proxy received from the holders of shares of Common Stock will
be voted for the election as directors of the eight (8) nominees named below as
Common Stock nominees to serve until the next annual meeting of stockholders and
until a successor in office shall be duly elected and qualified, and each proxy
received from the holders of shares of Series B Preferred Stock will be voted
for the election as directors of the two (2) nominees named below as Series B
Preferred Stock nominees to serve until the next annual meeting of stockholders
and until a successor in office shall be duly elected and qualified. Each of the
nominees has consented to be named as a nominee in this Proxy Statement and to
serve as a director if elected. Should any nominee become unable or unwilling to
accept his nomination or election, the persons named in the enclosed proxy will
vote for the election of a nominee designated by the Board of Directors.
Vote Required for Approval
The ten (10) directors (including those proposed to be elected by the
holders of the Series B Preferred Stock) are required to be elected by a
plurality of the votes cast as to the subject board seat. Votes may be cast in
favor of or withheld for any or all of the appropriate nominees. Unless
otherwise instructed by a record holder submitting a proxy, the persons named in
a proxy will vote the shares represented thereby for the election of all such
appropriate nominees. Abstentions and broker non-votes will not be counted
toward a nominee's achievement of a plurality and thus will have no effect on
the outcome of the election of directors.
The Board of Directors unanimously recommends a vote FOR each of the
nominees listed below.
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<PAGE> 6
The following persons have been nominated for election as directors:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS BY HOLDERS
OF THE COMPANY'S COMMON STOCK
<TABLE>
<CAPTION>
Name Description
---- -----------
<S> <C>
David J. Carman(1) David J. Carman, age 44, served as President and Chief
Operating Officer of the Company's Quantum
International Ltd. ("Quantum") subsidiary since joining
the Company in December 1991 until April 1995, has been
President and Chief Executive Officer of Quantum since
April 1995, and has been Executive Vice President of
the Company since September 1994. From June 1991 to
August 1994 Mr. Carman served as Vice President of the
Company. From October 1989 to June 1991 Mr. Carman had
been Vice President in charge of European, Central
Pacific, Australian and New Zealand operations of The
Franklin Mint. Between 1986 and 1989, he had been
President of various international subsidiaries of The
Franklin Mint. Prior to that time, Mr. Carman held a
Teaching Fellowship at an Australian university and was
President of his own strategic consulting company. He
has served as a Director of the Company since April
1993.
Constantinos I. Costalas(1) Constantinos I. Costalas, age 59, has been the Vice
Chairman of the Company since September 1994. Until
February 11, 1994, he served as Chairman of the Board,
President and Chief Executive Officer of Glendale
Bancorporation and as Chairman of the Board, President
and Chief Executive Officer of Glendale National Bank
of New Jersey, which positions were held since 1985 and
1976, respectively. He has served as a Director of the
Company since May 1993.
-4-
<PAGE> 7
Albert R. Dowden Albert R. Dowden, age 53, has served as a Director,
President and Chief Executive Officer of Volvo North
America Corporation and Senior Vice President of AB
Volvo since January 1991. Prior to such time, he
served in various other positions with Volvo North
America Corporation since 1974, most recently as
Executive Vice President and Deputy to the President
and Chief Executive Officer from June 1989 to January
1991. Mr. Dowden also serves on the Board of Directors
of the National Association of Manufacturers, the
Association of International Automobile Manufacturers
(as Chairman), the Business Committee for the Arts, the
Center for International Leadership, the Madison Square
Boys & Girls Club, the United Way of New York City, the
Cortland Trust, the American Scandinavian Foundation
(as Chairman), the American Intercultural Student
Exchange, the American Institute for Public Service and
the Swedish American Chamber of Commerce. Mr. Dowden
is not currently a Director of the Company.
Michael J. Emmi(2) Michael J. Emmi, age 53, has served as Chairman of the
Board, Chief Executive Officer and President of Systems
& Computer Technology Corporation, a provider of
computer software and services, since May 1985. Mr.
Emmi is also a Director of CompuCom Systems, Inc.,
Crusader Savings and Loan Association, and The Franklin
Institute and is the Chairman of the Pennsylvania
Chapter of the American Electronics Association. Prior
to such time, Mr. Emmi held various positions with
General Electric Information Services Company (GEISCO),
a unit of General Electric Company and other
subsidiaries of General Electric Company, most recently
as Senior Vice President, Marketing and U.S. Sales of
GEISCO, from February 1982 to May 1985. He has served
as a Director of the Company since April 1995.
-5-
<PAGE> 8
Frederick S. Hammer(1)(2)(3)(4) Frederick S. Hammer, age 59, has been Vice Chairman of
Tri-Arc Financial Services, Inc., a provider of
specialized insurance products to the financial
services industry, since June 1994. From February 1993
to June 1994, Mr. Hammer was Chairman of Mutual of
America Capital Management Corporation. From 1989
until 1993, Mr. Hammer was President of the SEI Asset
Management Group in Wayne, Pennsylvania. From 1989
until 1991, Mr. Hammer was Mazur Fellow at the Wharton
School of the University of Pennsylvania. Mr. Hammer
presently serves on the Board of Directors of Alco
Standard Corporation and was previously a director of
Meritor Savings Bank. He has served as a Director of
the Company since October 1994.
Mark P. Hershhorn(1) Mark P. Hershhorn, age 45, has served as President of
the Company since August 1994, has been Chief Executive
Officer of the Company and Chairman of Quantum since
April 1995 and served as Chief Operating Officer of the
Company from August 1994 until April 1995. From June
1993 to August 1994, Mr. Hershhorn served as President
and Chief Operating Officer of Buckeye Communications,
Inc. From December 1991 to April 1993 Mr. Hershhorn
was President and Chief Operating Officer of the
Company. From April 1990 until December 1991, Mr.
Hershhorn was Senior Vice President of Food Operations
and Joint Ventures for Nutri/System, Inc. Prior to
assuming the position with Nutri/System, Inc., he acted
as a consultant for J. Crew, Inc. from January through
April 1990. From 1985 to January 1990, Mr. Hershhorn
was an executive with The Franklin Mint in
Philadelphia, Pennsylvania, serving as Vice President
and Chief Financial Officer, as well as a Director. He
has served as a Director of the Company since September
1994.
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<PAGE> 9
Brian McAdams(1) Brian McAdams, age 53, has served as Chairman of the
Board of the Company since September 1994 and was Chief
Executive Officer of the Company from September 1994 to
April 1995. Mr. McAdams has served as President, Chief
Executive Officer and a Director of McAdams, Richard &
Ong, Inc., an advertising and marketing company, since
1976. He is also a Director of Crusader Savings and
Loan Association. He has served as a Director of the
Company since June 1990.
Jon W. Yoskin II(2)(3) Jon W. Yoskin II, age 55, has served as Chairman, Chief
Executive Officer and a Director of Tri-Arc Financial
Services, Inc., a provider of specialized insurance
products to the financial services industry since
1986. Prior to that time, he worked in the insurance
and banking industries with companies such as Meritor,
TransAtlantic Life Insurance Assurance Company and
Royal Oak Insurance Company. Mr. Yoskin has served as
a Director of the Company since June 1994.
</TABLE>
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Nominating Committee.
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<PAGE> 10
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS BY HOLDERS
OF THE COMPANY'S SERIES B PREFERRED STOCK
<TABLE>
<CAPTION>
Name Description
---- -----------
<S> <C>
Charles L. Andes(1) Charles L. Andes, age 64, has served as Chief Executive
Officer of Interactive Marketing Ventures since January
1995 and as Chief Executive Officer and President of
the Eastern Technology Council, an affiliation of
industry leaders in technology fields who collaborate
and cooperate on a broad range of technology related
matters, since 1991. From 1986 until 1991, Mr. Andes
was President and Chief Executive Officer of The
Franklin Institute in Philadelphia, a world-renowned
science museum and research center. From 1973 until
1985, Mr. Andes was Chairman of The Franklin Mint. Mr.
Andes is a Director of Information Systems Acquisition
Corporation and First Fidelity Bank, N.A., Chairman of
the Pennsylvania Academy of the Fine Arts and is Vice
Chairman of the Pennsylvania Intergovernmental
Corporation Authority, a board created by the
Commonwealth of Pennsylvania to oversee the operating
and capital budgets of the City of Philadelphia. He
has served as a Director of the Company since October
1994.
Ira M. Lubert(2) Ira M. Lubert, age 45, has served as Managing Director
of Radnor Venture Management Company and of Technology
Leaders Management, Inc., both of which are venture
capital management companies, since 1988. Mr Lubert is
a Director of CompuCom Systems, Inc. He has served as
Director of the Company since December 1994.
</TABLE>
(1) Member of the Nominating Committee.
(2) Member of the Audit Committee.
Holders of a majority of the Series B Preferred Stock have the right to
designate to the Company's Nominating Committee the two (2) nominees for
election as directors by the holders of Series B Preferred Stock.
-8-
<PAGE> 11
Meetings of the Board of Directors and its Committees
During the fiscal year ended March 31, 1995, there were eighteen (18)
meetings of the full Board of Directors. All nominees attended at least 75% of
the meetings held during their terms as directors. The Company's Board of
Directors has an Executive Committee, an Audit Committee, a Compensation
Committee and a Nominating Committee. Each committee met at least once during
the fiscal year ended March 31, 1995. All committee members attended at least
75% of all committee meetings held during their terms as members of such
committee.
Audit Committee. The Audit Committee is currently composed of three (3)
non-employee directors. The current members of the Audit Committee are Messrs.
Emmi, Hammer and Yoskin. This committee meets with the Company's independent
public accountants to review the scope and results of auditing procedures and
the Company's accounting procedures and controls. The Audit Committee also
provides general oversight with respect to the accounting principles employed in
the Company's financial reporting. The Audit Committee met thirteen (13) times
during the fiscal year ended March 31, 1995.
Executive Committee. The Executive Committee is currently composed of
five (5) directors. The current members of the Executive Committee are Messrs.
McAdams, Costalas, Hershhorn, Carman and Hammer. The Executive Committee met
three (3) times during the fiscal year ended March 31, 1995.
Compensation Committee. The Compensation Committee is composed of three
(3) non-employee directors. The current members of the Compensation Committee
are Messrs. Yoskin, Lubert and Hammer. The Compensation Committee is responsible
for determining and reviewing the compensation of the officers of the Company,
including the CEO. The Compensation Committee determines and reviews executive
bonus plan targets and allocations and administers the terms and provisions of
the Company's stock option plan. The Compensation Committee met seven (7) times
during the fiscal year ended March 31, 1995.
Nominating Committee. On November 30, 1994, the Board of Directors
appointed a Nominating Committee composed of two (2) non-employee directors. The
current members of the Nominating Committee are Messrs. Hammer and Andes. The
Nominating Committee is responsible for reviewing candidates and recommending to
the Board nominees for membership on the Board of Directors. The holders of a
majority of the Series B Preferred Stock have the right to designate to the
Nominating Committee the two (2) nominees for election as directors by the
holders of Series B Preferred Stock. The Nominating Committee met one (1) time
during the fiscal year ended March 31, 1995.
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<PAGE> 12
SECURITY OWNERSHIP OF MANAGEMENT
On June 1, 1995, there were outstanding and entitled to vote
approximately 14,241,332 shares of Common Stock and 255,796 shares of Series B
Preferred Shares (each of which is entitled to ten (10) votes on all
non-election matters expected to be presented to the Company's stockholders at
the Meeting). The following table sets forth certain information at June 1, 1995
with respect to the beneficial ownership of shares of Common Stock by (i) each
director/nominee, (ii) each executive officer of the Company and (iii) all
directors and executive officers of the Company as a group. Except for David J.
Carman, the address for each such person is 1700 Walnut Street, Philadelphia,
Pennsylvania 19103. Mr. Carman's address is C1-21 Soho Square, London, United
Kingdom, WIV5FD.
Number of Issued and Outstanding
Shares of Stock Owned
<TABLE>
<CAPTION>
Total Number
of Shares of
Common Stock
Common Series B Preferred Beneficially Percent of
Name(1) Stock(2) Stock Owned(3)(4) Class(5)(6)
------- -------- ----- ----------- -----------
<S> <C> <C> <C> <C>
Charles L. Andes 0 1,250 12,500 *
David J. Carman 331,900 2,500 356,900 2.5%
Constantinos I. Costalas 25,000 0 25,000 *
Albert R. Dowden 0 0 0 0
Michael J. Emmi 2,000 0 2,000 *
Frederick S. Hammer 25,000 2,500 50,000 *
Mark P. Hershhorn 150,000 5,000 200,000 1.4%
James A. Jernigan 146,803 0 146,803 1.0%
Ira M. Lubert(7) 0 1,250 12,500 *
Brian McAdams 31,050 0 31,050 *
John J. Sullivan 108,599 1,875 127,349 *
John W. Yoskin, II 27,000 3,546 62,460 *
All executive officers and 847,352 17,921 1,026,562 6.8%
directors as a group (12
persons)(7) (8)
</TABLE>
- --------------------------
*Less than one percent.
(1) To the Company's knowledge, each Director and Executive Officer listed
above has sole voting and investment power (with his spouse, in certain
circumstances) with respect to all shares indicated as beneficially
owned by such Director or Executive Officer.
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<PAGE> 13
(2) Includes shares which may be acquired upon the exercise of immediately
exercisable outstanding stock options in accordance with Rule 13d-3
under the Securities Exchange Act of 1934 as follows: Mr. Carman,
200,000; Mr. Costalas, 25,000; Mr. Hershhorn 150,000; Mr. Jernigan,
146,666; Mr. McAdams, 30,000; Mr. Sullivan, 33,334; Mr. Yoskin, 25,000;
Mr. Hammer, 25,000 and all executive officers and directors as a group,
635,000.
(3) In accordance with Rule 13d-3, includes shares of Common Stock issuable
upon the conversion of Series B Preferred Stock.
(4) In accordance with Rule 13d-3, does not include Private Placement
Warrants (as defined below - See "Certain Relationships and Related
Transactions - Private Placement") which are not presently exercisable.
(5) All percentages are rounded to the nearest tenth of a percent.
(6) Based on 14,241,332 shares outstanding as of June 1, 1995 as determined
in accordance with Rule 13d-3.
(7) Does not include the Holder Warrants (as defined below) to be granted
in the event the stockholders approve the matters contained in Proposal
III.
(8) Does not include Mr. Turchi who is named in the Summary Compensation
Table below but who is no longer an officer of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information at June 1, 1995 with
respect to each person, other than as set forth above, known by the Company to
beneficially own more than 5% of the Common Stock as determined in accordance
with Rule 13d-3. Certain of the information set forth below is derived, without
independent investigation on the part of the Company, from filings made by such
persons on Form 13D and Form 13F pursuant to Rule 13d-3.
Number of Issued and Outstanding
Stock Owned
<TABLE>
<CAPTION>
Total Number
of Shares of
Series B Common Stock
Common Preferred Beneficially Percent of
Name(1) Stock(2) Stock Owned(3)(4) Class(5)(6)
------- -------- ----- ----------- -----------
<S> <C> <C> <C> <C>
John J. Turchi, Jr. 1,543,265 0 1,543,265 10.8%
1700 Walnut Street
Philadelphia, PA 19103
ValueVision 1,152,000 0 1,152,000 8.1%
International, Inc.(7)(8)
6740 Shady Oak Road
Minneapolis, Minn. 55344
McCullough, Andrews & 1,419,300 0 1,419,300 10.0%
Cappiello, Inc. (9)
101 California Street
Suite 4250
San Francisco, CA 94111
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<PAGE> 14
Safeguard Group(10)(11) 0 88,750 887,500 5.9%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
(a) Safeguard Scientifics, 50,000 500,000 3.4%
Inc.(11)(12)
(b) Technology Leaders 25,000 250,000 1.7%
II Management
L.P.(11)(13)
(c) Warren V. Musser 5,000 50,000 *
(d) Robert Keith 2,500 25,000 *
(e) Ira M. Lubert(11) 1,250 12,500 *
(f) Gary Anderson 1,250 12,500 *
(g) Charles Andes 1,250 12,500 *
(h) Jean Tempel 2,500 25,000 *
</TABLE>
- ----------------
* Less than 1%
(1) To the Company's knowledge, except as otherwise indicated in the
footnotes to this table, each of the persons named in this table has
sole voting and investment power with respect to all shares of Common
Stock reported as beneficially owned by such person.
(2) In accordance with Rule 13d-3, includes 825,000 shares which may be
acquired by Mr. Turchi upon the exercise of immediately exercisable
outstanding stock options.
(3) In accordance with Rule 13d-3, includes shares of Common Stock
issuable upon the conversion of Series B Preferred Stock.
(4) In accordance with Rule 13d-3, does not include Private Placement
Warrants (as defined below - See "Certain Relationships and Related
Transactions - Private Placement") which are not presently exercisable.
(5) All percentages are rounded to the nearest tenth of a percent.
(6) Based on 14,241,332 shares outstanding as of June 1, 1995 as
determined in accordance with Rule 13d-3.
(7) Based on information contained in a Schedule 13D dated January 13,
1994, as amended.
(8) Does not include the ValueVision Warrants (as defined below) to be
granted in the event the Company's
stockholders approve the matters contained in Proposal II.
(9) Based on information contained in a Form 13F dated May 1, 1995.
(10) Based on information contained in Schedules 13D filed by each member
of the Safeguard Group on or about December 29, 1994.
(11) Does not include the Holder Warrants to be granted in the event the
Company's stockholders approve the matters contained in Proposal III.
(12) All shares listed as beneficially owned by Safeguard Scientifics, Inc.
("SSI") are held in the name of Safeguard Scientifics (Delaware), Inc.
("SSD"). SSD is a wholly owned subsidiary of SSI. SSI and SSD each
have shared voting and investment power with respect to such shares.
(13) All shares listed as beneficially owned by Technology Leaders II
Management L.P. ("TLM") are held in the name of Technology Leaders II
L.P. and Technology Leaders II Offshore C.V. TLM as the general partner
of each of such entities has sole voting and investment power with
respect to such shares.
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<PAGE> 15
EXECUTIVE OFFICERS OF THE COMPANY
Biographical information for James A. Jernigan and John J. Sullivan is
set forth below. Biographical information for David J. Carman, Constantinos I.
Costalas, Mark P. Hershhorn and Brian McAdams is set forth above under the
caption "ELECTION OF DIRECTORS."
James A. Jernigan, age 52, has served as Executive Vice President of
the Company and Chief Operating Officer for North American Operations since
September 1994. From June 1994 until September 1994, he served as Senior Vice
President and Chief Operating Officer of the Company. From January 1992 until
June 1994, Mr. Jernigan was Vice President, Manufacturing, Sourcing and
Distribution of the Company. He was Vice President of Sourcing and International
Operations at The Franklin Mint from December 1987 to January 1992.
John J. Sullivan, age 47, has served as Senior Vice President,
Administration, Planning and Investor Relations of the Company since April 1995
and as Vice President, Treasurer and Chief Financial Officer of the Company from
September 1991 to April 1995. From 1989 to September 1991, Mr. Sullivan was
Chief Financial Officer of Gold Medal Sporting Goods. Prior to that time, Mr.
Sullivan was employed by The Franklin Mint for more than 18 years in various
capacities, most recently as Corporate Controller.
The term of office for each of the Company's executive officers expires
on the date of the organizational meeting of the Board of Directors, to be held
immediately following the Meeting, at which time the Board of Directors intends
to reelect each officer.
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<PAGE> 16
PROPOSAL II
APPROVAL OF THE TELEMARKETING AGREEMENT AND,
IN CONNECTION THEREWITH, THE ISSUANCE TO VALUEVISION
OF WARRANTS TO PURCHASE 500,000 SHARES OF COMMON STOCK
The Proposal
At the Meeting, the stockholders will be presented with a proposal to
approve that certain Telemarketing, Production and Post-Production Agreement,
dated April 13, 1995, by and between the Company and ValueVision (the
"Telemarketing Agreement"), and, in connection therewith, the issuance to
ValueVision of warrants to purchase 500,000 shares of Common Stock (the
"ValueVision Warrants"). A copy of the Telemarketing Agreement is attached as
Exhibit 10.2 to the Company's Current Report on Form 8-K, dated April 13, 1995.
General
On April 13, 1995, the Company entered into a Settlement Agreement by
and among the Company, ValueVision, John J. Turchi, Jr., Robert A. Johander and
Mark A. Payne (the "Settlement Agreement") pursuant to which the parties agreed
to dismiss with prejudice all claims and counterclaims which they have in a
pending civil action in the United States District Court of the Eastern District
of Pennsylvania entitled National Media Corporation, et al. v. Value Vision
International, Inc., et al., Civil Action No. 94-CV-2500 (the "ValueVision
Litigation"). A copy of the Settlement Agreement is attached as Exhibit 10.1 to
the Company's Current Report on Form 8-K, dated April 13, 1995. In connection
with the Settlement Agreement, the Company and ValueVision entered into the
Telemarketing Agreement, which provides, among other things, that, as part of
the consideration to be received by ValueVision in exchange for their services
under the Telemarketing Agreement, the Company will issue to ValueVision the
ValueVision Warrants.
Pursuant to the rules of the New York Stock Exchange (the "NYSE"), the
Company is required to obtain stockholder approval if the Company proposes to
acquire tangible or intangible assets from a "substantial security holder" of
the Company and, in connection with such transaction, the Company proposes to
issue to such substantial security holder shares of Common Stock or securities
convertible into Common Stock which exceed an amount equal to one percent (1%)
of the outstanding shares of voting stock of the Company prior to issuance. Any
holder of aggregate interests which represent five percent (5%) or more of the
outstanding shares of a company's common stock or other voting securities is
generally considered by the NYSE to be a "substantial security holder."
As of June 1, 1995, the Company had approximately 14,241,332 shares of
Common Stock outstanding, of which ValueVision owned 1,152,000 shares (or
approximately 8.1% of the issued and outstanding shares of Common Stock).
Therefore, pursuant to NYSE rules, because (i) ValueVision is a "substantial
security holder" of the Company, (ii) the shares of Common Stock issuable upon
exercise of the ValueVision Warrants represent an amount in excess of one
percent (1%) of the Company's outstanding shares of voting stock, and (iii) the
Value Vision Warrants are being issued in consideration of the entering into of
the Telemarketing Agreement (and in connection with the Settlement Agreement
pursuant to which ValueVision is releasing its claims against the Company),
stockholder approval is required in connection with the issuance of the
ValueVision Warrants. Additionally, the approval by the Company's stockholders
of the Telemarketing Agreement and the issuance of the ValueVision Warrants is a
condition precedent to the effectiveness of each of the Settlement Agreement and
Telemarketing Agreement.
Also, in connection with the Settlement Agreement (i) the Company and
ValueVision entered into a Joint Venture Agreement, pursuant to which the
Company and ValueVision are required, subject to certain exceptions, to
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<PAGE> 17
negotiate in good faith with each other to form a joint venture to pursue home
shopping opportunities outside of the United States and Canada prior to pursuing
such opportunities by itself or with certain third parties, and (ii) the Company
entered into a letter agreement with John J. Turchi, a significant stockholder
of the Company and its former Chairman and former Chief Executive Officer and
Mergren Associates, an affiliate of Mr. Turchi. For a description of such letter
agreement, see "Certain Relationships and Related Transactions-Lease of Office
Space."
The issuance of shares of Common Stock upon exercise of all or any part
of the ValueVision Warrants will have the effect of diluting the percentage
ownership of the Company currently owned by the Company's security holders. To
the extent that the book value per share of Common Stock is greater than $8.865
as of the time ValueVision exercises the ValueVision Warrants, the Company's
then existing security holders will suffer a dilution to the book value of the
Common Stock held.
Terms of the Telemarketing Agreement
Pursuant to the Telemarketing Agreement, ValueVision is obligated to
provide to the Company, for a thirty-seven (37) month period beginning on the
effective date of the Telemarketing Agreement (the "Term"), telephone
call-taking services (the "Telemarketing Services") for inbound telephone calls
generated by the Company. Such services are to be provided at such times as may
be mutually agreed upon by ValueVision and the Company based upon ValueVision's
capacity as it may exist from time to time, provided, however, that ValueVision
is obligated to make available to the Company sufficient capacity to provide to
the Company telephone call-taking services for a minimum of 1,000,000 inbound
telephone calls (at a rate not to exceed 100,000 inbound telephone calls in any
month) during the first thirteen months of the Term and during each twelve month
period thereafter during the Term. The rates payable to ValueVision by the
Company for the Telemarketing Services are based upon the number and length of
telephone calls and are below the rates currently being paid by the Company for
similar services.
The Telemarketing Agreement will become effective upon the later to
occur (i) of the date the Company's stockholders approve the Telemarketing
Agreement (the "Stockholder Approval Date") and (ii) the date ValueVision
performs Telemarketing Services during any thirty consecutive day period for the
lesser of three thousand in-bound telephone calls and the number of calls that
the Company directs to ValueVision during such period (the "Certification
Date"). In the event the Company's stockholders do not approve the matters
contained in this Proposal II on or prior to August 31, 1995, either the Company
or ValueVision may terminate the Telemarketing Agreement. Upon such a
termination, the Settlement Agreement would become null and void. To the extent
that the Settlement Agreement were to become null and void, there can be no
assurance regarding the outcome of the litigation which the Settlement Agreement
addresses. In the event the Certification Date has not occurred by the sixtieth
day following the Stockholder Approval Date, the Company may terminate the
Telemarketing Agreement. Upon such a termination, the Company would be entitled
to receive liquidated damages in the amount of $3,000,000. The Company would
also be entitled to liquidated damages of a lesser amount for certain other
material breaches by ValueVision during the term of the Telemarketing Agreement.
The Telemarketing Agreement provides that ValueVision will make
available for use by the Company its production studios, equipment and employees
for taping, editing, sound recording and graphic design in connection with the
creation of program-length video infomercials and short spot video
advertisements. Additionally, ValueVision will provide the Company with certain
post-production editing services and a master videotape of certain programs in a
format capable of being broadcast. In exchange for such services, the Company
shall pay to ValueVision an amount equal to its costs and expenses in providing
such services and an hourly rate equal to fifty percent (50%) of the estimated
gross fair market value of such services.
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<PAGE> 18
Terms of the ValueVision Warrants
As additional consideration for the services to be provided by
ValueVision under the Telemarketing Agreement, the Company will grant to
ValueVision, on the effective date of the Telemarketing Agreement (the
"Effective Date"), the ValueVision Warrants. The form of ValueVision Warrant is
attached as Exhibit B to the Telemarketing Agreement. The ValueVision Warrants
permit ValueVision to purchase up to 500,000 shares of Common Stock at a price
of $8.865 per share. The ValueVision Warrants vest with respect to 166,667
shares of Common Stock on each of the thirteen month and two year anniversaries
of the Effective Date and 166,666 shares of Common Stock on the three year
anniversary of the Effective Date, provided ValueVision satisfies certain
performance conditions as more fully set forth in the ValueVision Warrants. The
ValueVision Warrants expire on the tenth anniversary of the Effective Date.
Additionally, in the event of the termination of the Telemarketing Agreement as
a result of certain material breaches of the Telemarketing Agreement by
ValueVision, all ValueVision Warrants which are not then vested shall
automatically expire. Prior to the termination of the Telemarketing Agreement,
the ValueVision Warrants are only transferable with the prior written consent of
the Company. The Company has granted ValueVision certain registration rights
with respect to the shares of Common Stock issuable upon exercise of the
ValueVision Warrants, as more fully set forth in the ValueVision Warrants.
The number of shares of Common Stock issuable upon exercise of the
ValueVision Warrants and the exercise price thereof will be adjusted in the
event the Company (i) takes a record of the holders of Common Stock for purposes
of entitling them to receive a dividend or distribution payable in shares of
Common Stock, (ii) subdivides the outstanding shares of Common Stock into a
larger number of shares or (iii) combines the outstanding shares of Common Stock
into a smaller number of shares. Additionally, if the Company (i) issues or
sells Common Stock or options, warrants or other securities or rights
convertible or exercisable into shares of Common Stock for consideration per
share less than the current market price of the Common Stock on the date of
issuance thereof or (ii) fixes a record date for the issuance of subscription
rights, options or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock or options, warrants or other securities
convertible or exercisable into shares of Common Stock at a price per share less
than the then current market price of Common Stock, the exercise price of the
ValueVision Warrants will be adjusted.
Vote Required for Approval
A quorum for the purpose of acting on this Proposal requires the
presence, in person or represented by proxy, of the holders entitled to cast at
least a majority of the votes that all stockholders are entitled to cast on such
matter at the Meeting. The approval of this Proposal requires the affirmative
vote of a majority of the votes cast, in person or by proxy, at the Meeting for
its approval. Abstentions may be specified on the proxy, and will be considered
present at the Meeting, but will not be counted as affirmative votes. Broker
non-votes will not be considered present at the Meeting and, therefore, will not
be voted or have any effect on the proposal.
The Board of Directors has determined that the execution and delivery
of the Telemarketing Agreement and, in connection therewith, the issuance of the
ValueVision Warrants, is beneficial to the Company and, therefore, recommends a
vote FOR this proposal.
-16-
<PAGE> 19
PROPOSAL III
APPROVAL OF THE ISSUANCE OF WARRANTS TO PURCHASE
AN AGGREGATE OF 500,000 SHARES OF COMMON STOCK
AT A PRICE OF $10.00 PER SHARE TO CERTAIN PERSONS
WHO WERE HOLDERS OF CERTAIN OF THE COMPANY'S DEBT
The Proposal
At the Meeting, the stockholders will be presented with a proposal to
approve the issuance of warrants to purchase an aggregate of 500,000 shares of
Common Stock at a price of $10.00 per share to certain persons who were holders
of certain of the Company's debt.
General
Pursuant to the terms of that certain Note and Warrant Purchase
Agreement dated as of October 19, 1994, by and between the Company, certain
subsidiaries of the Company and Safeguard Scientifics (Delaware), Inc.
("Safeguard"), the prior consent of the holders (the "Holders") of the notes in
the aggregate principal amount of $5,000,000 sold thereunder (the "Notes") is
required in the event that the Company proposes to issue securities exercisable
into shares of Common Stock for consideration other than cash. Because the
ValueVision Warrants are to be issued in consideration of the provision by
ValueVision to the Company of certain services, rather than cash, the consent of
the Holders is required prior to the issuance of the ValueVision Warrants.
In connection with the negotiation of the Telemarketing Agreement, the
Company approached the Holders in order to obtain the required consent. The
Holders agreed that they would grant the required consent if the Company agreed
to issue to the Holders the Holder Warrants. The Company's obligation to issue
the Holder Warrants is conditioned upon receipt of the approval of the Company's
stockholders of the matters contained in this Proposal III and the issuance of
the ValueVision Warrants pursuant to Proposal II. Ira M. Lubert, a Director of
the Company, will receive Holder Warrants to purchase 50,000 shares of Common
Stock, if they are approved pursuant to this Proposal III.
Subsequent to the grant of the consent by the Holders, all outstanding
Notes were transferred by the Holders to Meridian Bank and certain of the
Holders became limited guarantors of the Notes now held by Meridian Bank. The
Company is not required to obtain the consent of Meridian Bank in connection
with the issuance of either the ValueVision Warrants or the Holder Warrants.
The Holders, at the time of the grant of consent, and the number of
shares of Common Stock issuable upon exercise of Holder Warrants to be issued to
each Holder is set forth below:
-17-
<PAGE> 20
NUMBER OF SHARES OF
COMMON STOCK ISSUABLE
UPON EXERCISE OF
HOLDER HOLDER WARRANTS
------ ---------------
Safeguard Scientifics (Delaware), Inc. 300,000
Technology Leaders II L.P. 39,000
Technology Leaders II Offshore C.V. 61,000
Ira M. Lubert 50,000
Gary Erlbaum 22,500
Steven Erlbaum 12,500
Michael Erlbaum 5,000
Morris Saffer Holdings 10,000
Pursuant to the NYSE rule described under "Proposal II - General"
above, because (i) the Holders, as a group, are a "substantial security holder"
of the Company (as defined in the NYSE rules), (ii) the Holder Warrants are
convertible into more than one percent (1%) of the Company's outstanding voting
securities, and (iii) the Holder Warrants are being issued in consideration of
the grant by the Holders of their consent to the issuance of the ValueVision
Warrants, the issuance of the Holder Warrants requires the approval of the
Company's stockholders.
The issuance of shares of Common Stock upon exercise of all or any part
of the Holder Warrants will have the effect of diluting the percentage ownership
of the Company currently owned by the Company's security holders. To the extent
that the book value per share of Common Stock is greater than $10.00 as of the
time Holder Warrants are exercised, the Company's existing security holders will
suffer a dilution to the book value of the Common Stock held.
Terms of the Holder Warrants
The Holder Warrants may be exercised in whole or part by delivery of
the exercise price of $10.00 per share (or by forgiveness of an equivalent
amount owing under the Notes). The Holder Warrants expire on that date which is
twelve (12) months after the earlier of the date on which (i) the Notes are
satisfied or (ii) the Holders are no longer holders or guarantors of the Notes.
The Holder Warrants provide that the number of shares of Common Stock issuable
upon exercise thereof and the exercise price shall be adjusted in the event of
any stock split, subdivision or recapitalization of the Common Stock.
Additionally, Holders have certain registration rights with respect to the
shares of Common Stock issuable upon exercisability of the Holder Warrants.
Vote Required for Approval
A quorum for the purpose of acting on this Proposal requires the
presence, in person or represented by proxy, of the holders entitled to cast at
least a majority of the votes that all stockholders are entitled to cast at the
Meeting. The approval of this Proposal requires the affirmative vote of a
majority of the votes cast, in person or by proxy, at the Meeting for its
approval. Abstentions may be specified on the proxy, and will be considered
present at the Meeting, but will not be counted as affirmative votes. Broker
non-votes will not be considered present at the Meeting and, therefore, will not
be voted or have any effect on the proposal.
The Board of Directors has determined that the issuance of the Holder
Warrants is beneficial to the Company and, therefore, recommends a vote FOR this
proposal.
-18-
<PAGE> 21
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the cash
compensation and certain other components of the compensation received by (i)
Brian McAdams, the current Chairman of the Board of Directors and the Chief
Executive Officer of the Company from September 1994 until April 1995, (ii)
John J. Turchi, Jr., the Chief Executive Officer of the Company until September
1994, and (iii) the other four most highly compensated executive officers of the
Company during the fiscal year ended March 31, 1995 for each of the fiscal years
ended March 31, 1993, 1994 and 1995.
-19-
<PAGE> 22
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Other
Annual Securities All Other
Name and Fiscal Compen- Underlying Compen-
Principal Position Year Salary Bonus(1) sation Options sation(2)
------------------ ------ ------ -------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Brian McAdams(3) 1995 $ 74,748 0 0 90,000 $ 4,925
Chairman of the Board and 1994 5,000
former Chief Executive 1993
Officer
John J. Turchi, Jr.(4) 1995 $300,000 0 0 0 $2,625,314
Former Chairman of the Board 1994 $600,000 0 0 900,000 $ 2,480
and Chief Executive Officer 1993 $457,867 $ 63,654 0 150,000 $ 6,493
Mark P. Hershhorn(5) 1995 $254,451 0 0 450,000 $ 4,626
President and Chief 1994 $361,700 $ 6,731 0 0 $ 8,931
Executive Officer 1993 $115,224 0 0 250,000 0
David J. Carman(6) 1995 $350,000 0 $132,495(7) 0 $30,873
Executive Vice President of 1994 $324,801 0 $ 11,960(8) 300,000 $14,723
the Company and President 1993 $206,054 $ 29,731 $ 51,760(8) 0 $22,380
and Chief Executive Officer
of Quantum
James A. Jernigan 1995 $241,874 0 0 100,000 $ 480
Executive Vice President 1994 $188,125 0 0 5,000 $ 2,390
and Chief Operating Officer 1993 $191,378 $ 22,558 0 0 $ 3,770
- - North American Operations
John J. Sullivan 1995 $185,640 0 0 50,000 $ 1,963
Senior Vice President, 1994 $180,133 0 0 0 $ 1,180
Administration, Planning 1993 $171,555 $ 25,115 0 0 $ 712
and Investor Relations
</TABLE>
(1) Bonuses have been listed in the year earned, portions of which were
actually paid in the following fiscal year.
(2) Amounts for fiscal 1995 consist of (i) payments made to Mr. Turchi
pursuant to a separation agreement between Mr. Turchi and the Company,
see "Separation and Consulting Agreement - John J. Turchi, Jr.", (ii)
the Company's contributions under a defined contribution retirement
arrangement for Mr. Carman: $29,350, (iii) the Company's contribution
under a 401(k) plan for: Mr. Hershhorn, $96; Mr. Turchi, $314, Mr.
Jernigan, $480; and Mr. Sullivan, $423 and (iv) the Company's insurance
premiums for supplemental life insurance for: Mr. Hershhorn, $4,530;
Mr. McAdams, $4,925; Mr. Carman, $1,523; and Mr. Sullivan, $1,540.
Amounts for fiscal 1994 consist of (i) the Company's insurance premium
payments for supplemental life insurance for: Mr. Turchi, $2,030; Mr.
Carman, $1,523; Mr. Jernigan, $1,940; and Mr. Sullivan, $1,180; (ii)
the Company's contributions under its 401(k) plan for: Mr. Turchi,
$450; and Mr. Jernigan, $450; and (iii) the Company's contributions
under a defined contribution retirement arrangement for Mr. Carman,
$13,200. Amounts for fiscal 1993 consist of (i) the Company's insurance
premium payments for supplemental life insurance for: Mr. Turchi,
$1,732; Mr. Carman, $1,022; and Mr. Jernigan, $1,672; (ii) the
Company's contributions under its 401(k) plan for: Mr. Turchi, $4,761;
Mr. Jernigan, $2,098; and Mr. Sullivan, $712; and (iii) the Company's
contribution under a defined contribution retirement arrangement for
Mr. Carman, $21,358.
(3) Mr. McAdams served as Chief Executive Officer from September 1994 until
April 1995.
(4) Mr. Turchi resigned as Chairman of the Board and Chief Executive
Officer of the Company effective as of September 12, 1994.
(5) Mr. Hershhorn was appointed Chief Executive Officer in April 1995.
(6) Includes compensation paid to Mr. Carman by Quantum.
(7) Represents an allowance for overseas housing. A portion of such
allowance was paid retroactively to Mr. Carman.
(8) Represents an allowance for overseas housing.
-20-
<PAGE> 23
Employment Agreements
David J. Carman
In June 1993, the Company and its subsidiary, Quantum International
Ltd. ("Quantum") entered into employment agreements with Mr. Carman. Pursuant to
these agreements, Mr. Carman is employed as President and Chief Executive
Officer of Quantum and as an Executive Vice President of the Company for a
four-year term at an aggregate annual base salary of $350,000. The term of the
agreements will be automatically extended for successive one-year periods unless
terminated by either party upon 60 days' written notice prior to the end of any
such year. Mr. Carman is also entitled to participate in the Company's Executive
Bonus Plan. The Company has agreed to maintain $1,000,000 of insurance on the
life of Mr. Carman, which is payable to beneficiaries designated by Mr. Carman.
Pursuant to his employment agreement with the Company, Mr. Carman was granted
options to purchase 300,000 shares of Common Stock under the Company's 1991
Stock Option Plan, as amended, at an exercise price of $5.625 per share which is
equal to the market price on the date of grant. One-third of the options vested
in June 1994 and one-third will vest in each of June 1995 and 1996, provided Mr.
Carman is then employed by the Company.
Either party may terminate the agreement upon 60 days' prior written
notice. If Mr. Carman is terminated without Cause (as defined) or if Mr. Carman
terminates the agreements on account of Good Reason (as defined), the Company
will be required to (i) pay Mr. Carman, in installments, an amount equal to the
base salary payable during the remainder of the term, and (ii) maintain his
employee benefits for the greater of six (6) months or the remainder of the
term. Cause is defined for purposes of Mr. Carman's employment agreement as well
as for the other agreements described below, as a breach of the employment
agreement, the commission of certain crimes and offenses, mental incompetence or
drug or alcohol dependence. Good Reason is defined for purposes of Mr. Carman's
employment agreement as well as for the other agreements described below, as an
uncured failure of the Company to comply with the provisions of the employment
agreement. The Company and Quantum have also agreed to indemnify Mr. Carman in
his capacity as an officer and director of the Company and of Quantum to the
maximum extent permitted by law and to make advances to Mr. Carman for his
expenses (including attorneys' fees) incurred in defending any civil, criminal,
administrative or investigative action, suit or proceeding upon receipt by the
Company or an undertaking by or on behalf of Mr. Carman to repay such amounts if
its is ultimately determined that Mr. Carman is not entitled to such
indemnification. The Company and Mr. Carman are in the process of finalizing an
amendment to his employment agreement regarding the inclusion of a change of
control provision, a housing allowance, a pension obligation and certain other
matters. In connection with the private placement by the Company of the Series B
Preferred Stock Units, Mr. Carman waived the change of control provisions of the
employment agreement with respect to such transaction and to all prior actions.
Constantinos I. Costalas
As of November 30, 1994, the Company entered into an employment
agreement with Mr. Costalas. Pursuant to the agreement, Mr. Costalas is to be
employed as Vice-Chairman of the Company for a two-year term beginning December
1, 1994, at an annual base salary of $200,000. The term of the agreement will be
automatically extended for successive two-year periods after the expiration of
the initial term unless terminated by either party upon 6 months' written notice
prior to the end of the then current two-year period. Mr. Costalas participates
in the Company's 1995 Management Incentive Plan. The Company maintains
$1,000,000 of insurance on the life of Mr. Costalas, which is payable to
beneficiaries designated by Mr. Costalas, pays certain of Mr. Costalas's club
dues and pays Mr. Costalas an automobile allowance. Mr. Costalas will also be
reimbursed by the Company for all expenses reasonably incurred by him in the
performance of his duties. Pursuant to this employment agreement, Mr. Costalas
was granted options to purchase up to 60,000 shares of Common Stock at an
exercise price of $4.625 which was equal to the market price on the date of
grant. One-third of such options will vest on each of December 31, 1995, 1996
and 1997, provided Mr. Costalas is then an executive officer of the Company.
-21-
<PAGE> 24
The agreement provides that either party may terminate the agreement
upon 60 days' prior written notice. If the Company terminates the agreement
without Cause or if Mr. Costalas terminates the agreement on account of Good
Reason, the Company will be required to (i) pay Mr. Costalas, in installments,
an amount equal to the greater of one year's base salary or the base salary
payable during the remainder of the term, and (ii) maintain his employees
benefits for the greater of six (6) months or the remainder of the term. The
agreement also provides that in the event of the termination of Mr. Costalas'
employment upon the occurrence of a significant change in the beneficial
ownership of the Company's Common Stock or a significant change in the
composition of the Company's Board of Directors (a "Change of Control"), Mr.
Costalas will be entitled to receive, within thirty (30) days of the Change of
Control, a lump-sum payment in an amount equal to three years' base salary at
the then current amount and a lump-sum payment of the annual bonuses to which
Mr. Costalas would otherwise have been entitled through the remainder of the
term. In addition, Mr. Costalas will be entitled to the continuation of certain
allowances and benefits for the remainder of the term and the immediate vesting
of all unvested stock options. Pursuant to the agreement, the Company has also
agreed to indemnify Mr. Costalas in his capacity as an officer and director of
the Company to the maximum extent permitted by law and to make advances to Mr.
Costalas for his expenses (including attorneys' fees) incurred in defending any
civil, criminal, administrative or investigative action, suit or proceeding upon
receipt by the Company or an undertaking by or on behalf of Mr. Costalas to
repay such amounts if its is ultimately determined that Mr. Costalas is not
entitled to such indemnification.
Mark P. Hershhorn
On August 26, 1994, the Company entered into an employment agreement
with Mr. Hershhorn. Pursuant to the agreement, Mr. Hershhorn is to be employed
as President of the Company for a four-year term at an annual base salary of
$425,000. The term of the agreement will be automatically extended for
successive one-year periods after the expiration of the initial term unless
terminated by either party upon 60 days' written notice prior to the end of the
then current year. Mr. Hershhorn also participates in the Company's Executive
Bonus Plan. The Company maintains $2,000,000 of insurance on the life of Mr.
Hershhorn which is payable to beneficiaries designated by Mr. Hershhorn and pays
certain of Mr. Hershhorn's club dues and pays Mr. Hershhorn an automobile
allowance. Mr. Hershhorn will also be reimbursed by the Company for all expenses
reasonably incurred by him in the performance of his duties. Pursuant to this
employment agreement, Mr. Hershhorn was granted options to purchase 450,000
shares of Common Stock at an exercise price of $3.50 which is equal to the
market price on the date of grant. One-third of the options vested on the date
of grant and one-third of the options will vest on each of the first and second
anniversaries of the date of the employment agreement, provided Mr. Hershhorn is
then employed by the Company.
The agreement provides that either party may terminate the agreement
upon 60 days' prior written notice. If the Company terminates the agreement
without Cause or if Mr. Hershhorn terminates the agreement on account of Good
Reason, the Company will be required to (i) pay Mr. Hershhorn, in installments,
an amount equal to the greater of two years' base salary or the base salary
payable during the remainder of the term, and (ii) maintain his employee
benefits for the greater of six (6) months or the remainder of the term. The
agreement also provides that, in the event of a Change of Control, Mr. Hershhorn
will be entitled to receive, within thirty (30) days of the Change in Control, a
lump-sum payment in an amount equal to the greater of two years' base salary or
the base salary payable during the remainder of the term and a lump-sum payment
of bonuses for the remainder of the term. In addition, Mr. Hershhorn will be
entitled to the continuation of certain allowances and benefits for the
remainder of the term; and the immediate vesting of all unvested Stock Options.
Pursuant to the agreement, the Company has also agreed to indemnify Mr.
Hershhorn in his capacity as an officer and director of the Company to the
maximum extent permitted by law and to make advances to Mr. Hershhorn for his
expenses (including attorneys' fees) incurred in defending any civil, criminal,
administrative or investigative action, suit or proceeding upon receipt by the
Company or an undertaking by or on behalf of Mr. Hershhorn to repay such amounts
if its is ultimately determined that Mr. Hershhorn is not entitled to such
indemnification. In connection with the private placement by the Company of the
Series B Preferred Stock Units, Mr. Hershhorn waived the Change of Control
provisions of the employment agreement with respect to such transaction and to
all prior actions.
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<PAGE> 25
James J. Jernigan
In June 1994, the Company entered into an employment agreement with Mr.
Jernigan. Pursuant to this agreement, Mr. Jernigan is currently employed as
Executive Vice President of the Company and Chief Operating Officer for North
American Operations for a three-year term at an annual base salary of $250,000.
Mr. Jernigan is entitled to participate in the Company's Executive Bonus Plan.
The Company has agreed to maintain $1,000,000 of insurance on the life of Mr.
Jernigan, which is payable to beneficiaries designated by Mr. Jernigan and to
provide Mr. Jernigan with a monthly automobile allowance. Mr. Jernigan will also
be reimbursed by the Company for all expenses reasonably incurred by him in the
performance of his duties. Mr. Jernigan was granted options to purchase 100,000
shares of Common Stock at an exercise price of $4.875 per share which is equal
to the market price on the date of grant.
Either party may terminate the agreement upon 60 days' prior written
notice. If the Company terminates the agreement without Cause or if Mr. Jernigan
terminates the agreement on account of Good Reason, the Company will be required
to (i) pay Mr. Jernigan, in installments, an amount equal to the lesser of the
base salary for six months after termination or the base salary payable during
the remainder of the term, and (ii) maintain his employee benefits for the
lesser of six months or the remainder of the term. The agreement also provides
that in the event of a Change of Control, Mr. Jernigan will be entitled to
receive, within thirty (30) days of a Change of Control, a lump-sum payment in
an amount equal to twelve (12) months' base salary and a lump sum equal to the
last annual bonus received by Mr. Jernigan prior to a Change in Control. In
addition, Mr. Jernigan will be entitled to the continuation of certain
allowances and benefits for twelve (12) months and the immediate vesting of all
unvested Options. The Company has also agreed to indemnify Mr. Jernigan in his
capacity as an officer of the Company to the maximum extent permitted by law. In
connection with the private placement by the Company of the Series B Preferred
Stock Units, Mr. Jernigan waived the Change of Control provisions of the
employment agreement with respect to such transaction and to all prior actions.
Brian McAdams
As of November 30, 1994, the Company entered into an employment
agreement with Mr. McAdams. Pursuant to the agreement, Mr. McAdams is to be
employed as Chairman of the Company for a two-year term beginning on January 1,
1995, at an annual base salary of $275,000. The term of the agreement will be
automatically extended for successive two-year periods after the expiration of
the initial term unless terminated by either party upon 6 months' written notice
prior to the end of the then current two-year period. Mr. McAdams participates
in the Company's 1995 Management Incentive Plan. The Company maintains
$1,000,000 of insurance on the life of Mr. McAdams, which is payable to
beneficiaries designated by Mr. McAdams, pays certain of Mr. McAdams's club dues
and pays Mr. McAdams an automobile allowance. Mr. McAdams will also be
reimbursed by the Company for all expenses reasonably incurred by him in the
performance of his duties. Pursuant to this employment agreement, Mr. McAdams
was granted options to purchase up to 90,000 shares of Common Stock at an
exercise price of $4.625 which was equal to the market price on the date of
grant. One-third of such options will vest on each of December 31, 1995, 1996
and 1997, provided Mr. McAdams is then an executive officer of the Company.
The agreement provides that either party may terminate the agreement
upon 60 days' prior written notice. If the Company terminates the agreement
without Cause or if Mr. McAdams terminates the agreement on account of Good
Reason, the Company will be required to (i) pay Mr. McAdams, in installments, an
amount equal to the greater of one year's base salary or the base salary payable
during the remainder of the term, and (ii) maintain his employees benefits for
the greater of six (6) months or the remainder of the term. The agreement also
provides that in the event of the termination of Mr. McAdams' employment upon
the occurrence of a Change of Control, Mr. McAdams will be entitled to receive,
within thirty (30) days of the Change of Control, a lump-sum payment in an
amount equal to three years' base salary at the then current amount years' base
salary and a lump-sum payment of the annual bonuses to which Mr. McAdams would
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<PAGE> 26
otherwise be entitled through the remainder of the term. In addition, Mr.
McAdams will be entitled to the continuation of certain allowances and benefits
for the remainder of the term; and the immediate vesting of all unvested Stock
Options. Pursuant to the agreement, the Company has also agreed to indemnify Mr.
McAdams in his capacity as an officer and director of the Company to the maximum
extent permitted by law and to make advances to Mr. McAdams for his expenses
(including attorneys' fees) incurred in defending any civil, criminal,
administrative or investigative action, suit or proceeding upon receipt by the
Company or an undertaking by or on behalf of Mr. McAdams to repay such amounts
if its is ultimately determined that Mr. McAdams is not entitled to such
indemnification.
John J. Sullivan
In June 1994, the Company entered into an employment agreement with Mr.
Sullivan. Pursuant to this agreement, Mr. Sullivan is employed as Senior Vice
President and Chief Financial and Accounting Officer of the Company for a
three-year term at an annual base salary of $185,000. Mr. Sullivan is entitled
to participate in the Company's Executive Bonus Plan. The Company has agreed to
maintain $1,000,000 of insurance on the life of Mr. Sullivan, which is payable
to beneficiaries designated by Mr. Sullivan and to provide Mr. Sullivan with a
monthly automobile allowance. Mr. Sullivan will also be reimbursed by the
Company for all expenses reasonably incurred by him the performance of his
duties. Mr. Sullivan was granted options to purchase 50,000 shares of Common
Stock at an exercise price of $4.875 per share which is equal to the market
price on the date of grant. One-third of the options vested on each of the date
of grant and the first and second anniversaries of the date of grant, provided
Mr. Sullivan is then employed by the Company.
Either party may terminate the agreement upon 60 days' prior written
notice. If the Company terminates the agreement without Cause or if Mr. Sullivan
terminates the agreement on account of Good Reason, the Company will be required
to (i) pay Mr. Sullivan, in installments, an amount equal to the lesser of the
base salary for six months after termination or the base salary payable during
the remainder of the term, and (ii) maintain his employee benefits for the
lesser of six (6) months or the remainder of the term. The agreement also
provides that in the event of a Change of Control, Mr. Sullivan will be entitled
to receive, within thirty (30) days of a Change of Control, a lump-sum payment
in an amount equal to twelve (12) months base salary and a lump-sum payment
equal to the last annual bonus received by Mr. Sullivan prior to a Change of
Control. In addition, Mr. Sullivan will be entitled to the continuation of
certain allowances and benefits for twelve (12) months and the immediate vesting
of all unvested Stock Options. The Company has also agreed to indemnify Mr.
Sullivan in his capacity as an officer of the Company to the maximum extent
permitted by law. In connection with the private placement by the Company of the
Series B Preferred Stock Units, Mr. Sullivan waived the Change of Control
provisions of the employment agreement with respect to such transaction and to
all prior actions.
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<PAGE> 27
Stock Options
The following table sets forth certain information concerning options
to purchase Common Stock of the Company made to the executive officers named in
the Summary Compensation Table in the fiscal year ended March 31, 1995.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Potential Realized
-------------------------------------------------- Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term (1)
% of Total -----------------
Number of Options
Securities Granted to
Underlying Employees
Options in Fiscal Exercise Expiration
Name Granted Year Price Date 5% 10%
---- ------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Brian McAdams 90,000 8.9% $4.625 1/5/05 261,821 663,503
John J. Turchi, Jr. 0 0 0 0 0 0
Mark P. Hershhorn 450,000 44.3% $3.500 8/25/99 434,700 962,325
David J. Carman 0 0 0 0 0 0
James A. Jernigan 100,000 9.9% $4.875 6/1/04 306,638 777,075
John J. Sullivan 50,000 4.9% $4.875 6/1/04 153,319 388,538
</TABLE>
- ------------------
(1) Potential Realizable Values are based on an assumption that the stock
price of the Common Stock starts equal to the exercise price shown for
each particular option grant and appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the term
of the option. These amounts are reported net of the option exercise
price, but before any taxes associated with exercise of the subsequent
sale of the underlying stock. The actual value, if any, an optionholder
may realize will be a function of the extent to which the stock price
exceeds the exercise price on the date the option is exercised and also
will depend on the optionholder's continued employment through the
vesting period. The actual value to be reached by the optionholder may
be greater or less than the values estimated in this table.
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<PAGE> 28
The following table sets forth certain information concerning
the exercise in the fiscal year ended March 31, 1995 of options to purchase
Common Stock of the Company by the executive officers named in the Summary
Compensation Table and the unexercised options to purchase Common Stock of the
Company held by such individuals at March 31, 1995. Year-end values are based
upon the closing market price of a share of the Company's Common Stock on March
31, 1995 of $7.75.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Option at In-the-Money Options
FY-End (#) at FY-End ($)(1)
-------------------------- ----------------------------
Shares
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian McAdams 0 0 30,000 90,000 156,250 281,250
John J. Turchi, Jr. 0 0 825,000 0 1,832,813 0
Mark P. Hershhorn 0 0 150,000 300,000 637,500 1,275,000
David J. Carman 0 0 100,000 200,000 212,500 425,000
James J. Jernigan 0 0 111,667 68,333 551,666 194,585
John J. Sullivan 0 0 16,667 33,333 47,918 95,833
</TABLE>
- -----------------
(1) Values are calculated by subtracting the exercise price from the fair
market value as of the exercise date or fiscal year end, as
appropriate. Values are reported before any taxes associated with
exercise or subsequent sale of the underlying stock.
Compensation of Directors
From April 1, 1994 until December 31, 1994, non-employee Directors of
the Company received an annual fee of $18,000 and a fee of $1,000 for each
committee meeting attended. In addition, Directors were reimbursed for expenses
incurred in connection with their attendance at meetings of the Board of
Directors and committees thereof.
Beginng January 1, 1995, each Director who is not an employee
of the Company is paid an annual fee of $25,000 a year for his or her service
as a Director, and an additional $1,000 per calendar quarter for each
committee on which he or she serves, subject to an adjustment based on
attendance at committee meetings during each quarter. Pursuant to the same
set of resolutions approved by the Board, a Director may also receive an
additional $2,000 a year for service as a committee chairman, over and above
the payment for committee service. Directors who are employees of the
Company do not receive additional compensation for their service on the
Board or on any committee thereof.
COMPENSATION COMMITTEE REPORT
The following report shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the event that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The executive compensation program of the Company is administered by
the Compensation Committee, which is composed of three independent, non-employee
directors. The function of the Compensation Committee is to review general
compensation policies and to review recommendations made regarding the
compensation of executive officers. The Company seeks to provide executive
compensation that will support the achievement of the Company's financial goals
while attracting and retaining talented executives and rewarding superior
performance.
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<PAGE> 29
This report covers the compensation of the Chief Executive Officer and
the Company's executive officers for the year ended March 31, 1995, the
Company's most recent complete fiscal year, as required under applicable rules
of the Securities and Exchange Commission.
Compensation Philosophy for 1995 and Thereafter
In designing its compensation programs for 1995 and thereafter, the
Committee intends that compensation should reflect individual performance and
the value created for shareholders while supporting the Company's strategic
goals. This represents a shift in emphasis from prior years, in which
performance of the Company was not necessarily linked to individual
compensation. The new compensation programs in effect and proposed to
shareholders reflect the following philosophy:
* Compensation should be meaningfully related to the value created
for shareholders in share price and earnings per share.
* While compensation opportunities should be based on individual
contributions, the actual amounts earned by executives under
variable compensation programs should be determined primarily by
how well the Company performs.
* Compensation programs should support the short term and long term
strategic objectives of the Company.
* Compensation programs should encourage and support equity ownership
by executives and managers of the Company.
Payments and Measurement
The Company's executive compensation is based on three components, each
of which is intended to serve the overall compensation philosophy.
Base Salary. Base salaries for executive officers are initially
determined based upon a subjective evaluation by the Compensation Committee of
the responsibilities of the position held and the experience of the individual,
with reference to the officer's prior salary history and the competitive
marketplace for executive talent generally. The Company compares itself to a
peer group of companies in related businesses, as well as competition within the
Philadelphia area. Salaries for executives are reviewed by the Committee on an
annual basis, and may be increased or decreased based on the Committee's
determination of the individual's contribution to the Company.
The Bonus Plan for Year ended March 31, 1995. The executive
compensation program consisted in the fiscal year ended March 31, 1995 of base
salary and a bonus plan based on the Company's net income and return on
shareholders' equity in excess of defined levels. During the fiscal year ended
March 31, 1995, the Company's net income and return on shareholders' equity did
not exceed the levels defined in the Company's executive compensation program,
and no incentive bonuses were paid. The amount of bonus funds distributed under
the bonus plan is calculated at the end of each fiscal year according to
guidelines set out in the bonus plan. The guidelines for determining bonus funds
distributed under the Company's bonus plan provide that no bonus distribution
will be made until net after-tax earnings of the Company provide a return on
shareholders' equity of more than 12%. Amounts contributed to the bonus pool may
range from 20% to 33% of the excess of net income over the threshold levels set
forth in the plan. The bonus pool is allocated to participants in accordance
with their predetermined bonus pool shares. Effective April 1, 1995, the bonus
plan was replaced by the Management Incentive Plan (as described below) being
approved by the Company's stockholders at its last annual meeting.
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<PAGE> 30
Long Term Incentives. In the past, long term incentives have been
provided through annual grants of stock options to the named executives and
others. Stock options have been granted with exercise prices set at the
prevailing market value and will only have value to the executives if the
Company's stock price increases. The Committee approved the grant of options to
Messrs. McAdams and Costalas in January 1995, and Mr. Hershhorn in August 1994,
in connection with the employment of these individuals by the Company, and to
certain other executive officers. (See "Executive Compensation - Employment
Agreements.")
The Committee does not intend to grant additional options pursuant to
the 1991 Stock Option Plan and expects to rely on the Management Incentive Plan
to provide appropriate incentives to covered employees, including the most
highly compensated executed officers.
1995 Management Incentive Plan
The 1995 Management Incentive Plan (the "Management Incentive Plan"),
has replaced the Company's annual bonus program. Under the Management Incentive
Plan, eligible management personnel will receive corporate and individual
performance units at the beginning of each of the Company's fiscal years
(commencing April 1, 1995) which will provide incentive compensation based upon
predetermined corporate and individual goals.
The corporate goals, which will be fixed by the Board, based on the
recommendations of the Compensation Committee, include (i) attainment of a
specific share price, (ii) attainment of a specific earnings per share of common
stock outstanding, and (iii) achievement of specific strategic objectives. The
value of performance units will depend upon the extent to which the corporate
goals for the fiscal year were achieved, and the maximum award cannot be
received unless each of the corporate goals have been met. The value of
individual units will depend upon both corporate success and individual
performance. Units assigned will vary from individual to individual, and the
targeted, maximum awards range from 11% to 110% of base salary.
Payment of awards to the Chairman, Vice Chairman, President and
Executive Vice Presidents of the Company will be made 50% in cash and 50% in
common stock of the Company, and payment to other participants will be 90% in
cash and 10% in common stock, although such participants may elect to receive,
instead of 10%, 20% or 30% of the incentive payment in stock.
Compensation of the Chief Executive Officer
For the fiscal year ended March 31, 1995, Mr. Turchi, the Chief
Executive Officer of the Company until September 1994, was compensated pursuant
to the terms of an employment agreement dated April 1, 1992, effective September
23, 1993. This agreement provided for a base salary of $600,000 per year,
subject to adjustment, plus amounts receivable under the bonus plan then in
effect, together with certain other benefits. No bonus was paid to Mr. Turchi
during the fiscal year ended March 31, 1995. Mr. Turchi also received options to
purchase a total of 750,000 shares of common stock of the Company pursuant to
the agreement, which were to vest at the rate of 250,000 shares per year
beginning one year after the grant. Mr. Turchi resigned his position and
terminated his employment in September 1994 and resigned as a director in
December 1994. See "Separation and Consulting Agreements - John J. Turchi, Jr."
The Compensation Committee at the time believed that the cash and
incentive compensation provided under the contract described above were
appropriate in light of Mr. Turchi's past and expected future contributions to
the Company, and information on compensation paid to other chief executive
officers. The Company's performance during Mr. Turchi's tenure as Chief
Executive Officer in the fiscal year ended March 31, 1995 was disappointing and,
as noted above, Mr. Turchi resigned his position and terminated his employment
in September 1994.
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<PAGE> 31
Following Mr. Turchi's departure, the Board elected Mr. McAdams as the
Chief Executive Officer, and he became a full-time employee in December 1994
pursuant to an employment contract (See "Executive Compensation-Employment
Agreements"). From the time Mr. McAdams was appointed as Chief Executive Officer
of the Company until his employment contract became effective, he was
compensated at the rate of $6,000 per month. Mr. McAdams' compensation for this
period and his compensation pursuant to his employment contract was determined
based upon an analysis of the amount of time he devoted to the Company's
business, an evaluation of his contribution to the Company as a Director, the
compensation paid to executives of other similar companies and on his position
and compensation at his former employer.
In April 1995, Mr. McAdams resigned and Mr. Hershhorn was appointed as
the Company's Chief Executive Officer. The Company and Mr. Hershhorn entered
into an employment agreement in August 1994 pursuant to which Mr. Hershhorn was
to be employed as the Company's President and would receive an annual base
salary of $425,000 and the grant of options, among other things (See "Executive
Compensation - Employment Agreements"). Mr. Hershhorn's compensation was based
on an analysis of the compensation paid to the Company's prior President and
other executives of similar companies, Mr. Hershhorn's expected contribution to
the Company's business, and Mr. Hershhorn's position and compensation at his
former employer. As Chief Executive Officer, Mr. Hershhorn continues to be
compensated under his employment agreement.
The Compensation Committee believes that Mr. McAdams' and Mr.
Hershhorn's leadership in (i) affecting organizational changes within the
Company, (ii) improving the Company's business in existing and new markets,
(iii) developing new business relationships and solidifying the Company's
current relationships, (iv) consummating the sale of the Units (See "Certain
Relationships and Related Transactions - Private Placement), and (v) improving
the performance of the Company's Common Stock, has significantly improved the
Company's performance. In light of these contributions and expected future
contributions, the Compensation Committee believes that the compensation paid to
each of Messrs. McAdams and Hershhorn was and continues to be appropriate.
The Compensation Committee of National Media Corporation
Jon W. Yoskin, II
Frederick S. Hammer
Ira M. Lubert
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<PAGE> 32
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock with the cumulative total stockholder return of (i) the Russell
2000 Index, and (ii) an index of four companies in the Company's peer group (the
"Peer Group Index"), assuming an investment of $100 on March 31, 1990 in each of
the Common Stock of the Company, the stocks comprising the Russell 2000 Index
and the stocks comprising the Peer Group Index. The companies in the Peer Group
Index are Fingerhut Companies, Inc., Home Shopping Network, Inc., Hanover
Direct, Inc. (formed September 1993 and formerly known as Horn & Hardart
Company) and Lillian Vernon Corporation. The Company previously used a peer
group which included the companies listed above, as well as QVC Network, Inc.
("QVC") and Regal Communications Corporation ("Regal"). The Company has
determined that because the common stock of QVC is no longer publicly traded and
because Regal is involved in bankruptcy reorganization proceedings, the
inclusion of QVC and Regal in the peer group would artificially skew the results
of the peer group and, therefore, is no longer appropriate.
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------
3/90 3/91 3/92 3/93 3/94 3/95
<S> <C> <C> <C> <C> <C> <C>
National Media Corporation 100 38 52 132 113 106
Peer Group 100 85 106 132 206 106
Russell 2000 100 107 129 149 165 174
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lease of Office Space
The Company leases office space for its principal executive offices in
Philadelphia, Pennsylvania. The lease, which commenced in November 1992 and runs
for a period of ten years, provides for the Company to rent approximately 29,795
square feet. The initial rent for years one through five is $14.75 per square
foot with an increase to $15.75 per square foot effective for years six through
ten. The lease provides that it may be terminated by the Company at the end of
the initial five year period upon at least six months written notice and the
payment of a termination fee equal to six months rent (the "Termination Fee").
This building is owned by Mergren Associates ("Mergren"), a company owned by
John J. Turchi, Jr., the Company's former Chairman of the Board and Chief
Executive Officer. An independent real estate firm engaged by the Company
determined that the lease was based on fair market conditions at the time of
inception. The building is managed by another independent real estate firm. The
Company believes the terms of the agreement are fair to the Company.
In connection with the execution and delivery of the Settlement
Agreement and the Telemarketing Agreement, the Company, John J. Turchi, Jr. and
Mergren entered into a Letter Agreement dated April 13, 1995 (the Letter
Agreement"). Because Mr. Turchi was a named party to the ValueVision Litigation
(see "Proposal II-General"), Mr. Turchi's agreement was necessary in order to
effect the Settlement Agreement. The Company and ValueVision approached Mr.
Turchi to obtain his consent to the Settlement Agreement. Mr. Turchi agreed that
he would execute the Settlement Agreement if the Company agreed to enter into
the Letter Agreement. Pursuant to the Letter Agreement, the Company exercised
its option to terminate, effective October 31, 1997, the lease with Mergren and
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<PAGE> 33
in connection with such termination has paid Mergren the sum of $219,738.12 as a
Termination Fee. The Letter Agreement also provides that Mr. Turchi will vote
all of the shares of Common Stock which he owns or controls in favor of the
matters contained in Proposals II and III.
Separation and Consulting Agreements
John J. Turchi, Jr.
On September 12, 1994 the Company and John J. Turchi, Jr. entered into
a separation agreement pursuant to which, among other things, Mr. Turchi
resigned as Chairman of the Board and Chief Executive Officer of the Company. On
December 21, 1994, the Company and Mr. Turchi entered into further agreements
(including a consulting agreement) in part amending the earlier separation
agreement. Pursuant to such agreements the Company agreed to (i) pay Mr. Turchi
the sum of $300,000 in six (6) equal monthly installments of $50,000 commencing
October 1994, (ii) forgive two notes made by Mr. Turchi, one in the principal
amount of $80,750 and one in the principal amount of $1,565,439.25 and (iii)
retain Mr. Turchi as a consultant for a term of 36 months.
Pursuant to the terms of Mr. Turchi's Consulting Agreement, Mr. Turchi
agreed to hold himself available to perform consulting services for the Company
as requested by the Chairman or Vice Chairman of the Board for a maximum of 12
hours per month for a period of 36 months. The consulting services to be
provided by Mr. Turchi are intended to involve every aspect of the Company's
business, including information and related matters about vendors and customers
of the Company. The Consulting Agreement provides that Mr. Turchi will be paid
at the rate of $2,000 per month for the period January 1995 - March 1995,
$40,000 per month for the period April 1995 - September 1995 and $2,000 per
month for the period October 1995 until the termination of the agreement. The
consulting agreement is not cancelable by the Company. As long as he continues
to serve as a consultant to the Company, Mr. Turchi will continue to be eligible
to participate in the 1991 Option Plan and stock options granted to him under
such plan, but yet unexercised will not terminate until 90 days after the
termination of his services as a consultant. The option agreements pursuant to
which Mr. Turchi was granted such stock options have been amended to provide
that Mr. Turchi may not pay the exercise price of such stock options by
delivering a promissory note.
Pursuant to the Letter Agreement, the Company agreed to accelerate the
payment to Mr. Turchi pursuant to the Consulting Agreement of the sum of
$277,500 as well as reimburse Mr. Turchi $50,000 for certain legal fees and
associated costs he incurred in connection with the ValueVision Litigation and
certain other matters to which Mr. Turchi and the Company are parities. The
Letter Agreement also provides that Mr. Turchi will continue to provide
consulting services for the Company until December 20, 1997 and will be paid
$500.00 per month for such services.
Promissory Notes
Under the Company's 1988 Stock Option Plan and 1991 Stock Option Plan,
participants may be entitled, in the discretion of the Company's Compensation
Committee at the time of grant, to purchase shares of Common Stock issued upon
the exercise of options through a nominal cash payment and the delivery of a
promissory note (a "Note") to the Company for the balance of the exercise price.
Interest on the Notes is payable quarterly. The interest rate and term of the
Notes vary depending upon the option plan specifications at the time the Notes
were issued. Notes must be paid down proportionately as Common Stock purchased
in connection with their issuance is sold. If a Note maker's employment is
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<PAGE> 34
terminated before the Note has been paid in full, the Note is due at such time
(except with respect to two (2) Notes made by Mr. Turchi on January 1, 1992 and
January 14, 1994, respectively, which are due and payable on January 1, 1997, if
not paid earlier). Certain of the Company's current and former executive
officers have outstanding balances on Notes issued to the Company since the
beginning of the last fiscal year.
John J. Turchi, Jr.
See "Separation Agreement - John J. Turchi, Jr."
David J. Carman
The Company holds one Note made by Mr. Carman in the principal amount
of $199,000 bearing interest at a rate of 3.79% per annum. In December 1994, in
consideration of the waiver by Mr. Carman of certain rights under his employment
agreement, such Note was amended to provide that in the event Mr. Carman ceases
to be an employee of the Company, such Note shall not be payable immediately but
shall be payable over three years, in equal quarterly installments of principal,
beginning ninety days after the termination of such employment, and one final
payment of all outstanding principal and interest.
James A. Jernigan
See "Advances - James A. Jernigan"
John J. Sullivan
The Company holds one Note made by Mr. Sullivan bearing interest at a
rate of 3.87% per annum. The amount of indebtedness owned by Mr. Sullivan on
this Note is $149,250. In December 1994, in consideration of the waiver by Mr.
Sullivan of certain rights under his employment agreement, such Note was amended
to provide that in the event Mr. Sullivan ceases to be an employee of the
Company, such Note shall not be payable immediately but shall be payable over
three years, in equal quarterly installments of principal, beginning ninety days
after the termination of such employment, and one final payment of all
outstanding principal and interest.
Mark P. Hershhorn
During the fiscal year ended March 31, 1994, the Company held Notes
made by Mr. Hershhorn at interest rates ranging from 5.85% to 5.88% per annum.
The largest aggregate amount outstanding on these Notes during the fiscal year
ended March 31, 1994 was $262,500, all of which had been repaid to the Company
by December 31, 1993.
Advances
David J. Carman
In 1993 and 1994, the Company advanced Mr. Carman the aggregate amount
of $75,000 in the form of payments under a Company lease for his overseas
housing. The Company subsequently determined that Mr. Carman's employment
agreement did not require it to make such payments and beginning June 1994, Mr.
Carman made bi-monthly payments to the Company in the aggregate amount of
$40,000 which were credited against this advance. Effective October 1, 1994. Mr.
Carman's employment agreement was revised to include his use of an apartment
leased by the Company for his overseas housing. In connection with such
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<PAGE> 35
revision, the balance of the advance was forgiven by the Company. In December,
1994, the Board approved the reimbursement to Mr. Carman of the amount
previously repaid to the Company.
James A. Jernigan
The Company has made advances to Mr. Jernigan in the aggregate amount
of $106,218. Of such advances, $70,000 was advanced to and used by Mr. Jernigan
to defray certain costs of relocation made at the request of the Company. The
advance in the amount of $70,000 is evidenced by a Note bearing interest at a
rate of 6.875% per annum. To secure his obligation under the Note, Mr. Jernigan
has given the company a lien and security interest in and to stock options
previously granted to him to purchase 75,000 shares of Common Stock.
Telemarketing Agreement and ValueVision Warrant
On April 13, 1995, the Company entered into the Settlement Agreement,
the Telemarketing Agreement and Joint Venture Agreement with, among others,
ValueVision, as further described above under Proposal II. The Telemarketing
Agreement provides, among other things, that the Company will issue to
ValueVision the ValueVision Warrants. ValueVision currently owns approximately
8.1% of the Company's issued and outstanding shares of Common Stock. The
effectiveness of the Settlement Agreement and the Telemarketing Agreement are
subject to the approval of the Company's stockholders. The Settlement Agreement,
Telemarketing Agreement, Joint Venture Agreement and ValueVision Warrants are
described more fully under "Proposal II."
Holder Warrants
Subject to the receipt of stockholder approval, the Company will issue
to the Holders the Holder Warrants as further described above under Proposal
III. Safeguard Scientifics (Delaware) Inc. ("Safeguard"), the beneficial owner
of approximately 5.9% of the Company's issued and outstanding shares of Common
Stock, will be issued Holder Warrants to purchase 300,000 shares of Common
Stock, and Technology Leaders II L.P. and Technology Leaders II Offshore C.V.
(collectively, "Technology Leaders"), affiliates of Safeguard, will be issued
Holder Warrants to purchase an aggregate of 100,000 shares of Common Stock. Ira
M. Lubert, a director of the Company and a Managing Director of the general
partner of Technology Leaders, will be issued Holder Warrants to purchase 50,000
shares of Common Stock. For a more complete description of the stock ownership
of Safeguard, Technology Leaders, Ira M. Lubert and their affiliates see
"Security Ownership of Certain Beneficial Owners." For a more complete
description of the Holder Warrants see "Proposal III."
Other Agreements
As of August 26, 1994, the Company entered into an agreement with
Buckeye Communications, Inc. ("Buckeye") and Mark P. Hershhorn pursuant to which
Mr. Hershhorn resigned as an officer and director of Buckeye and its
subsidiaries and joined the Company as President and Chief Operating Officer.
Mr. Hershhorn retains an equity interest in Buckeye and served as a consultant
to Buckeye for a period of six months from the date of the agreement.
In exchange for the release by Buckeye of Mr. Hershhorn from his
obligations under an employment agreement, the Company (i) issued to Buckeye
stock options to purchase 25,000 shares of Common Stock at an exercise price of
$4.25 per share and (ii) agreed to enter into certain other transactions with
Buckeye upon the consummation of cash infusions to the Company in the aggregate
principal amount of $10,000,000. Based upon the consummation of such infusions,
and in accordance with the agreement, on January 13, 1995, the Company (i)
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<PAGE> 36
reimbursed Buckeye approximately $100,000 for certain expenses, (ii) purchased a
block of the common stock of Positive Response Television, Inc. from Buckeye,
(iii) entered into negotiations with Buckeye regarding a joint venture relating
to Major League Properties and (iv) issued additional stock options to purchase
75,000 shares of Common Stock at an exercise price of $4.25.
Private Placement
From October 1994 through January 1995, the Company offered and sold
255,796 investment units (the "Units"), each Unit consisting of one (1) share of
Series B Convertible Preferred Stock (the "Series B Preferred Stock") and a
warrant to purchase up to twelve (12) shares of Common stock (the "Private
Placement Warrants") in a private placement.
Each share of Series B Preferred Stock is immediately convertible into
ten (10) shares of Common Stock (subject to adjustment). Each Private Placement
Warrant is exercisable beginning one (1) year after the date of issuance and
expires at the end of ten (10) years from the date of issuance. Certain of the
Private Placement Warrants become exercisable as early as October 5, 1995. The
Common Stock issuable pursuant to the conversion of the Series B Preferred Stock
and upon exercise of the Private Placement Warrants is subject to registration
for resale by the holders thereof. The following sets forth the name of each
director and executive officer of the Company who purchased Units in the private
placement, the number of Units purchased, the price per Unit paid, and the
exercise price of the Private Placement Warrants received:
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<PAGE> 37
<TABLE>
<CAPTION>
Name(1) Number of Units Price per Unit Warrant Exercise Price
------- --------------- -------------- ----------------------
<S> <C> <C> <C>
Charles L. Andes 1,250 $40.00 $4.80
David J. Carman 2,500 40.00 4.80
Frederick P. Hammer 2,500 47.80 5.74
Mark P. Hershhorn 5,000 40.00 4.80
Ira M. Lubert 1,250 40.00 4.80
John J. Sullivan 1,875 40.00 4.80
Jon W. Yoskin, II 3,546 42.30(2) 5.07(2)
</TABLE>
(1) Other than the Units purchased by Mr. Hammer and certain of the Units
purchased by Mr. Yoskin, all Units purchased in the Private Placement
by directors and executive officers of the Company were purchased at
the same prices offered other investors.
(2) Represents the average price per Unit payed by Mr. Yoskin and the
average warrant exercise price. Mr. Yoskin purchased 2,500 units at a
price of $40.00 per unit with a corresponding warrant exercise price
of $4.80 and 1,046 units at a price of $47.80 per unit with a
corresponding warrant exercise price of $5.74.
Indemnification Payments
The Company has made required indemnification payments to present and
former officers and directors in connection with pending securities class and
derivative actions against the Company and such individuals. The Company may be
required to pay additional amounts for indemnification in connection with these
actions.
-35-
<PAGE> 38
OTHER MATTERS
Shareholder Proposals and Nominations for Directors for the Company's
Next Annual Meeting
Any shareholder who intends to present a proposal for consideration at
the Company's next annual meeting of stockholders intended to occur on or about
August 15, 1996, must, on or before ___________, 1996, submit his proposal to
the Company and notify the Company that he intends to appear personally at such
annual meeting to present his proposal, in order to have the Company consider
the inclusion of such proposal in the Company's Proxy Statement and form of
proxy relating to such annual meeting. Reference is made to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, for information concerning the
content and form of such proposal and the manner in which such proposal must be
made.
Nominations for election to the Board of Directors at the Company's
next annual meeting may be made only in writing by a shareholder entitled to
vote at such annual meeting and must be addressed to the Secretary, National
Media Corporation, 1700 Walnut Street, Philadelphia, PA 19103. Nominations must
be received by the Secretary on or before ___________, 1996, and must be
accompanied by the written consent of the nominee. Nominations should also be
accompanied by a description of the nominee's business or professional
background and otherwise contain the information required by Schedule 14A of the
Securities Exchange Act of 1934, as amended.
Other Business
The Board of Directors is not aware of any other matters that may be
brought before the Meeting. If other matters not now known come before the
Meeting, the persons named in the accompanying form of proxy or their
substitutes will vote such proxy in accordance with their judgment.
Annual Report to Stockholders
A copy of the Company's Annual Report to Stockholders which contains
copies of the Company's audited financial statements is being sent to
stockholders with this Proxy Statement.
Annual Report on Form 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY STOCKHOLDER, UPON THE
WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K. REQUESTS FOR THIS REPORT SHOULD BE ADDRESSED TO MARSHALL A. FLEISHER,
SECRETARY OF NATIONAL MEDIA CORPORATION, 1700 WALNUT STREET, PHILADELPHIA,
PENNSYLVANIA 19103.
-36-
<PAGE> 39
NATIONAL MEDIA CORPORATION
COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
I hereby constitute and appoint Marshall A. Fleisher and James
Gallagher and each of them acting individually my true and lawful agents and
proxies, with full power of substitution in each, to vote all shares held of
record by me at the Annual Meeting of Shareholders of National Media Corporation
to be held on August 15, 1995 and any adjournments or postponements thereof. I
direct said proxies to vote as specified on the reverse side.
UNLESS OTHERWISE SPECIFIED, ALL SHARES WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES LISTED AND FOR EACH OF THE PROPOSALS TO BE ACTED UPON AT THE MEETING.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OF
POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY.
[Reverse Side]
1. Election of Directors To withhold authority to vote for any
FOR WITHHOLD individual nominee, strike a line through the
all AUTHORITY nominee's name listed below:
nominees to vote for
listed all nominees
(except as David J. Carman Frederick S. Hammer
indicated to Constantinos I. Costalas Mark P. Hershhorn
the contrary Albert R. Dowden Brian McAdams
at right) Michael J. Emmi Jon W. Yoskin, II
/ / / /
2. Proposal II to approve a Telemarketing, Production and Post-Production
Agreement dated April 13, 1995 by and between the Company and
ValueVision International, Inc. ("ValueVision") and to approve the
issuance by the Company to ValueVision of warrants to purchase up to
500,000 shares of the Company's common stock, par value $.01 per share,
at a price of $8.865 per share.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE> 40
3. Proposal III to approve the issuance of warrants to purchase an
aggregate of 500,000 shares of Common Stock at a price of $10.00 per
share to certain persons who were holders of certain of the Company's
debt.
FOR AGAINST ABSTAIN
/ / / / / /
THE UNDERSIGNED HEREBY REVOKES ALL
PREVIOUS PROXIES FOR THE MEETING
AND ACKNOWLEDGES RECEIPT OF THE
NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT OF NATIONAL MEDIA
CORPORATION
Date:________________________, 1995
___________________________________
___________________________________
By:________________________________
NOTE: Please sign this proxy exactly
as name(s) appear in address. When
signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please add your title
as such.
<PAGE> 41
NATIONAL MEDIA CORPORATION
SERIES B PREFERRED STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
I hereby constitute and appoint Marshall A. Fleisher and James
Gallagher and each of them acting individually my true and lawful agents and
proxies, with full power of substitution in each, to vote all shares held of
record by me at the Annual Meeting of Shareholders of National Media Corporation
to be held on August 15, 1995 and any adjournments or postponements thereof. I
direct said proxies to vote as specified on the reverse side.
UNLESS OTHERWISE SPECIFIED, ALL SHARES WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES LISTED AND FOR EACH OF THE PROPOSALS TO BE ACTED UPON AT THE MEETING.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OF
POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY.
[Reverse Side]
1. Election of Directors To withhold authority to vote for any
FOR WITHHOLD individual nominee, strike a line through the
all AUTHORITY nominee's name listed below:
nominees to vote for
listed all nominees
(except as Charles L. Andes Ira M. Lubert
indicated to
the contrary
at right)
/ / / /
2. Proposal II to approve a Telemarketing, Production and Post-Production
Agreement dated April 13, 1995 by and between the Company and
ValueVision International, Inc. ("ValueVision") and to approve the
issuance by the Company to ValueVision of warrants to purchase up to
500,000 shares of the Company's common stock, par value $.01 per share,
at a price of $8.865 per share.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE> 42
3. Proposal III to approve the issuance of warrants to purchase an
aggregate of 500,000 shares of Common Stock at a price of $10.00 per
share to certain persons who were holders of certain of the Company's
debt.
FOR AGAINST ABSTAIN
/ / / / / /
THE UNDERSIGNED HEREBY REVOKES ALL
PREVIOUS PROXIES FOR THE MEETING
AND ACKNOWLEDGES RECEIPT OF THE
NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT OF NATIONAL MEDIA
CORPORATION
Date:________________________, 1995
___________________________________
___________________________________
By:________________________________
NOTE: Please sign this proxy exactly
as name(s) appear in address. When
signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please add your title
as such.
