SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Exchange Act Rule 14a-11(c) or 14a012
NATIONAL MEDIA CORPORATION
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(Name of Registrant as Specified In Its Charter)
NATIONAL MEDIA CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which the transaction applies:
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3) Per unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11: (set forth the amount on which the filing fee is
calculated and state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee paid
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/X/ Fee paid previsouly with preliminary materials.
/ / Check box if any part of the fee is offset by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount previously paid:
$125.00
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2) Form, Schedule or Registration Statement No.
Schedule 14A
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3) Filing Party:
National Media Corporation
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4) Date Filed:
May 31, 1996
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<PAGE>
NATIONAL MEDIA CORPORATION
1700 Walnut Street
Philadelphia, PA 19103
June 21, 1996
DEAR STOCKHOLDER:
You are cordially invited to attend the annual meeting of the stockholders
(the "Meeting") of National Media Corporation (the "Company") to be held on
July 25, 1996, at 10:00 a.m., local time, at The Union League, 140 South
Broad Street, Philadelphia, Pennsylvania 19102.
The proposals for the Meeting relate to: (i) the election of ten (10)
Directors; (ii) an amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Common Stock; (iii) amendments
to the Company's 1991 Stock Option Plan (the "1991 Option Plan") increasing
the number of shares of Common Stock available for awards under the 1991
Option Plan and making certain other revisions thereto; (iv) the extension of
the Company's Management Incentive Plan and certain other revisions
thereto; and (v) ratification of the Board of Directors' appointment of Ernst
& Young LLP, independent certified public accountants, as auditors for the
Company for the fiscal year ending March 31, 1997. Our Annual Report to
Stockholders for the fiscal year ended March 31, 1996 accompanies this Proxy
Statement.
We look forward to seeing you at the Meeting. Whether or not you are
planning to attend, we urge you to return the enclosed proxy at your earliest
convenience.
Sincerely,
/s/ BRIAN McADAMS
----------------------------------
Brian McAdams
Chairman of the Board
and Chairman of
the Executive Committee
<PAGE>
NATIONAL MEDIA CORPORATION
1700 Walnut Street
Philadelphia, PA 19103
------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On July 25, 1996
------
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 Union League, 140 South Broad
Street, Philadelphia, Pennsylvania 19102 at 10:00 a.m. on Thursday, July 25,
1996, for the following purposes:
I. To elect ten (10) Directors to hold office until the Company's next
annual meeting of stockholders;
II. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation by increasing the number of authorized
shares of Common Stock;
III. To consider and vote upon a proposal to amend the Company's 1991
Stock Option Plan (the "1991 Option Plan") by increasing the number
of shares of Common Stock available for awards under the 1991 Option
Plan and by making certain other revisions thereto;
IV. To consider and vote upon a proposal to extend the Company's
Management Incentive Plan (the "Incentive Plan") beyond March 1997
and to make certain other revisions thereto;
V. To ratify the Board of Directors' appointment of Ernst & Young LLP,
independent certified public accountants, as auditors for the
Company for the fiscal year ending March 31, 1997; and
VI. To transact such other business as may properly come before the
Meeting.
The close of business on June 7, 1996 has been fixed as the record date
for the Meeting. Only stockholders of record of the Company 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 Series B Preferred Stock (as hereinafter defined) in the enclosed
postage pre-paid envelope.
By order of the Board of Directors
MARSHALL A. FLEISHER, ESQ.
Secretary
June 21, 1996
Philadelphia, Pennsylvania
<PAGE>
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 Union League, 140 South Broad Street, Philadelphia, Pennsylvania 19102 at
10:00 a.m. on Thursday, July 25, 1996, or any adjournment(s) or
postponement(s) thereof. This Proxy Statement and accompanying proxy are
first being mailed to stockholders on or about June 21, 1996.
VOTING AT THE ANNUAL MEETING; REVOCATION OF PROXIES
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 June 7,
1996 (the "Record Date"). As of such date, the Company had approximately
19,612,008 shares of common stock, par value $.01 per share ("Common Stock")
issued and outstanding, each of which is entitled to one (1) vote as to all
matters to be acted upon at the Meeting; and 124,500 shares of its Series B
Convertible Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock") issued and outstanding, each of which is entitled to ten
(10) votes per share as to all matters to be voted upon at the Meeting except
the election of the ten (10) 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 20,857,008.
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. The holders of
Common Stock shall not 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. Proxies indicating a vote against the proposals
contained herein may not be voted by the persons marked in the accompanying
proxy or their duly constituted substitutes for adjournment of the Meeting.
WHITE proxy card(s) for use by holders of the Company's Common Stock and/or
WHITE proxy card(s) with a BLUE 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 represented at the Meeting by the enclosed proxy will be
voted FOR the election of each of the nominees of the Board of Directors in the
election of Directors, and the shares of Common Stock or Series B Preferred
Stock represented at the Meeting by the enclosed proxy will be voted (i) FOR the
proposal to amend the Company's Certificate of Incorporation by increasing the
number of authorized shares of Common Stock; (ii) FOR the proposal to amend the
Company's 1991 Stock Option Plan (the "1991 Option Plan") by increasing the
number of shares of Common Stock available for awards under the 1991 Option Plan
and by making certain other revisions thereto; (iii) FOR the proposal to extend
the Company's Management Incentive Plan (the "Incentive Plan") and to make
certain other revisions thereto; and (iv) FOR the ratification of the
appointment of Ernst and Young LLP, independent certified public accountants, as
auditors for the Company for the fis-
<PAGE>
cal year ending March 31, 1997. Any stockholder giving a proxy may revoke it
at 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.
ADDITIONAL INFORMATION
The Company will furnish without charge to any stockholder, upon written
or oral request, a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996 and other documents filed pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
Requests for such documents should be addressed to Marshall A. Fleisher,
Esq., Vice President (Legal) and Corporate Secretary of National Media
Corporation, 1700 Walnut Street, Philadelphia, Pennsylvania 19103, telephone
number (215) 772-5000.
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 are welcome to call between the hours of
9:00 a.m. and 8:00 p.m. (Eastern Standard 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.
2
<PAGE>
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 eleven (11) Directors and has been
decreased, effective upon the occurrence of the Meeting, to ten (10). The
Company is nominating ten (10) Directors for re-election at the Meeting.
Charles Andes, a Director of the Company since October 1994, has decided not
to stand for re-election. Each of the ten (10) Directors to be elected at the
Meeting will be elected by the holders of the Common Stock. Two of the
holders of Series B Preferred Stock have a contractual right to
representation on the Board of Directors. Ira M. Lubert will act as a
representative of such holders on the Board of Directors if elected.
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 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 ten (10) nominees named below as 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 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.
3
<PAGE>
The Board of Directors unanimously recommends a vote FOR each of the
nominees listed below.
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 ............... David J. Carman, age 45, 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. Mr. Carman
has served as a Director of the Company since April 1993.
Constantinos I. Costalas ...... Constantinos I. Costalas, age 60, has been the Vice Chairman of the Company
since September 1994 and was the Senior Financial Officer from April
1995 until May 1996. 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 until February 1994. Such positions were held since
1985 and 1976, respectively. Mr. Costalas has served as a Director of
the Company since May 1993.
Albert R. Dowden(2) ........... Albert R. Dowden, age 54, 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,
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,
the American Intercultural Student Exchange, the American Institute for
Public Service and the Swedish American Chamber of Commerce. Mr. Dowden
has served as a Director of the Company since August 1995.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name Description
------------------------------- -------------------------------------------------------------------
<S> <C>
Michael J. Emmi(1) ............ Michael J. Emmi, age 54, 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., Premier Solutions, Inc.
and The Franklin Institute and is the Chairman of the Pennsylvania Chapter
of the American Electronics Association. Mr. Emmi has served as a Director
of the Company since April 1995.
William M. Goldstein, Esq. .... William M. Goldstein, Esq., age 60, is a Managing Partner and Chairman
of the Tax Department of the law firm of Drinker Biddle & Reath in Philadelphia,
Pennsylvania, where he has practiced since 1982. Mr. Goldstein specializes
in federal taxation, securities law and general corporate law. He previously
held the position of Deputy Assistant Secretary for Tax Policy with the
United States Department of Treasury. Mr. Goldstein is also a Director
of Integra LifeSciences Corporation. Mr. Goldstein has served as a Director
of the Company since April 1996.
Frederick S. Hammer(1)(3) ..... Frederick S. Hammer, age 60, has been a partner of Inter- Atlantic Securities
Corporation, an investment banking firm focused primarily on the financial
services industry, since December 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,
Tri-Arc Financial Services, Inc., Search Capital, Inc. and United Student
Aid Group, and was previously a director of Meritor Savings Bank. Mr.
Hammer has served as a Director of the Company since October 1994.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name Description
------------------------------- -------------------------------------------------------------------
<S> <C>
Mark P. Hershhorn ............. Mark P. Hershhorn, age 46, 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., a licensing and theme park development
company. 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. 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. Mr. Hershhorn has served as a Director of the
National Infomercial Marketing Association since September 1994 and was
elected to its Executive Committee in September 1995. Mr. Hershhorn has
served as a Director of the Company since September 1994.
Ira M. Lubert ................. Ira M. Lubert, age 46, 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. Mr. Lubert has served as Director
of the Company since December 1994.
Brian McAdams ................. Brian McAdams, age 54, has served as Chairman of the Board and Chairman
of the Executive Committee of the Company since September 1994. He was
also Chief Executive Officer of the Company from September 1994 to April
1995. From 1976 through November 1994, Mr. McAdams served as President
and Chief Executive Officer and continues to serve as a Director of McAdams,
Richman & Ong, Inc., a national advertising and design firm. In 1994,
he was named Chairman of such firm and continues in that role today.
He is also a Director of Crusader Savings and Loan Association and Chairman
of the Penjerdel Telecommunications Committee. Mr. McAdams served on
the board of the Council of the Better Business Bureau between 1989 and
1995. Mr. McAdams has served as a Director of the Company since June
1990.
Jon W. Yoskin II(1)(2) ........ Jon W. Yoskin II, age 56, 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 Savings Bank, 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 Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
6
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended March 31, 1996, there were ten (10) 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, a Nominating Committee and a Legal, Finance, Mergers and
Acquisitions Committee. Each committee met at least once during the fiscal
year ended March 31, 1996. All committee members attended at least 75% of all
committee meetings held during their terms as members of such committees.
Audit Committee. The Audit Committee is currently composed of three (3)
non-employee Directors. The current members of the Audit Committee are
Messrs. Hammer, Emmi 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 four (4) times during the fiscal year ended March 31, 1996.
Compensation Committee. The Compensation Committee is composed of two (2)
non-employee Directors. The current members of the Compensation Committee are
Messrs. Yoskin and Dowden. The Compensation Committee is responsible for
determining and reviewing the compensation of the officers of the Company,
including the Company's Chief Executive Officer. The Compensation Committee
determines and reviews executive bonus plan targets and allocations and
administers the terms and provisions of the Company's stock option plans. The
Compensation Committee met six (6) times during the fiscal year ended March
31, 1996.
Nominating Committee. The Nominating Committee is 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 Nominating Committee met three (3) times during
the fiscal year ended March 31, 1996.
SECURITY OWNERSHIP OF MANAGEMENT
On June 7, 1996, there were outstanding and entitled to vote approximately
19,612,008 shares of Common Stock and 124,500 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 7, 1996
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, John W. Kirby and Michael S. Levey, 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. Mr.
Kirby's address is 300 Esplanade Drive, Suite 1680, Oxnard, California 93030.
Mr. Levey's address is 14724 Ventura Boulevard, Suite 600, Sherman Oaks,
California 91403.
7
<PAGE>
NUMBER OF SHARES OF STOCK OWNED
<TABLE>
<CAPTION>
Total Number
of Shares of Percent of
Series B Common Stock Common Stock Percent of
Common Preferred Beneficially Beneficially Total Voting
Name(1) Stock(2)(3) Stock Owned(4) Owned(5)(6) Power(5)(7)
-------------------------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Charles L. Andes ......... 20,000 1,250 32,500 * *
David J. Carman .......... 373,258 0 373,258 1.9% *
Constantinos I. Costalas . 57,949 0 57,949 * *
Dolores Dinyon ........... 2,834 0 2,834 * *
Albert R. Dowden ......... 6,000 0 6,000 * *
Michael J. Emmi .......... 7,000 0 7,000 * *
Marshall A. Fleisher ..... 16,449 0 16,449 * *
James M. Gallagher ....... 12,573 0 12,573 * *
William M. Goldstein ..... 15,000 0 15,000 * *
Frederick S. Hammer ...... 60,000 2,500 85,000 * *
Mark P. Hershhorn ........ 261,547 0 261,547 1.3% 1.0%
James A. Jernigan ........ 113,110 0 113,110 * *
John W. Kirby ............ 374,784 0 374,784 1.9% 1.8%
Michael S. Levey ......... 600,026 0 600,026 3.1% 2.9%
Ira M. Lubert ............ 82,500 0 82,500 * *
Brian McAdams ............ 57,114 0 57,114 * *
John J. Sullivan. ........ 167,320 0 167,320 * *
Jon W. Yoskin II ......... 116,712 0 116,712 * *
All executive officers and
Directors as a group
(18 persons)(8) ......... 2,344,176 3,750 2,381,676 11.7% 7.9%
</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.
(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. Fleisher, 16,000; Mr. Gallagher, 11,667; Mr.
Hammer, 25,000; Mr. Jernigan, 105,000; Mr. McAdams, 5,000; Mr. Sullivan,
50,000; Mr. Yoskin, 25,000; and all executive officers and Directors as a
group, 462,667.
(3) Includes shares which may be acquired upon the exercise of immediately
exercisable warrants in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934 as follows: Mr. Andes, 15,000; Mr. Carman, 30,000;
Mr. Hammer, 30,000; Mr. Hershhorn, 60,000; Mr. Lubert, 65,000; Mr.
Sullivan, 22,500; Mr. Yoskin, 42,552 and all executive officers and
Directors as a group, 265,052.
(4) In accordance with Rule 13d-3, includes shares of Common Stock issuable
upon the conversion of Series B Preferred Stock.
(5) All percentages are rounded to the nearest tenth of a percent.
(6) Based on 19,612,008 shares issued and outstanding as of June 7, 1996 as
determined in accordance with Rule 13d-3.
(7) Based on 20,857,008 shares issued and outstanding as of June 7, 1996.
Includes all shares of Common Stock owned and all shares of Common Stock
issuable upon exercise of Series B Preferred Stock owned, but does not
include options to purchase Common Stock or warrants exercisable into
Common Stock.
(8) Does not include (a) options which will be granted if Proposal III is
approved; or (b) shares which will be granted to Mr. Dowden, Mr. Emmi,
Mr. Goldstein, Mr. Hammer, Mr. Lubert and Mr. Yoskin in the event of
their re-election to the Board of Directors at the Meeting.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information at June 7, 1996 with
respect to each person, 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 Schedule 13D
and Schedule 13G pursuant to Rule 13d-3.
NUMBER OF SHARES OF STOCK OWNED
<TABLE>
<CAPTION>
Total Number
of Shares of Percent of
Series B Common Stock Common Stock Percent of
Common Preferred Beneficially Beneficially Total Voting
Name(1) Stock(2) Stock Owned(3) Owned(4)(5) Power(4)(6)
-------------------------------------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
John J. Turchi, Jr. .................. 1,543,265 0 1,543,265 7.6% 3.4%
1700 Walnut Street
Philadelphia, PA 19103
McCullough, Andrews .................. 1,602,000 0 1,602,000 8.2% 7.7%
& Cappiello, Inc. (7)
101 California Street
Suite 4250
San Francisco, CA 94111
Safeguard Group(8)(9) ................ 3,227,500 85,000 4,077,500 17.3% 4.3%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
(a) Safeguard Scientifics, Inc.(9)(10) . 2,250,000 50,000 2,750,000 12.3% 2.4%
(b) Technology Leaders II Management
L.P.(9)(11) ....................... 850,000 25,000 1,100,000 5.3% 1.2%
(c) Warren V. Musser ................. 5,000 50,000 * *
(d) Robert Keith ..................... 25,000 0 25,000 * *
(e) Ira M. Lubert(9) ................. 82,500 0 82,500 * *
(f) Gary Anderson .................... 1,250 12,500 * *
(g) Charles Andes(9) ................. 20,000 1,250 32,500 * *
(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) All percentages are rounded to the nearest tenth of a percent.
(5) Based on 19,612,008 shares issued and outstanding as of June 7, 1996 as
determined in accordance with Rule 13d-3.
(6) Based on 20,857,008 shares issued and outstanding as of June 7, 1996.
Includes all shares of Common Stock owned and all shares of Common Stock
issuable upon exercise of Series B Preferred Stock owned, but does not
include options to purchase Common Stock and warrants exercisable into
Common Stock.
(7) Based on information contained in a Form 13F dated March 1996.
(8) Based on information provided by the Safeguard Group.
(9) Includes shares which may be acquired upon the exercise of immediately
exercisable warrants in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934.
(10) 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.
(11) 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.
9
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Biographical information for Dolores Dinyon, Marshall A. Fleisher, Esq.,
James A. Jernigan, James M. Gallagher, John W. Kirby, Michael S. Levey 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."
Dolores Dinyon, age 41, has been Senior Vice President, Global Marketing
and Product Development since January 1995. From May 1991 until January 1995,
Ms. Dinyon was Vice President of Marketing and Sales for Myron Manufacturing
("Myron"). Prior to joining Myron, Ms. Dinyon served as Vice President of
Marketing for the Female Collectables and Home Decor division of The Franklin
Mint.
Marshall A. Fleisher, Esq., age 44, has served as Vice President (Legal)
and Corporate Secretary of the Company since December 1994. From September
1992 to December 1994, Mr. Fleisher was the Company's Vice President and
General Counsel for Business Affairs. From July 1984 to August 1992, Mr.
Fleisher practiced law at the firm of Duane, Morris & Heckscher in
Philadelphia, Pennsylvania, where, as a partner and an associate, he
specialized in finance, intellectual property and general corporate law.
James A. Jernigan, age 53, was promoted to the position of President of
the Company's North American Operations in January 1996. Mr. Jernigan has
served as Executive Vice President of the Company and Chief Operating Officer
of the Company's 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 International
Operations of the Company. He was Vice President of Sourcing and
International Operations at The Franklin Mint from December 1987 to January
1992.
James M. Gallagher, age 39, has served as Vice President and Chief
Financial Officer of the Company since May 1996. From October 1993 to May
1996, Mr. Gallagher served as Vice President and Corporate Controller of the
Company. Prior to joining the Company, Mr. Gallagher was employed by Ernst &
Young LLP, an international public accounting firm, where Mr. Gallagher was
employed in various capacities from January 1979 to October 1993, most
recently as senior manager.
John W. Kirby, age 36, is Executive Vice President of the Company and
Chairman and Chief Executive Officer of DirectAmerica Corporation, a
wholly-owned subsidiary of the Company which was acquired, along with
California Production Group, Inc., ("CAPG"), in October 1995 (collectively
with CAPG, "DirectAmerica"). He has served as Chairman of the Board, Chief
Executive Officer and President of DirectAmerica since August 1994 and as
Executive Vice President of the Company since its acquisition of
DirectAmerica in October 1995. Mr. Kirby previously served as Chairman of the
Board, Chief Executive Officer and President of CAPG from January 1991 until
the Company's acquisition of CAPG in October 1995.
Michael S. Levey, age 47, serves as Executive Vice President of the
Company and Chief Executive Officer of Positive Response Television, Inc., a
wholly-owned subsidiary of the Company which was acquired in May 1996
("Positive Response"). Mr. Levey founded Positive Response in 1988. From 1985
to 1989, Mr. Levey was employed by Twin Star Productions, where he produced
infomercials and developed fulfillment, outbound marketing and product
selection activities.
John J. Sullivan, age 49, 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 reappoint each officer.
10
<PAGE>
PROPOSAL II
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK TO
75,000,000 SHARES OF COMMON STOCK
On May 20, 1996, the Board of Directors unanimously adopted a resolution
approving an amendment to the first paragraph of Article Fourth of the
Company's Certificate of Incorporation increasing the number of shares of
Common Stock which the Company is authorized to issue from 50,000,000 to
75,000,000. The Board of Directors determined that such an amendment is
advisable and directed that the proposed amendment be considered by the
Company's stockholders at the Meeting.
The full text of the introductory paragraph of Article Fourth of the
Company's Certificate of Incorporation, if amended as proposed, will be as
follows:
The aggregate number of shares which the Company shall have the
authority to issue is 85,000,000 of which 10,000,000 shall be
Preferred Stock par value $.01 and 75,000,000 shall be common stock
par value $.01 ("Common Stock") and the voting powers, designations,
preferences and relative, participating, optional or other special
qualifications, limitations or restrictions thereof are set forth
hereinafter:
The amendment will not increase the number of shares of Preferred Stock
authorized. The relative rights and limitations of the Common Stock and
Preferred Stock would remain unchanged under the proposed amendment.
PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The proposed amendment would increase the number of shares of Common Stock
which the Company is authorized to issue from 50,000,000 to 75,000,000. The
additional 25,000,000 shares, if and when issued, would have the same rights
and privileges as the shares of Common Stock presently issued and
outstanding. The holders of Common Stock of the Company are not entitled to
preemptive rights or cumulative voting.
On the Record Date, the Company had 19,612,008 shares of Common Stock
issued and outstanding. In addition, as of such date, an aggregate of
approximately 16,354,966 shares of Common Stock were reserved or allocated
for issuance by the Company (i) upon exercise of options granted, or to be
granted upon the approval of Proposal III, under the Company's employee stock
option plans and pursuant to certain employment agreements; (ii) upon
exercise of warrants issued in connection with certain capital-raising and
other business transactions completed by the Company; (iii) upon conversion
of issued and outstanding Series B Preferred Stock; (iv) pursuant to its
Incentive Plan and Director's Stock Grant Plan; and (v) in connection with
the proposed transactions described below.
In late May 1996, the Company executed definitive agreements to acquire
Prestige Marketing Limited and Prestige Marketing International Limited
(collectively, "Prestige") and Suzanne Paul Holdings Pty Limited and its
operating subsidiaries ("Suzanne Paul"). Prestige and Suzanne Paul are direct
response television marketing companies operating in New Zealand and
Australia, respectively. The aggregate consideration to be paid by the
Company for Prestige and Suzanne Paul will include 787,879 shares of Common
Stock. In addition, the Company may pay up to an aggregate of an additional
$5 million in Common Stock, valued at then present market prices, in 1997 and
1998, contingent upon the levels of net income achieved in those years by
Prestige and Suzanne Paul.
Additionally, on June 14, 1996, the Company filed a registration statement
with the Securities and Exchange Commission concerning a public offering of
up to 2,000,000 shares of Common Stock (not including an underwriters'
over-allotment option of up to 300,000 additional shares).
After taking into account the number of currently issued and outstanding
shares of Common Stock together with the shares of Common Stock reserved or
allocated for issuance by the Company, the Company has approximately
14,000,000 shares of Common Stock which remain unreserved for issuance. A
significant element
11
<PAGE>
of the Company's business strategy is the continued expansion of the
Company's business in existing and in new markets, in part through the
acquisition of existing operating companies. The ability of the Company to
utilize Common Stock as consideration in any such transaction is viewed by
management as a key element of such growth strategy. The Board of Directors
recommends the proposed increase in the authorized number of shares of Common
Stock to ensure that an adequate number of authorized and unissued shares is
available principally for (i) the raising of additional capital for the
operations of the Company and (ii) the financing of the acquisitions of other
businesses. Except as described above, there are currently no plans or
arrangements relating to the issuance of any of the additional shares of
Common Stock proposed to be authorized and such shares would be available for
issuance without further action by stockholders, unless required by the
Company's Certificate of Incorporation, its By-Laws or by applicable law.
The increase in the number of authorized shares of Common Stock has not
been proposed for any anti- takeover-related purpose, and the Board of
Directors and management of the Company have no knowledge of any current
effort to obtain control of the Company or accumulate large amounts of its
Common Stock. However, the availability of additional shares of Common Stock
could make any attempt to gain control of the Company or of the Board of
Directors more difficult. Shares of authorized but unissued Common Stock
could be issued in an effort to dilute the stock ownership and voting power
of any person or entity desiring to acquire control of the Company, which
might have the effect of discouraging or making less likely such a change of
control. Such shares could also be issued to other persons or entities who
support the Board of Directors in opposing a takeover attempt that the Board
of Directors has deemed not to be in the best interests of the Company and
its stockholders.
In evaluating the proposed amendment, stockholders should consider the
effect of certain other provisions of the Company's Certificate of
Incorporation and By-Laws which may have anti-takeover consequences. These
provisions include (a) the authorization of up to 10,000,000 shares of
Preferred Stock, the terms of which may be fixed by the Board of Directors
without further action by stockholders, (b) a provision that standing
Directors may be removed only by a majority vote of stockholders entitled to
vote, (c) a limitation on the ability of stockholders to call special
stockholder meetings, and (d) a provision that vacancies in, and newly
created directorships resulting from an increase in the authorized number of
Directors on, the Board of Directors may be filled by a majority of the
remaining Directors.
EFFECTIVE DATE OF PROPOSED AMENDMENT
If the proposed amendment to Article Fourth of the Certificate of
Incorporation of the Company is adopted by the required vote of the Company's
stockholders, such amendment will become effective upon the filing by the
Company of a Certificate of Amendment to the Company's Certificate of
Incorporation with the Secretary of the State of Delaware, which is expected
to be accomplished as soon as practicable after stockholder approval is
obtained.
VOTE REQUIRED FOR APPROVAL
The proposal to approve the amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
75,000,000 shares of Common Stock described above requires the affirmative
vote of a majority of shares present in person or represented 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. Abstentions, therefore, will have the practical effect of voting
against the proposal because the affirmative vote of a majority of the shares
present at the Meeting is required to approve the proposal. Broker non-votes
are considered not present at the Meeting and, therefore, will not be voted
or have any effect on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSED
AMENDMENT.
12
<PAGE>
PROPOSAL III
APPROVAL OF AMENDMENTS TO THE COMPANY'S 1991 STOCK OPTION PLAN
THE PROPOSAL
At the Meeting, there will be presented to the stockholders a proposal to
increase the number of shares covered by the 1991 Stock Option Plan, as
heretofore amended (the "1991 Option Plan"), by 3,000,000 shares and to make
certain other revisions thereto. Previously, stockholders have approved a
total of 3,565,000 shares of Common Stock for issuance under the 1991 Option
Plan. In addition to an increase in the number of shares of Common Stock
available for issuance pursuant to the 1991 Option Plan, the Board of
Directors has also approved for proposal to the stockholders revisions to the
1991 Option Plan pursuant to which each non- employee Director will receive,
upon the receipt of stockholder approval of this Proposal III, a one-time
grant of options to purchase 50,000 shares of the Company's Common Stock at
the market price on the date of stockholder approval. The proposed revisions
to the 1991 Option Plan further provide that any non-employee Director
elected to the Board of Directors for the first time after the Meeting will
be eligible to receive a one-time grant of options to purchase 50,000 shares
of Common Stock upon such non-employee Director's initial election to the
Board of Directors by the Company's stockholders, at the market price on such
date. If the proposed revisions are approved, such options will be issued in
lieu of the following non-cash remuneration presently received by
non-employee Directors, which will be discontinued: options to purchase
25,000 shares of Common Stock upon initial election to the Board of Directors
by the Company's stockholders; and a grant of 5,000 shares of Common Stock
upon each election of such non-employee Director to the Board of Directors by
the Company's stockholders.
Of the shares which are the subject of the proposed increase, persons
named in the Summary Compensation Table (appearing hereinafter) would receive
an aggregate of 1,290,000 options to purchase shares of Common Stock in the
following increments: options to purchase 250,000 of such shares of Common
Stock at the market price on the date of stockholder approval have been
granted, subject to stockholder approval of this Proposal III, to each of
Messrs. McAdams, Costalas, Hershhorn and Carman in recognition of the
Company's and their recent performance. Mr. Jernigan and Mr. Sullivan have
each been granted options, subject to approval of this Proposal III, to
purchase 50,000 of such shares of Common Stock, also at the market price on
the date of stockholder approval. In addition, Mr. McAdams and Mr. Costalas
were previously granted, subject to stockholder approval of this Proposal
III, 110,000 options and 80,000 options, respectively, in connection with the
execution of their employment agreements with the Company in 1995.
This Proposal III reflects a series of carefully considered and
coordinated changes in the approach of the Board of Directors toward
compensation of management, Directors and employees. In its continuing effort
to tailor the Company's compensation package to the realities of the market
and the interests of stockholders, the Compensation Committee of the Board of
Directors recently commissioned Ernst & Young LLP, the Company's independent
auditors, to study the current executive compensation packages of the
Company. Ernst & Young LLP reported to the Compensation Committee that the
portion of the Company's executive remuneration package which is tied to the
Company's stock performance was significantly smaller (20% versus 64%) than
that found in comparable companies. Ernst & Young LLP further reported that
executive stock ownership at comparable companies, as a percentage of common
stock outstanding, averaged nearly three times the ownership level of Common
Stock at the Company. Based on these findings, the Compensation Committee of
the Board of Directors recommended the one-time grant of options to purchase
250,000 shares of Common Stock to each of Messrs. McAdams, Costalas,
Hershhorn and Carman and grants of an aggregate of up to 1,000,000 to over
seventy other members of the Company's management team. The option grants to
each of Messrs. McAdams, Costalas, Hershhorn and Carman are intended to be
the only grants of options made to such executive officers during the next
four years. Moreover, such options are scheduled to vest in five years and
can be accelerated only upon the attainment of specified market price or
earnings-per-share goals. The Board believes that such vesting schedule
serves to strengthen the mutuality of interests between such executives and
the Company's stockholders.
With respect to non-employee Directors of the Company, the Board reviewed
the analysis of Director compensation provided by Ernst & Young LLP and
concluded that a one-time grant of options to purchase 50,000
13
<PAGE>
shares of Common Stock to each non-employee Director was more common with
industry competitive practice than the package of recurring non-cash
remuneration to which non-employee Directors are currently entitled. The
Board further concluded that, with vesting terms of such options identical to
those outlined above for Messrs. McAdams, Costalas, Hershhorn and Carman, the
grant of such options also strengthens the mutuality of interests between
such Board members and the Company's stockholders compared to the current
non-employee Director compensation program.
Based on the analysis provided by Ernst & Young LLP, the Board of
Directors believes that the 1991 Option Plan, in conjunction with the
Incentive Plan, is the proper mechanism through which to provide incentives
to all members of the Company's management team and the non-employee Board
members which are closely aligned to the Board of Directors' foremost goal,
that of increasing stockholder value.
These amendments will not be effective unless and until stockholder
approval is obtained, and will not change the 1991 Option Plan except as
stated above. The Board of Directors believes that the approval and
confirmation of such amendments by stockholders is an important factor in the
Company's ability to attract and retain high-quality employees and
non-employee Directors. If this proposal is not approved by the stockholders,
none of the options granted or proposed to be granted as set forth below will
be issuable either pursuant to the 1991 Option Plan or pursuant to the
employment agreements with Messrs. McAdams and Costalas. The effectiveness of
the amendments to the 1991 Option Plan is not contingent upon approval of
Proposal II.
If the proposed amendments are not approved at the Meeting, the only
options issuable pursuant to the 1991 Option Plan will be options pertaining
to shares as to which outstanding options have expired and have not been
exercised.
The table below summarizes the stock options awarded under the 1991 Option
Plan subject to stockholder approval, and provides other information as to
the persons and categories of persons to whom such options were granted.
NEW PLAN BENEFITS
NATIONAL MEDIA CORPORATION AMENDED AND RESTATED 1991 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Options Granted Subject
to Stockholder Option Exercise
Name and Position Approval(1)(2) Price
-------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
Mark P. Hershhorn
President and Chief Executive Officer ....................... 250,000(3) (4)
Brian McAdams
Chairman of the Board and Chairman of the Executive Committee . 360,000(3) (4)(5)
Constantinos I. Costalas
Vice Chairman of the Board .................................. 330,000(3) (4)(6)
David J. Carman
Executive Vice President of the Company and President and
Chief Executive Officer of Quantum ......................... 250,000(3) (4)
James A. Jernigan
President-North American Operations ......................... 50,000 (4)
John J. Sullivan,
Senior Vice President, Administration, Planning and Investor
Relations .................................................. 50,000 (4)
Executive Group .............................................. 1,445,500 (4)
Non-Executive Director Group ................................. 300,000 (4)
Non-Executive Officer Employee Group ......................... 744,500 (4)
</TABLE>
- ------
(1) These stock options were granted by the Board of Directors subject to
stockholder approval of Proposal III to increase the number of shares
eligible for issuance under the 1991 Option Plan and to make certain
other revisions thereto.
(2) The stock options expire ten years from the date of grant.
14
<PAGE>
(3) Includes or consists of 250,000 options which vest on April 25, 2001,
subject to the following provisions for accelerated vesting: (i) in the
event of a change of control of the Company (as defined in the 1991
Option Plan), all of such options shall vest immediately; (ii) in the
event that the closing price of the Company's Common Stock as reported on
the New York Stock Exchange is $35.00 or more per share for ten
consecutive trading days, all of such options shall vest immediately; or
(iii) in the event that the Company achieves the following
earnings-per-share ratios calculated cumulatively from the fiscal year
ending March 31, 1997, 25% of the shares of Common Stock underlying such
options shall vest immediately for each fiscal year: FY1997: $ .80;
FY1988: $1.73; FY1999: $2.79 and FY 2000: $4.01.
(4) If Proposal III is approved, such options will be granted at an exercise
price per share equal to the last reported sales price for the Company's
Common Stock on the New York Stock Exchange on the date of receipt of
such stockholder approval.
(5) Includes 110,000 stock options, issued at an exercise price of $12.99 per
share, which were granted in connection with the execution of Mr.
McAdams' employment agreement with the Company in September 1995. In the
event such options are not approved by the Company's stockholders, such
options shall be deemed automatically to be converted into five (5) year
cash only stock appreciation rights having an established price of $12.99
per share and otherwise having terms and conditions substantially similar
to such options.
(6) Includes 80,000 stock options, issued at an exercise price of $12.99 per
share, which were granted in connection with the execution of Mr.
Costalas' employment agreement with the Company in September 1995. In the
event such options are not approved by the Company's stockholders, such
options shall be deemed automatically to be converted into five (5) year
cash only stock appreciation rights having an established price of $12.99
per share and otherwise having terms and conditions substantially similar
to such options.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
VOTE REQUIRED FOR APPROVAL
The proposal to approve the issuance and grant of up to 3,000,000
additional shares of Common Stock under the 1991 Option Plan and the other
proposed revisions to the 1991 Option Plan described herein require the
affirmative vote of a majority of shares present in person or represented by
proxy at the Meeting for approval. Abstentions may be specified on the proxy
and will be considered present at the Meeting, but will not be counted as
affirmative votes. Abstentions, therefore, will have the practical effect of
voting against the proposal because the affirmative vote of a majority of the
shares present at the Meeting is required to approve the proposal. Broker
non-votes are considered not present at the Meeting and, therefore, will not
be voted or have any effect on the proposal.
SUMMARY DESCRIPTION OF THE 1991 OPTION PLAN, AS IT APPLIES TO PROPOSAL III.
In 1991 and 1992 the Board adopted and the stockholders of the Company
approved the Company's 1991 Option Plan. The 1991 Option Plan was
subsequently amended and restated on two different occasions and, in each
instance, received the required approval of stockholders. As currently in
effect, the 1991 Option Plan provides for the granting of options intended to
qualify as incentive stock options ("ISOs") as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock
options ("NQSOs") (ISOs and NQSOs, collectively, the "Stock Options"),
restricted stock, and stock appreciation rights ("SARs"). On April 25, 1996
the Board adopted a further amendment and restatement to the 1991 Option
Plan, subject to receipt of stockholder approval at the Meeting. The amended
and revised version of the 1991 Option Plan as adopted by the Board of
Directors is set forth as Exhibit A to this Proxy Statement. The description
of the 1991 Option Plan contained herein is qualified in its entirety by
reference to such Exhibit.
General. Employees eligible for participation in the 1991 Option Plan
include key employees, independent contractors and consultants who perform
services for the Company or a subsidiary company, and non- employee Directors
("Eligible Participants"). Only Eligible Participants who are officers or
other employees of the Company or a subsidiary company are eligible to
receive ISOs. All Eligible Participants are eligible to receive NQSOs,
restricted stock and SARs. No Eligible Participant may be granted Stock
Options for more than 1,000,000 shares in any one taxable year of the
Company. Under the current terms of the 1991 Option Plan, options to purchase
3,565,000 shares of Common Stock were available for issuance. Approval of the
proposed revisions to the 1991 Option Plan would increase the maximum number
of shares of Common Stock that would be issuable under the 1991 Option Plan
by an additional 3,000,000 shares.
Administration. The 1991 Option Plan is administered by a committee of the
Board consisting of not less than two persons who must be "disinterested
persons" under Rule 16b-3 of the Securities Exchange Act of 1934
15
<PAGE>
(the "Exchange Act") and "outside Directors" under Section 162(m) of the Code
(the "Committee"). The Committee has full power to administer and interpret
the 1991 Option Plan. The Company's Compensation Committee serves as the
"Committee" for the 1991 Option Plan.
The Shares. Each of the Stock Options will be granted for a term of ten
years from the date of grant, subject to earlier termination on the
optionee's death, disability or termination of employment or other
relationship with the Company. The Stock Options are subject to vesting,
which commences on the date of grant and ends on the date or dates determined
by the Committee. In the event of a change of control, as defined in the 1991
Option Plan, all options granted become immediately vested and exercisable.
The Stock Options are not assignable or otherwise transferrable except by
will or the laws of descent and distribution and, if permitted under Rule
16b-3 of the Exchange Act and the Committee, pursuant to a qualified domestic
relations order as defined under the Code or Title I of ERISA. The exercise
price of the Stock Option is payable in cash, or, with the consent of the
Committee, by delivering shares of Common Stock already owned by the
optionee, by a combination of cash and shares, or by delivering a note
approved by the Committee at the time of grant. Shares subject to Stock
Options granted under the 1991 Option Plan which lapse or terminate may again
be granted under the 1991 Option Plan. The Committee may offer to exchange
new options for existing options, with the shares subject to the existing
options being again available for grant under the 1991 Option Plan.
Non-Employee Directors Under the terms of the 1991 Option Plan, as
currently in effect, each Director who is not an employee of the Company (a
"Non-Employee Director") at the time he or she is first elected as a Director
by the stockholders is entitled to receive a grant of an option to purchase
25,000 shares and each Non-Employee Director in office immediately after the
annual election of Directors (other than any Non- Employee Director first
elected by stockholders at such meeting) is entitled to receive a grant of an
option to purchase 5,000 shares. Such options will be immediately exercisable
on the date of grant. The revisions to the 1991 Option Plan, if approved,
provide that each Non-Employee Director, will receive, upon the receipt of
stockholder approval, the grant of an option to purchase 50,000 shares and
each Non-Employee Director elected to the Board of Directors by stockholders
for the first time after the Meeting will be entitled to receive a grant of
an option to purchase 50,000 shares. The Stock Options are subject to vesting
which commences on the date of grant and ends on the date or dates determined
by the Committee.
Amendments. The Committee has the full authority to amend the 1991 Option
Plan, except that stockholder approval is required to (i) increase the number
of shares available for the 1991 Option Plan, (ii) materially increase the
benefits accruing to optionees, (iii) materially modify the eligibility
requirements for options granted under the 1991 Option Plan, (iv) increase
the number of shares for which any optionee may be granted Stock Options, or
(v) modify the provisions for determining fair market value under the 1991
Option Plan. If this Proposal III is approved at the Meeting, the amended and
restated 1991 Option Plan as approved by the Board shall be deemed effective
as of April 25, 1996, subject to stockholder approval, and will terminate on
April 25, 2006, the tenth anniversary of its effective date.
Federal Income Tax Consequences. The federal income tax consequences of an
optionee's participation in the 1991 Option Plan are complex and subject to
change. The following discussion is only a summary of the general rules
applicable to Stock Options.
The tax consequences of a Stock Option depend on whether the Stock Option
is an ISO or a NQSO. An optionee will not recognize income at the time of a
grant or exercise of an ISO and the Company may not deduct the related
expense at those times. However, for purposes of the alternative minimum tax,
the difference between the exercise price and the fair market value of the
stock will be included in alternative minimum tax income. The optionee has a
taxable event only upon a later sale or disposition of the stock acquired
pursuant to the exercise of the ISO. The tax treatment of the disposition of
the stock will depend on when the optionee disposes of the stock. An optionee
who sells stock acquired pursuant to the exercise of an ISO within one year
from the date of exercise or within two years of the date of grant will
recognize capital gain on the sale of the stock and ordinary income equal to
the difference between the ISO's exercise price and the fair market value of
the stock. An optionee who disposes of stock after a date that is both two
years after the grant and one year after its exercise will recognize capital
gain equal to the difference between the amount received on disposition and
the adjusted basis in the stock.
16
<PAGE>
A different set of rules govern NQSOs. There are no federal income tax
consequences to the optionee or the Company upon the grant of NQSOs. Upon
exercise of a NQSO, the optionee will recognize ordinary income in the amount
by which the fair market value of the Stock Option exceeds the exercise price
of the Stock Option. The Company is allowed a deduction for federal income
tax purposes equal to the amount of ordinary income recognized by the
optionee at the time of exercise of NQSOs. The optionee's holding period for
purposes of determining whether any subsequently realized gain or loss will
be long-term or short-term will begin at the time the optionee recognizes
ordinary income. If, at the time of issuance of the option shares, the
optionee is subject to the restrictions of Section 16(b) of the Exchange Act,
then the optionee generally will recognize ordinary income as of the later of
(i) the date of exercise, or (ii) the expiration of six months from the date
of option grant, based upon the difference between the fair market value of
the option shares at such time and the exercise price.
Section 162(m). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration
in excess of $1,000,000 paid to the chief executive officer or to any of the
other four most highly compensated officers in any one year. Total
remuneration would include amounts received upon the exercise of Stock
Options granted after February 17, 1993. An exception does exist, however,
for "performance-based" remuneration, including amounts received upon the
exercise of Stock Options pursuant to a plan approved by stockholders that
meets certain requirements. The Option Plan is intended to make option grants
thereunder meet the requirements of "performance-based" remuneration.
17
<PAGE>
PROPOSAL IV
APPROVAL OF AMENDMENTS TO THE COMPANY'S MANAGEMENT INCENTIVE PLAN
THE PROPOSAL
At the Meeting, there will be presented to the stockholders a proposal to
extend the Company's Incentive Plan indefinitely; (ii) to make certain
revisions related to the eligibility for participation and form of payment
provisions contained therein; and (iii) to make certain other revisions to
the Incentive Plan regarding the administrative aspects of the Incentive
Plan.
In order to attract and retain qualified management to serve the Company,
the Board of Directors has utilized the Incentive Plan. All capitalized terms
utilized but not defined herein are defined in the Incentive Plan. The
purpose of the Incentive Plan is to promote the interests of the Company by
relating the compensation of certain key employees to the Company's
performance, and to reward these key individuals by affording them the
opportunity to earn incentive compensation under the Incentive Plan based
upon the attainment of specified Corporate and Individual Goals.
The Incentive Plan, as initially approved by the Company's stockholders in
February 1995, expires pursuant to its terms with the Plan Year ending March
31, 1997. The Board of Directors has concluded that the Incentive Plan has
proven to be a useful mechanism by which to reward strong performances by
individuals and the Company. As a result, the Board has approved, subject to
stockholder approval, the extension of the Incentive Plan indefinitely in
order to continue to reward strong individual and corporate performances in
the future. The Board of Directors has not approved any increase in the
aggregate number of shares of Common Stock issuable pursuant to the Incentive
Plan.
In addition to extending the duration of the Incentive Plan, the Board of
Directors has approved, subject to stockholder approval, a revision to the
Incentive Plan which provides for the inclusion of an additional category of
participants in the Incentive Plan and grants to the Compensation Committee
of the Board of Directors the discretion to name additional categories of
participants and a revision also requiring that, in order to participate in a
distribution under the Incentive Plan for a particular year, a person must be
actively employed or otherwise in a participating category, as of the
distribution date under the Incentive Plan for that year. These revisions
will permit the Compensation Committee to efficiently address compensation
issues with respect to the Company's management and to effectively adapt the
Company's compensation programs to an ever-changing workplace. In addition,
the Board has approved certain revisions related to the administrative
aspects of the Incentive Plan which are reflected in the copy of the
Incentive Plan (in its proposed revised form) attached to this Proxy
Statement as Exhibit B.
Last, the Board of Directors has approved a revision to the Incentive Plan
pursuant to which participants may elect to receive up to 100% of their
Incentive Plan payment in Common Stock. At present, the Incentive Plan
provides that the Chairman, Vice-Chairman, President and Executive
Vice-Presidents of the Company shall receive 50% of their Incentive Plan
payment in Common Stock and other participants may receive a maximum of 30%
of their Incentive Plan payment in Common Stock. The Board of Directors
believes that this revision serves to align the interests of Incentive Plan
participants with the interests of the Company's stockholders by promoting
investment in the Company by all levels of the Company's management.
VOTE REQUIRED FOR APPROVAL
The proposal to extend and amend the Incentive Plan requires the
affirmative vote of a majority of shares present in person or represented 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. Abstentions, therefore, will have the practical effect
of voting against the proposal because the affirmative vote of a majority of
the shares present at the Meeting is required to approve the proposal. Broker
non-votes are considered not present at the Meeting and, therefore, will not
be voted or have any effect on the proposal.
The Board of Directors unanimously recommends a vote FOR this proposal.
18
<PAGE>
DESCRIPTION OF THE MANAGEMENT INCENTIVE PLAN, AS IT APPLIES TO PROPOSAL IV
There follows a brief description of the Incentive Plan, with proposed
revisions, as approved by the Board of Directors on April 25, 1996. No
amendments have been proposed to the Incentive Plan other than those
described above. The full text of the proposed amended and restated Incentive
Plan is attached to this Proxy Statement as Exhibit B, and the following
description is qualified in its entirety by reference to such Exhibit. All
capitalized terms utilized but not defined herein shall be deemed to have the
meaning ascribed thereto in the Incentive Plan.
General. Awards granted under the Incentive Plan shall entitle
Participants to compensation based upon the achievement of pre-established
Corporate and Individual Goals during a Plan Year. Each Participant shall
receive an Award Agreement which shall state the terms of the Award, the
number of Corporate and Individual Performance Units granted to the
Participant, and the applicable Corporate and Individual Goals. The Goals
will be subject to changes approved by the Chairman and the Board during the
Plan Year. The number of Corporate and Individual Units granted to each
Participant shall be determined annually by the Committee based upon the
Participant's position and responsibilities and shall in no event exceed an
aggregate of 300 corporate and individual Units per Participant. No Award
under the Incentive Plan shall be assignable or transferable by a Participant
except by will or by the laws of descent and distribution.
Corporate Units. At the end of a Plan Year, the Committee will determine,
after consultation with Company management, a Corporate Unit Percentage,
ranging from 0% to 150%, depending on the extent to which the Corporate Goals
for the Plan Year were achieved by the Company. If all of the Corporate Goals
for a Plan Year are met, the Corporate Unit Percentage shall be at least
100%. The Corporate Unit Percentage shall then be multiplied by $1,000 to
produce the Corporate Unit Value.
Individual Units. At the end of a Plan Year, the Committee will determine,
after consultation with Company management, an Individual Unit Percentage,
ranging from 0% to 150%, depending on the extent to which the Corporate Goals
for the Plan Year were achieved by the Company and the contribution of the
Participants in achieving these Goals. The Individual Unit Percentage shall
then be multiplied by $1,000 to produce the Individual Unit Value.
Company management will also recommend to the Board, in the case of
Participants whose base salary is $100,000 or more, or to the Committee, in
the case of other Participants, a Performance Factor for each Participant
granted an Award for the Plan Year. The Performance Factor shall range
between 0 and 1.5, depending on the extent to which the Participant achieved
his or her Individual Goals for the Plan Year.
Determination of Award Amount. The amount earned by the Participant based
on the Company's performance for a Plan Year shall be the number of Corporate
Units granted under his or her Award Agreement, multiplied by the Corporate
Unit Value for the Plan Year. The amount earned by the Participant based on
his or her individual performance for a Plan Year shall be the number of
Individual Units granted under his or her Award Agreement, multiplied by the
Individual Unit Value for the Plan Year, multiplied by the Participant's
Performance Factor for the Plan Year, if any.
Form of Payment. The Chairman, Vice Chairman, President and Executive Vice
Presidents of the Company shall receive 50% of the Award payment in cash and
50% in stock. However, each year such Participants may elect, under terms and
conditions prescribed by the Committee, to receive, instead of 50% in stock,
60% to 100% (in 10% increments) of their payment in stock, with the remainder
payable in cash. Other Participants shall receive 90% of their Award payments
in cash and 10% in stock. However, each year such Participants may elect,
under terms and conditions prescribed by the Committee, to receive, instead
of 10% in stock, 20% to 100% (in 10% increments) of their payment in stock,
with the remainder payable in cash.
Stock Subject to the Incentive Plan. The number of shares of Common Stock
authorized for issuance under the Incentive Plan shall be 750,000 shares,
subject to adjustment for changes in the Company's capitalization.
Adjustments to Terms of Awards. If there is a change in the capitalization
of the Company or if a material, extraordinary, unusual or non-recurring
event occurs, including material changes in applicable laws or regulations,
accounting practices, or accounting credits or charges, the Committee, in its
discretion, may make adjustments to previously established Corporate or
Individual Goals or other terms and conditions of outstanding Awards
appropriate to reflect such change.
19
<PAGE>
Liquidation and Certain Corporate Transactions. If the Company is
liquidated or a corporate transaction, as defined in section 424(a) of the
Code, occurs, each outstanding Award shall become payable on such date (the
"Accelerated Date"), not later than the effective date of the liquidation or
corporate transaction, as the Committee shall determine. The amount payable
pursuant to Awards shall be determined based upon the results of completed
months in the Plan Year up to the Accelerated Date.
In the event of any actual or proposed liquidation or corporate
transaction, or in the event the Committee determines that a change in
control of the Company has occurred or is likely to occur, the Committee, in
its discretion may: (i) determine any or all outstanding Awards to have been
earned in full or in part, even if the Goals for such Awards have not been
met; and (ii) accelerate the date of payment of any such Awards.
Forfeitures. No amount earned under an Award shall be paid if the Chairman
and the Board determine that the Participant has violated Company policies,
that the Participant's performance was documented as unsatisfactory, or that
similar circumstances exist.
Employment Requirement. Subject to the discretion of the Committee, a
Participant will not be entitled to any amounts under an Award if he or she
is not on the payroll of, or under an active independent consulting contract
with, the Company or a Subsidiary as of the day in which Awards are actually
delivered to Participants for such Plan Year, unless the Participant dies or
suffers a disability during the Plan Year.
New Participants. Awards granted to any individuals who become
Participants after the start of a Plan Year shall be determined by
multiplying the amount earned under such an Award by the quotient of the
number of months worked by the individual (not including the month the
individual became a Participant), divided by twelve.
Participants. Individuals employed or otherwise retained as independent
contractors by the Company and its Subsidiaries in the following positions
shall be eligible to participate in the Incentive Plan:
Chairman
Vice Chairman
President
Executive Vice-President
Senior Vice-President
General Manager
Vice-President
Director (does not include members of the Board of Directors)
Manager
The Committee shall also have the discretion to name other salaried
employees as Participants for one or more Plan Years.
Administration. The Incentive Plan shall be administered by the Committee,
which shall consist of not less than two persons, all of whom shall be
"disinterested persons" as defined under Rule 16b-3 under the Exchange Act.
The Committee shall have full authority to construe and interpret the
Incentive Plan, and, subject to the provisions of the Incentive Plan: (a) to
establish, amend and rescind appropriate rules and regulations relating to
the Incentive Plan; (b) to grant Awards and set the terms and conditions
thereof; (c) to waive any supplemental terms and conditions imposed upon
Awards by the Committee; (d) to make recommendations to the Board concerning
the Incentive Plan; and (e) to take all such steps and make all such
determinations in connection with the Incentive Plan and the Awards granted
hereunder as it may deem necessary or advisable. All such rules, regulations,
determinations and interpretations of the Committee shall be final,
conclusive and binding on all persons.
Amendment and Termination. Pursuant to a written resolution, the Board may
terminate or amend the Incentive Plan at any time, except that, without
stockholder approval, no such amendment may: (1) increase the maximum number
of shares of stock which may be issued under the Incentive Plan (other than
as permitted under Section 13 thereof); or (2) materially modify the
requirements for eligibility for participation in the Incentive Plan.
20
<PAGE>
Federal Income Tax Consequences. The federal income tax consequences of an
employee's participation in the Incentive Plan are complex and subject to
change. The following discussion is only a summary of the general rules
applicable to the Incentive Plan.
Generally, when the amount earned by a Participant under the Incentive
Plan is determined and becomes payable, the Participant will recognize
ordinary income equal to the amount of cash received and the fair market
value of any Common Stock received. A Participant who is subject to Section
16(b) of the Act and who does not make a timely election under Section 83(b)
of the Code generally will recognize income attributable to any Common Stock
received in an amount equal to the fair market value of the Common Stock six
months after the amount of Common Stock is determined and becomes payable. In
any case, the Company is entitled to a Federal tax deduction in the year in
which the Participant recognizes income, and in an amount equal to the income
realized by the Participant, except to the extent limited by Section 162(m)
of the Code.
Section 162(m). Under Section 162(m) of the Code, enacted in August 1993,
the Company may be precluded from claiming a federal income tax deduction for
total remuneration in excess of $1,000,000 paid to the chief executive
officer or to any of the other four most highly compensated officers in any
one year beginning in 1994. Compensation paid pursuant to the Incentive Plan
will be taken into account in arriving at the $1,000,000 limitation. However,
it is unlikely that the total compensation of the officers subject to the
limitation will exceed $1,000,000 in any one year.
21
<PAGE>
PROPOSAL V
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has, subject to the ratification by the
stockholders, appointed Ernst & Young LLP, independent certified public
accountants, to audit the financial statements of the Company for the fiscal
year ending March 31, 1997. Ernst & Young LLP has audited the financial
statements of the Company for each of the six fiscal years ended March 31,
1996. Representatives of Ernst & Young LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions from
those attending the Meeting.
VOTE REQUIRED FOR APPROVAL
The proposal to ratify the appointment of Ernst & Young LLP requires the
affirmative vote of the majority of shares present in person or represented
by proxy at the Meeting for its approval. Abstentions may be specified on the
proposal and will be considered present at the Meeting, but will not be
counted as affirmative votes. Abstentions, therefore, will have the practical
effect of voting against the proposal because the affirmative vote of a
majority of the shares present at the Meeting is required to approve the
proposal. Broker non-votes are considered not present at the Meeting and,
therefore, will not be voted or have any effect on the proposal.
The Board of Directors unanimously recommends a vote FOR this proposal.
22
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation received by (i) Mark P.
Hershhorn, the current President and Chief Executive Officer of the Company,
(ii) Brian McAdams, the current Chairman of the Board of Directors who served
as Chief Executive Officer of the Company from September 1994 until April
1995, and (iii) the other four most highly compensated executive officers of
the Company during the fiscal year ended March 31, 1996 for each of the
fiscal years ended March 31, 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------------ -------------- -------------------------------
Other Securities All
Name and Fiscal Annual Underlying Other
Principal Position Year Salary Bonus(1) Compensation Options Compensation(2)
---------------------------------- -------- ---------- ---------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Hershhorn(3) 1996 $439,964 $390,940 0 0 $11,642
President and Chief 1995 $254,451 0 0 450,000 $4,626
Executive Officer 1994 $361,700 $6,731 0 0 $8,931
Brian McAdams(4) 1996 $287,496 $427,821 0 210,000 $11,376
Chairman of the Board and 1995 $74,748 0 0 90,000 $4,925
Chairman of Executive Committee
Constantinos I. Costalas(5) 1996 $212,500 $318,407 0 140,000 $8,730
Vice Chairman of the Board 1995 $60,000 0 0 0 $8,730
David J. Carman(6) 1996 $374,018 $331,930 87,386(7) 0 $53,058
Executive Vice President of 1995 $350,000 0 $132,495(8) 0 $30,873
the Company and President 1994 $324,801 0 $ 11,960(7) 300,000 $14,723
and Chief Executive Officer
of Quantum
James A. Jernigan 1996 $257,500 $263,108 0 0 $8,696
Executive Vice President of the 1995 $241,874 0 0 100,000 $480
Company and President and Chief 1994 $188,125 0 0 5,000 $2,390
Operating Officer - North American
Operations
John J. Sullivan 1996 $190,017 $132,772 0 0 $8,184
Senior Vice President, 1995 $185,640 0 0 50,000 $1,963
Administration, Planning and 1994 $180,133 0 0 0 $1,643
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 1996 consist of (i) the Company's contributions under
a defined contribution retirement arrangement for Mr. Carman: $51,458;
(ii) the Company's contribution under a 401(k) plan for: Mr. Hershhorn,
$6,672; Mr. McAdams, $6,451; Mr. Jernigan, $6,446; and Mr. Sullivan,
$6,454; and (iii) the Company's insurance premiums for supplemental life
insurance for: Mr. Costalas, $8,730; Mr. Hershhorn, $4,970; Mr. McAdams,
$4,925; Mr. Carman, $1,600; Mr. Jernigan, $2,250 and Mr. Sullivan,
$1,730. Amounts for fiscal 1995 consist of (i) the Company's
contributions under a defined contribution retirement arrangement for Mr.
Carman: $29,350, (ii) the Company's contribution under a 401(k) plan for:
Mr. Hershhorn, $96; Mr. Jernigan $480 and Mr. Sullivan, $423; and (iii)
the Company's insurance premiums for supplemental life insurance for: Mr.
Costalas, $8,730; Mr. Hershhorn, $4,530; Mr. McAdams, $4,925; Mr. Carman,
$1,523 and Mr. Sullivan, $1,546. Amounts for fiscal 1994 consist of (i)
the Company's insurance premium payments for supplemental life insurance
for: 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. Jernigan,
$450 and Mr. Sullivan $463, and (iii) the Company's contributions under a
defined contribution retirement arrangement for Mr. Carman, $13,200.
(3) Mr. Hershhorn was appointed Chief Executive Officer in April 1995.
(4) Mr. McAdams served as Chief Executive Officer from September 1994 until
April 1995.
(5) Mr. Costalas joined the Company in November 1994.
(6) Includes compensation paid to Mr. Carman by Quantum.
(7) Represents an allowance for overseas housing.
(8) Represents an allowance for overseas housing. A portion of such allowance
was paid retroactively to Mr. Carman.
23
<PAGE>
EMPLOYMENT AGREEMENTS
BRIAN MCADAMS
As of November 30, 1994, the Company entered into an employment agreement
with Mr. McAdams. In September 1995, the employment agreement was amended and
restated. Pursuant to the agreement, Mr. McAdams is employed as Chairman of
the Company for a two-year term, beginning on September 27, 1995, at an
annual minimum base salary of $300,000. 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 twelve (12)
months' written notice prior to the end of the then current two-year period.
Mr. McAdams is entitled to participate in the Company's Incentive Plan and
its other executive compensation programs. 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. Pursuant to this employment agreement,
Mr. McAdams was granted options to purchase up to 100,000 shares of Common
Stock at an exercise price of $12.99 per share which was equal to the market
price on the date of grant. One-third of such options will vest on each of
September 27, 1996, 1997 and 1998, provided Mr. McAdams is then an executive
officer of the Company. All of such options expire on September 27, 2005.
Upon the execution of this employment agreement, Mr. McAdams was also granted
options to purchase up to 110,000 shares of Common Stock at an exercise price
of $12.99 per share, which was equal to the market price on the date of
grant. Such grant is conditioned upon the approval by the Company's
stockholders of Proposal III. In the event such options are not approved by
the Company's stockholders, such options shall be deemed automatically to be
converted into five (5) year stock appreciation rights having an established
price of $12.99 per share and otherwise having terms and conditions
substantially similar to such options. One third of such options will vest on
each of September 27, 1996, 1997 and 1998. All of such options expire on
September 27, 2005.
The agreement provides that either party may terminate the agreement upon
sixty (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 and a lump-sum payment of the annual bonuses to which
Mr. McAdams would otherwise be entitled through the remainder of the term,
based on the last annual bonus received by Mr. McAdams. 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. If Mr. McAdams' employment is not terminated within
thirty (30) days after a Change of Control, his employment agreement shall
automatically be renewed for a two-year period from the date of the Change of
Control. 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 of 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.
DAVID J. CARMAN
In June 1993, the Company and its subsidiary, Quantum International Ltd.
("Quantum") entered into employment agreements with Mr. Carman. In July 1995,
such employment agreements were amended. 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. His initial
annual aggregate base salary pursuant to such employment agreements was
$350,000. His minimum annual aggregate base salary was increased, effective
June 1, 1995, to $370,000 per year. Following the initial four year term, the
term of the agreements will be automatically extended for successive one-year
periods unless terminated by either party upon sixty (60) days' written
notice prior to the end of any such year. Mr. Carman is also entitled to
participate in the Compa-
24
<PAGE>
ny's Incentive Plan and its other executive compensation programs. 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. Each of one-third of such
options vested in June 1994 and 1995 and one-third will vest in June 1996.
Mr. Carman exercised 100,000 of such options on January 24, 1996. The
remainder of such options expire on June 1, 1998.
Either party may terminate the agreement upon sixty (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 greater of two (2) years base salary and 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 agreement also provides that, 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. Carman will be
entitled to receive, within thirty (30) days of such Change of Control, a
lump sum payment in an amount equal to the greater of such years' base salary
or the base salary payable during the remainder of the term, a lump sum
payment of bonuses payable to Mr. Carman for the remainder of the term based
upon the last annual bonus received by Mr. Carman, continuation of all
benefit plans and allowances for the remainder of the term and immediate
vesting of all unvested stock options granted pursuant to the terms of the
employment agreements. 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 of an undertaking by or on behalf of Mr. Carman
to repay such amounts if it is ultimately determined that Mr. Carman is not
entitled to such indemnification. The Company and Mr. Carman have also agreed
that the Company will pay him a housing allowance through the balance of his
employment term (so long as he does not purchase a home) and the Company will
fund a pension for Mr. Carman equal to a percentage of his base salary. 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. In September 1995, the employment agreement was amended
and restated. Pursuant to the agreement, Mr. Costalas is employed as
Vice-Chairman of the Company for a two-year term beginning September 27,
1995, at an annual minimum base salary of $225,000. 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 twelve
(12) months' written notice prior to the end of the then current two-year
period. Mr. Costalas is entitled to participate in the Company's Incentive
Plan and its other executive compensation programs. 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. 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 $12.99 per salary which
was equal to the market price on the date of grant. One-third of such options
will vest on each of September 27, 1996, 1997 and 1998, provided Mr. Costalas
is then an executive officer of the Company. All of such options expire on
September 27, 2005. Upon the execution of this employment agreement, Mr.
Costalas was also granted options to purchase up to 80,000 shares of Common
Stock at an exercise price of $12.99 per share, which was equal to the market
price on the date of grant. Such grant is conditioned upon the approval by
the Company's stockholders of Proposal III. In the event such options
25
<PAGE>
are not approved by the Company's stockholders, such options shall be deemed
automatically to be converted into five (5) year cash only stock appreciation
rights having an established price of $12.99 per share and otherwise having
terms and conditions substantially similar to such options. One third of such
options will vest on each of September 27, 1996, 1997 and 1998. All of such
options expire on September 27, 2005.
The agreement provides that either party may terminate the agreement upon
sixty (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 employee 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 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 based on the last annual bonus received by Mr. Costalas. 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. If Mr. Costalas' employment is not
terminated within thirty (30) days after a Change of Control, his employment
agreement shall automatically be extended an additional two years from the
date of the Change of Control. 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 of an undertaking by
or on behalf of Mr. Costalas to repay such amounts if it 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 minimum 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 sixty (60) days' written notice prior
to the end of the then current year. Mr. Hershhorn is entitled to participate
in the Company's Incentive Plan and its other executive compensation
programs. 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. 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 were to 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. In September, 1995, the Board of Directors granted Mr. Hershhorn
the right to exercise all unvested option shares by December 31, 1995,
whereupon he exercised options to purchase 150,000 shares on October 11,
1995. In addition, Mr. Hershhorn exercised his options to purchase his
remaining 300,000 option shares on January 24, 1996.
The agreement provides that either party may terminate the agreement upon
sixty (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 based on the last annual bonus received by Mr. Hershhorn. 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 and Quantum to the maxi-
26
<PAGE>
mum 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 of an undertaking by or on behalf of Mr. Hershhorn to
repay such amounts if it 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.
JAMES A. JERNIGAN
In June 1994, the Company entered into an employment agreement with Mr.
Jernigan. Pursuant to the agreement Mr. Jernigan is currently employed as
Executive Vice President of the Company and President and Chief Operating
Officer of North American Operations for a three-year term at an annual
minimum base salary of $250,000. Mr. Jernigan is entitled to participate in
the Company's Incentive Plan and its other executive compensation programs.
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 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. One-third of such options vested on each of the date of the grant and
the one year anniversary of the date of the grant and one-third will vest on
the two-year anniversary of the date of the grant, provided Mr. Jernigan is
then an executive officer of the Company. All of such options expire on June
1, 2004.
Either party may terminate the agreement upon sixty (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 stock options granted to Mr.
Jernigan pursuant to the agreement. The Company has also agreed to indemnify
Mr. Jernigan in his capacity as an officer of the Company and pay attorneys'
fees, expenses and costs incurred by Mr. Jernigan in defending claims which
are subject to the Company's indemnification obligations, all 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.
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, Administration, Planning and Investor Relations 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 Incentive 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. In connection with the
agreement, Mr. Sullivan was granted options to purchase 50,000 shares of
Common Stock at an exercise price of $4.875 per share which was 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 anniversary of the date of the grant and
one-third will vest on the second anniversary of the date of grant, provided
Mr. Sullivan is then employed by the Company. All of such options expire on
June 1, 2004.
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
27
<PAGE>
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 and pay
attorneys' fees, expenses and costs incurred by Mr. Sullivan in defending
claims which are subject to the Company's indemnification obligations, all 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.
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, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants 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>
Mark P. Hershhorn ...... 0 0 -- -- 0 0
Brian McAdams .......... 210,000(2) 60.0% 12.99 9/27/05 $1,715,849 $4,348,272
Constantinos I. Costalas . 140,000(3) 40.0% 12.99 9/27/05 $1,143,899 $2,898,848
David J. Carman ........ 0 0 -- -- 0 0
James A. Jernigan ...... 0 0 -- -- 0 0
John J. Sullivan ....... 0 0 -- -- 0 0
</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 option holder 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 option holder's continued employment through the vesting
period. The actual value to be reached by the option holder may be
greater or less than the values estimated in this table.
(2) Includes 110,000 stock options, issued at an exercise price of $12.99 per
share, which were granted in connection with the execution of Mr.
McAdams' employment agreement with the Company in September 1995. In the
event such options are not approved by the Company's stockholders, such
options shall be deemed automatically to be converted into five (5) year
cash only stock appreciation rights having an established price of $12.99
per share and otherwise having terms and conditions substantially similar
to such options.
(3) Includes 80,000 stock options, issued at an exercise price of $12.99 per
share, which were granted in connection with the execution of Mr.
Costalas' employment agreement with the Company in September 1995. In the
event such options are not approved by the Company's stockholders, such
options shall be deemed automatically to be converted into five (5) year
cash only stock appreciation rights having an established price of $12.99
per share and otherwise having terms and conditions substantially similar
to such options.
28
<PAGE>
The following table sets forth certain information concerning the exercise
in the fiscal year ended March 31, 1996 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, 1996. Year-end values are based upon
the closing market price of a share of the Company's Common Stock on March
31, 1996 of $16.50.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options atIn-the-Money Options
FY-End(#) at FY-End ($)(1)
-------------------------------- --------------------------------
Shares
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
------------------------ ------------- ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Hershhorn ...... 450,000 $6,093,750 0 0 0 0
Brian McAdams .......... 115,000 $1,271,250 5,000 210,000 $ 28,750 $ 737,100
Constantinos I. Costalas . 60,000 $ 622,500 25,000 140,000 $ 143,750 $ 491,400
David J. Carman ........ 100,000 $1,262,500 100,000 100,000 $1,087,500 $1,087,500
James A. Jernigan ...... 75,000 $1,337,500 71,666 33,334 $ 827,492 $ 387,508
John J. Sullivan ....... 0 $ 0 33,334 16,666 $ 271,258 $ 193,742
</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
Each Director who is not an employee of the Company is paid an annual cash
fee of $25,000 a year for his or her service as a Director, and an additional
$1,000 in cash 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. A Director may also receive an additional $2,000 in cash
per 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.
In August 1995, the Company's stockholders approved the Company's
Director's Stock Grant Plan. The Director's Stock Grant Plan provides that
each Director who is serving as a Director at the commencement of each annual
meeting and who is not an employee of the Company be granted 5,000 shares of
Common Stock, provided the Director has been in office for at least ninety
(90) days. The stock will be valued at the closing price on the New York
Stock Exchange on the date of the grant. Each Director so granted shares of
the Company's Common Stock shall be required to hold the shares for at least
six months from the date the stock is granted. The Director's Stock Grant
Plan may not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act or the rules thereunder.
In the event that the Company's stockholders approve Proposal III
hereunder, awards of 50,000 options to purchase Common Stock will be made to
each Director who is not an employee of the Company. Such options will be
priced as of the date stockholder approval is received and will vest in five
years, subject, however, to acceleration of vesting upon the attainment of
certain market price or earnings-per-share goals. In the event stockholder
approval is received for Proposal III, the Board intends to discontinue
making grants of Common Stock pursuant to the Company's Director's Stock
Grant Plan after making final grants to the non-employee Directors.
During the fiscal year ended March 31, 1996, the Company granted 25,000
shares of Common Stock to non-employee Directors pursuant to the Director's
Stock Grant Plan valued at approximately $306,000, based on the fair market
value of such shares of Common Stock on the date of grant, and incurred other
expenses of approximately $227,000 for Directors' fees for all meetings.
29
<PAGE>
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 in 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 two 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.
This report covers the compensation of the Chief Executive Officer and the
Company's other executive officers for the year ended March 31, 1996, the
Company's most recently completed fiscal year, as required under applicable
rules of the Securities and Exchange Commission.
COMPENSATION PHILOSOPHY FOR 1996 AND THEREAFTER
Beginning in 1995, the Compensation Committee adopted the philosophy that
compensation should reflect individual performance and the value created for
stockholders while supporting the Company's strategic goals. This represented
a shift in emphasis from prior years, in which performance of the Company was
not necessarily linked to individual compensation. The compensation programs
in effect reflect the following philosophy:
o Compensation should be meaningfully related to the value created for
stockholders in share price and earnings-per-share.
o 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.
o Compensation programs should support the short-term and long-term
strategic objectives of the Company.
o 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.
Long-term Incentives. Prior to 1995, long-term incentives were provided
principally through grants of stock options. Stock options were granted with
exercise prices set at the prevailing market value as of the date of grants.
Therefore such options had no realizable value to the Executive unless the
Company's stock price increased. In 1995, the Company's Board of Directors
proposed and the Company's stockholders approved the Incentive Plan, as
described below. At the time of approval of the Incentive Plan, there were no
shares available for stock grants under the 1991 Stock Option Plan.
30
<PAGE>
After consultation with Ernst & Young LLP as to compensation matters, the
Compensation Committee concluded that grants of options to purchase Common
Stock pursuant to the 1991 Stock Option Plan, in conjunction with the
Incentive Plan, would be the most effective method for aligning compensation
of executives with the goals of the Company's stockholders. As a result of
such analysis, the Committee approved, subject to stockholder approval of
Proposal III, the grant of options to each of the named executive officers,
as well as to over seventy (70) members of the Company's management team, in
April 1996.
MANAGEMENT INCENTIVE PLAN
Effective April 1, 1995, the Incentive Plan replaced the Company's annual
bonus program. Under the Incentive Plan, eligible management personnel
receive corporate and individual performance units at the beginning of each
of the Company's fiscal years which provide incentive compensation based upon
predetermined corporate and individual goals.
The corporate goals, are fixed annually 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 depend upon the extent to which
the corporate goals for the fiscal year are achieved, and the maximum award
cannot be received unless each of the corporate goals have been met. The
value of individual units depend upon both corporate success and individual
performance. Units assigned 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 are 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
higher percentages of the incentive payment in stock.
The Board of Directors has presented to the Company's stockholders a proposal
to extend the Incentive Plan so that awards may be made thereunder subsequent to
March 31, 1997. Such proposal is more fully described under Proposal IV-Approval
of Amendments to the Company's Management Incentive Plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. McAdams served as Chief Executive Officer of the Company from
September 1994 until April 1995. During such time, Mr. McAdams devoted his
full time to resolving the problems of the Company and relinquished his
Director's fees. Mr. McAdams' compensation for this period and his
compensation pursuant to his employment contract was determined based upon 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, with the approval of the Board, formed the
office of the Chairman, and appointed Mr. Hershhorn as his successor 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 a minimum 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 Mr.
Hershhorn's predecessors 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) effecting organizational changes within the Company, (ii)
improving and expanding the Company's business in existing and new markets,
(iii) developing new business relationships and solidifying the Company's
existing relationships, and (iv) 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.
31
<PAGE>
THE COMPENSATION COMMITTEE OF NATIONAL MEDIA CORPORATION
Jon W. Yoskin II
Albert R. Dowden
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, 1991 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.
Total Return -- Data Summary
Cumulative Total Return
----------------------------------
3/91 3/92 3/93 3/94 3/95 3/96
National Media Corp NM 100 136 350 300 282 600
PEER GROUP PPEER1 100 125 156 243 125 126
RUSSELL 2000 IR20 100 121 139 154 163 211
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description concerning transactions which may not
otherwise be described herein by and between the Company and/or its
affiliates and other persons or entities affiliated with the Company or its
affiliates. The Company is of the view that each of such transactions was on
terms no less favorable to the Company than would otherwise have been
available to the Company in transactions with unaffiliated third parties, if
available at all.
VALUEVISION AGREEMENTS
In April 1994, the Company and its then Chairman, John J. Turchi, Jr.,
filed suit against ValueVision International, Inc. ("ValueVision") alleging
that ValueVision had wrongfully terminated its tender offer for shares of the
Company's Common Stock and the associated Agreement and Plan of Merger. The
Company's complaint sought damages in excess of $20 million. In May 1994,
ValueVision answered the complaint and asserted various counterclaims seeking
an unspecified amount of damages. Subsequent to the institution of the
ValueVision Litigation (as defined below), the Company undertook a
recapitalization and a management restructuring. The Company's new management
team initiated contact with ValueVision in order to discuss potential
settlement of the ValueVision Litigation and potential business
relationships. These discussions led to the negotiation and execution of a
Settlement Agreement, dated April 13, 1995, by and among the Company,
ValueVision, John J. Turchi, Jr., Robert A. Johander and Mark A. Payne (the
"Settlement Agreement") and the Telemarketing, Production and Post-Production
Agreement, dated April 13, 1995, by and between the Company and ValueVision
(the "Telemarketing Agreement"). The material terms of the Settlement
Agreement and the Telemarketing Agreement are set forth below.
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 Telemarketing 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 charged by providers of similar
services.
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.
VALUEVISION WARRANTS
As additional consideration for the services to be provided by ValueVision
under the Telemarketing Agreement, the Company granted to ValueVision, on the
effective date of the Telemarketing Agreement (the "Effective Date"),
warrants to purchase shares of the Company's Common Stock (the "ValueVision
Warrants"). 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
33
<PAGE>
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.
SETTLEMENT AGREEMENT
Pursuant to the Settlement Agreement, the parties agreed to dismiss with
prejudice all claims and counterclaims which they had against one another in
the civil action in the United States District Court of the Eastern District
of Pennsylvania entitled National Media Corporation, et al. v. ValueVision
International, Inc., et al., Civil Action No. 94-CV-2500 (the "ValueVision
Litigation").
JOINT VENTURE AGREEMENT
In connection with the Settlement Agreement, on April 13, 1995 the Company
also entered into a Joint Venture Agreement with ValueVision (the "Joint
Venture Agreement"). The Joint Venture Agreement provides that if at any time
prior to April 13, 1999 (i) ValueVision intends to conduct an infomercial
business in any market outside of the United States or Canada, or (ii) the
Company intends to conduct television home shopping in any market outside of
the United States or Canada, such party shall negotiate with the other party
to establish a joint venture to conduct such business.
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 Value Vision
Litigation, 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 in connection with such termination has paid Mergren the sum of
$219,738.12, constituting the Termination Fee, calculated as set forth in the
Lease.
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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
thirty-six (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 thirty-six (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 ninety (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 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 parties.
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.
The aggregate consideration payable to Mr. Turchi (or to Mergren
Associates) pursuant to the Separation and Consulting Agreements and the
Letter Agreement is $2,920,000 ($300,000 of which represents consulting
fees).
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 terminated before the Note has been paid in full, the
Note is due at such time (except as noted below and with respect to a note
made by a former executive of the Company in the original principal amount of
$1.364 million, which is due and payable on September 30, 1996, if not paid
earlier). During the fiscal year ended March 31, 1996, certain of the
Company's current and former executive officers had outstanding balances on
Notes issued to the Company.
John J. Turchi, Jr.
See "Separation Agreement -- John J. Turchi, Jr."
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David J. Carman
During fiscal 1996 the Company held one Note made by Mr. Carman in the
principal amount of $199,000 bearing interest at a rate of 3.79% per annum.
The Note was fully repaid by Mr. Carman prior to March 31, 1996.
Additionally, effective as of January 24, 1996, in connection with the
exercise of certain Common Stock purchase options by Mr. Carman, Mr. Carman
executed a Note in favor of the Company in the principal amount of $472,642
bearing interest at a rate of 5.50% per annum. The Note was fully repaid by
Mr. Carman on June 7, 1996 through the delivery to the Company of an
aggregate of 25,220 shares of Common Stock, valued at $19.125 per share, the
closing price of the Common Stock as reported on the New York Stock Exchange
on such date.
John J. Sullivan
During fiscal 1996, the Company held one Note made by Mr. Sullivan in the
principal amount of $150,000 bearing interest at a rate of 3.87% per annum.
The Note was fully repaid by Mr. Sullivan prior to March 31, 1996.
James A. Jernigan
During fiscal 1996, the Company held one Note made by Mr. Jernigan in the
principal amount of $70,000 bearing interest at a rate of 6.875% per annum,
which Note was secured by Mr. Jernigan granting a lien and security interest
in and to stock options previously granted to him to purchase 75,000 shares
of Common Stock. Mr. Jernigan fully repaid the Note prior to March 31, 1996.
HOLDER WARRANTS
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
(the "Notes") in the aggregate principal amount of $5,000,000 sold thereunder
was required in order to issue the ValueVision Warrants discussed above under
- -- "ValueVision Agreements." The Holders agreed to grant the required consent
if the Company agreed, subject to stockholder approval, to issue to the
Holders 500,000 warrants to purchase shares of the Company's Common Stock
(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
exercise of the Holder Warrants.
Following the Company's most recent meeting of stockholders, the Company
issued the Holder Warrants to the Holders. Safeguard, the beneficial owner of
approximately 12.3% of the Company's issued and outstanding shares of Common
Stock, was 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, were 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, was 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."
OTHER AGREEMENTS
McAdams, Richman & Ong, an advertising firm of which Mr. McAdams, the
Company's Chairman of the Board and Chairman of the Executive Committee, was
the President and CEO, and is currently a Director, performed certain
services for the Company in connection with the preparation of various
reports and other matters. McAdams, Richman & Ong was paid approximately
$258,000 for such services since the beginning of the Company's last fiscal
year.
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The Outsourcing Partnership, in which Mr. Lubert holds an interest,
performed internal audit services for the Company. Such services consisted of
analysis of the Company's management information systems and certain other
financial analysis. The Company paid The Outsourcing Partnership
approximately $78,000 since the beginning of the Company's last fiscal year.
INDEMNIFICATION PAYMENTS
The Company has made required indemnification payments on behalf of
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.
OTHER MATTERS
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTORS FOR THE COMPANY'S NEXT
ANNUAL MEETING
Any stockholder who intends to present a proposal for consideration at the
Company's next annual meeting of stockholders intended to occur on or about
July 25, 1997 must, on or before March 28, 1997, submit his proposal to the
Company 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 stockholder 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 March 28, 1997, 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.
SECTION 16(A) DISCLOSURE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors and persons who own more than ten percent of
the Company's Common Stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the New York and
Philadelphia Stock Exchanges. Officers, Directors and greater than
ten-percent owners are required by the Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on the Company's review of the copies of such forms received
by it, the Company believes that, during the fiscal year ended March 31,
1996, all filing requirements applicable to its officers, Directors and
greater than ten-percent owners were complied with except that one report
covering a transaction was filed late by Mr. Dowden.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Ernst & Young LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
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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 OR ORAL 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, ESQUIRE, VICE PRESIDENT (LEGAL) AND CORPORATE SECRETARY OF NATIONAL
MEDIA CORPORATION, 1700 WALNUT STREET, PHILADELPHIA, PENNSYLVANIA 19103,
TELEPHONE NUMBER (215) 772-5000.
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EXHIBIT A
NATIONAL MEDIA CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
--------------------------------------
(AS LAST AMENDED EFFECTIVE APRIL 25, 1996, PURSUANT TO STOCKHOLDER VOTE ON
JULY 25, 1996)
The purpose of the Amended and Restated Stock Option Plan (the "Plan") of
National Media Corporation (the "Company") is to promote the interests of the
Company by providing incentives to (i) designated officers and other
employees of the Company or a Subsidiary Corporation (as defined herein),
(ii) non-employee members of the Company's Board of Directors (the "Board")
and (iii) independent contractors and consultants (who may be individuals or
entities) who perform services for the Company, to enable the Company to
attract and retain them and to encourage them to acquire a proprietary
interest, or to increase their proprietary interest, in the Company. The
Company believes that the Plan will cause participants to contribute
materially to the growth of the Company, thereby benefiting the Company's
stockholders. For purposes of the Plan, the terms "Parent Corporation" and
"Subsidiary Corporation" shall have the meanings set forth in subsections (e)
and (f) of Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code").
1. ADMINISTRATION
(a) The Plan shall be administered and interpreted by a committee of the
Board (the "Committee") consisting of not less than two persons, all of whom
shall be "disinterested persons" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor
provisions and "outside directors" for purposes of Section 162(m) of the
Code. The Committee shall have the sole authority to determine (i) who is
eligible to receive Grants (as defined in Section 2 below) under the Plan,
(ii) the type, size and terms of each Grant under the Plan (subject to
Section 4 below), (iii) the time when each Grant will be made and the
duration of any exercise or restriction period; (iv) any restrictions on
resale applicable to the shares to be issued or transferred pursuant to the
Grant; and (v) any other matters arising under the Plan. The Committee may,
if it so desires, base any of the foregoing determinations upon the
recommendations of management of the Company. The Committee shall have full
power and authority to administer and interpret the Plan and to adopt or
amend such rules, regulations, agreements and instruments as it may deem
appropriate for the proper administration of the Plan. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding
on all persons having any interests in the Plan or in any Grants under the
Plan. No person acting under this subsection shall be held liable for any
action or determination made in good faith with respect to the Plan or any
Grant under the Plan.
(b) Each member of the Committee shall be indemnified and held harmless by
the Company against any cost or expense (including counsel fees) reasonably
incurred by him or her, or liability (including any sum paid in settlement of
a claim with the approval of the Company) arising out of any act or omission
to act in connection with the Plan, unless arising out of such member's own
fraud or bad faith, to the extent permitted by applicable law. Such
indemnification shall be in addition to any rights of indemnification the
members may have as directors or otherwise under the Certificate of
Incorporation or By-Laws of the Company, any agreement of stockholders or
disinterested directors or otherwise.
2. GRANTS
(a) Grants. Incentives under the Plan shall consist of Incentive Stock
Options (as defined in Section 5(b) below), Nonqualified Stock Options (as
defined in Section 5(b) below), Restricted Stock Grants (as defined in
Section 6 below) or SARs (as defined in Section 7 below) (hereinafter
collectively referred to as "Grants"). All Grants shall be subject to the
terms and conditions set forth herein and to such other terms and conditions
of any nature as long as they are not inconsistent with the Plan as the
Committee deems appropriate and specifies in writing to the participant (the
"Grant Letter"). The Committee shall approve the form and provisions of each
Grant Letter. Grants under any section of the Plan need not be uniform as
among the participants receiving the same type of Grant, and Grants under two
or more sections of the Plan may be combined in one Grant Letter.
(b) Option Grants to Non-Employee Directors. A member of the Board of the
Company who is not an employee of the Company or any of its Subsidiary
Corporations (a "Non-Employee Director) shall receive Nonqualified Stock
Options in accordance with this Section 2(b).
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(1) Each Non-Employee Director who has such status on the date of the
annual meeting of stockholders at which the Plan is approved by stockholders
and each other Non-Employee Director who is elected by the stockholders of
the Company for the first time at an annual meeting of the stockholders on a
date after the Plan is approved by stockholders shall be entitled to a
one-time grant of a Nonqualified Stock Option to purchase 50,000 shares of
Common Stock (subject to adjustment as provided in Section 3(b) of this Plan)
on the date of the appropriate annual meeting of stockholders.
(2) Options granted under this Section 2(b) shall have a per share
exercise price equal to the fair market value of a share of Common Stock on
the date of grant (as determined in accordance with Section 5(b)(2), and such
option shall become exercisable with respect to the shares of Common Stock
underlying the option, subject to vesting commencing on the date of grant and
ending on the date or dates determined by the Committee. Notwithstanding any
other provision of the Plan, this Section 2(b) may not be amended more than
once every six months, except for amendments necessary to conform the Plan to
changes in the provisions of or the regulations relating to the Code or the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(3) To the extent that administrative determinations are required under
this Section 2(b), such determinations shall be made by the members of the
Board who are not eligible to receive grants under this Section 2(b), but in
no event shall such determinations affect the eligibility of optionees, the
determination of the exercise price, the timing of the grants or the number
of shares subject to options hereunder.
(4) Except as otherwise provided in this Section 2(b), the Nonqualified
Stock Options to Non-Employee Directors shall be subject to the provisions of
this Plan applicable to Nonqualified Stock Options to other persons.
3. SHARES SUBJECT TO THE PLAN
(a) The aggregate number of shares of the Common Stock, par value $.01
("Common Stock"), of the Company that may be issued or transferred under the
Plan is 6,565,000, subject to adjustment pursuant to Section 3(b) below. Such
shares may be authorized but unissued shares or reacquired shares. If and to
the extent that options granted under the Plan terminate, expire or are
canceled without having been exercised (including shares canceled as part of
an exchange of Grants), or if any shares of restricted stock are forfeited,
the shares subject to such Grant shall again be available for subsequent
Grants under the Plan.
(b) If any change is made to the Common Stock (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, combination of shares, or exchange of shares or any other change
in capital structure made without receipt of consideration), then unless such
event or change results in the termination of all outstanding Grants under
the Plan, the Committee shall preserve the value of the outstanding Grants by
adjusting the maximum number and class of shares issuable under the Plan to
reflect the effect of such event or change in the Company's capital
structure, and by making appropriate adjustments to the number and class of
shares, the exercise price of each outstanding option and otherwise, except
that any fractional shares resulting from such adjustments shall be
eliminated by rounding any portion of a share equal to .500 or greater up,
and any portion of a share equal to less than .500 down, in each case to the
nearest whole number.
4. ELIGIBILITY FOR PARTICIPATION
Officers and other employees of the Company or a Subsidiary Corporation,
non-employee members of the Board, and independent contractors and
consultants who perform services for the Company shall be eligible to
participate in the Plan (hereinafter referred to individually as an "Eligible
Participant", and collectively as the "Eligible Participants"). Only Eligible
Participants who are officers or other employees of the Company or a
Subsidiary Corporation shall be eligible to receive Incentive Stock Options.
All Eligible Participants shall be eligible to receive Nonqualified Stock
Options, Restricted Stock Grants and SARs. The Committee shall select from
among the Eligible Participants those who will receive Grants (the
"Grantees") and shall determine the number of shares of Common Stock subject
to each Grant. The maximum number of shares of Common Stock for which any
Grantee may be granted options under this Plan in any one taxable year of the
Company shall not exceed 1,000,000 shares. The Committee may, if it so
desires, base any such selections or determinations upon the recommendations
of management of the Company. Nothing contained in the Plan shall be
construed to limit in any manner whatsoever the right of the Company to grant
rights or options to acquire Common Stock or awards of Common Stock otherwise
than pursuant to the Plan.
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5. STOCK OPTIONS
(a) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be subject to each
option.
(b) Type of Option and Option Price.
(1) The Committee may grant options qualifying as incentive stock
options within the meaning of Section 422 of the Code ("Incentive Stock
Options") and other stock options ("Nonqualified Stock Options") in
accordance with the terms and conditions set forth herein, or may grant
any combination of Incentive Stock Options and Nonqualified Stock Options
(hereinafter referred to collectively as "Stock Options"). The option
price per share of an Incentive Stock Option shall be the fair market
value (as defined herein) of a share of Common Stock on the date of grant.
If the Grantee of an Incentive Stock Option is the owner of Common Stock
(as determined under section 424(d) of the Code) who possesses more than
10% of the total combined voting power of all classes of stock of the
Company or a Parent Corporation or Subsidiary Corporation, the option
price per share in the case of an Incentive Stock Option shall not be less
than 110% of the fair market value of a share of Common Stock on the date
of grant.
(2) For all valuation purposes under the Plan, the fair market value of
a share of Common Stock shall be determined in accordance with the
following provisions.
(A) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter
market (but not on the Nasdaq National Market segment of The Nasdaq
Stock Market), the fair market value shall be the mean between the last
reported bid and asked prices of one share of Common Stock on the date
in question in the over-the-counter market, as such prices are reported
by the National Association of Securities Dealers through its Nasdaq
system or any successor system. If there are no reported bid and asked
prices on the date in questions, then the mean between the last
reported bid and asked prices on the next preceding date for which such
quotations exist shall be determinative of fair market value. If the
Common Stock is traded over-the-counter on the Nasdaq National Market
segment of The Nasdaq Stock Market, the fair market value shall be the
closing selling price of one share of Common Stock on the date in
question as such price is reported by the National Association of
Securities Dealers through such system or any successor system. If
there is no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the next preceding
date for which such quotation exists shall be determinative of fair
market value.
(B) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price of one share of Common Stock on the date in
question on the stock exchange determined by the Committee to be the
primary market for the Common Stock, as such prices are officially
quoted on such exchange. If there is no reported closing selling price
of Common Stock on such exchange on the date in question, then the fair
market value shall be the closing selling price on the next preceding
date for which such quotation exists.
(C) If the Common Stock is at the time neither listed nor admitted
to trading on any stock exchange nor traded in the over-the-counter
market (or, if the Committee determines that the value as determined
pursuant to Section 5(b)(2)(A) or (B) above does not reflect fair
market value), then the Committee shall determine fair market value
after taking into account such factors as it deems appropriate.
(c) Exercise Period. The Committee shall determine the option exercise
period of each Stock Option. The exercise period shall not exceed ten years
from the date of grant. Notwithstanding any determinations by the Committee
regarding the exercise period of any Stock Option, all outstanding Stock
Options shall become immediately exercisable upon a Change of Control of the
Company (as defined in Section 9 below).
(d) Vesting of Options and Restrictions on Shares. The vesting period for
Stock Options shall commence on the date of grant and shall end on the date
or dates, or upon the happening of the events or events, as determined by the
Committee, that shall be specified in the Grant Letter. The Committee may
impose upon the shares of Common Stock issuable upon the exercise of a Stock
Option such restrictions as it deems appropriate and
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specifies in the Grant Letter. During any period in which such restrictions
apply, the provisions of Section 6(d) below shall be applicable to such
shares, and the Committee, in such circumstances as it deems equitable, may
determine that all such restrictions shall lapse. Notwithstanding any other
provision of the Plan, all outstanding Stock Options shall become immediately
exercisable upon a Change of Control of the Company (as defined in Section 9
below).
(e) Manner of Exercise. A Grantee may exercise a Stock Option by
delivering a duly completed notice of exercise to the Committee, together
with payment of the option price. Such notice may include instructions
authorizing the Company to deliver the certificates representing the shares
of Common Stock issuable upon the exercise of such Stock Option to any
designated registered broker or dealer ("Designated Broker"). Such
instructions shall designate the account into which the shares are to be
deposited. The Grantee may tender such notice of exercise, which has been
properly executed by the Grantee, and the aforementioned delivery
instructions to any Designated Broker.
(f) Termination of Employment, Disability or Death.
(1) If a Grantee ceases to be an Eligible Participant for any reason
(other than, in the case of an individual, the death of such individual)
any Stock Option which is otherwise exercisable by the Grantee shall
terminate unless exercised within three months after the date on which the
Grantee ceases to be an Eligible Participant (or within such other period
of time, which may be longer or shorter than three months, as may be
specified in the Grant Letter), but in any event no later than the date of
expiration of the option exercise period, except that in the case of an
individual Grantee who is disabled within the meaning of section 105(d)(4)
of the Code, such period shall be one year rather than three months
(except as otherwise provided in the Grant Letter).
(2) Except to the extent more liberal terms are set forth in a Grant
Letter, in the event of the death of an individual Grantee while he or she
is an Eligible Participant or within not more than three months after the
date on which the Grantee ceases to be an Eligible Participant (or within
such other period of time, which may be longer or shorter than three
months, as may be specified in the Grant Letter), any Stock Option which
was otherwise exercisable by the Grantee at the date of death may be
exercised by the Grantee's personal representative at any time prior to
the expiration of one year from the date of death, but in any event no
later than the date of expiration of the option exercise period.
(g) Satisfaction of Option Price. The Grantee shall pay the option price
in full at the time of exercise in cash, or, with the consent of the
Committee in its sole discretion, by delivering shares of Common Stock
already owned by the Grantee and having a fair market value on the date of
exercise equal to the option price or a combination of cash and shares of
Common Stock; provided, however, that in lieu of payment in full in such
manner, a Grantee may with the approval of the Board in its sole discretion,
be entitled to pay for the shares purchased upon exercise of the Stock Option
by payment to the Company in cash or by certified or bank check a sum equal
at least to the par value of the Common Stock, with the remainder of the
purchase price satisfied by the issuance of an interest bearing promissory
note or notes, in a form and having terms, including rate of interest,
satisfactory to the Board in its sole discretion. The Grantee shall also pay
the amount of withholding tax due, if any, at the time of exercise. Shares of
Common Stock shall not be issued or transferred upon any purported exercise
of a Stock Option until the option price and the withholding obligation are
fully paid.
(h) Limits on Incentive Stock Options. Each Grant of an Incentive Stock
Option shall provide that:
(1) the Stock Option is not transferable by the Grantee, except, in the
case of an individual Grantee, by will or the laws of descent and
distribution;
(2) the Stock Option is exercisable only by the Grantee, except as
otherwise provided herein or in the Grant Letter in the event of the death
of an individual Grantee;
(3) the aggregate fair market value of the Common Stock on the date of
the Grant with respect to which Incentive Stock Options are exercisable
for the first time by a Grantee during any calendar year under the Plan
and under any other stock option plan of the Company shall not exceed
$100,000; and
(4) unless the Grantee could otherwise transfer Common Stock issued
pursuant to the Stock Option without incurring liability under Section
16(b) of the Exchange Act, at least six months must elapse from the date
of acquisition of the Stock Option until the date of disposition of the
Common Stock issued upon exercise thereof.
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6. RESTRICTED STOCK GRANTS
The Committee may issue shares of Common Stock to an Eligible Participant
pursuant to an incentive or long range compensation plan, program or contract
approved by the Committee (a "Restricted Stock Grant"). The following
provisions are applicable to Restricted Stock Grants:
(a) General Requirements. Shares of Common Stock issued pursuant to
Restricted Stock Grants will be issued in consideration for cash or services
rendered having a value, as determined by the Board, at least equal to the
par value thereof. All conditions and restrictions imposed under each
Restricted Stock Grant, and the period of years during which the Restricted
Stock Grant will remain subject to such restrictions, shall be set forth in
the Grant Letter and designated therein as the "Restriction Period." All
restrictions imposed under any Restricted Stock Grant shall lapse on such
date or dates as the Committee may approve until the restrictions have lapsed
as to 100% of the shares, except that upon a Change of Control of the
Company, all restrictions on the transfer of the shares which have not been
forfeited prior to such date shall immediately lapse. In addition, the
Committee, in circumstances that it deems equitable, may determine as to any
or all Restricted Stock Grants, that all the restrictions shall lapse,
notwithstanding any Restriction Period.
(b) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be granted in each
Restricted Stock Grant.
(c) Requirement of Relationship with Company. If the Grantee's
relationship with the Company (as an employee, non-employee member of the
Board, independent contractor or consultant, as the case may be) terminates
during the period designated in the Grant Letter as the Restriction Period,
the Restricted Stock Grant shall terminate as to all shares covered by the
Grant as to which restrictions on transfer have not lapsed, and such shares
shall be immediately returned to the Company. The Committee may, in its sole
discretion, provide for complete or partial exceptions to the provisions of
this Section 6(c).
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Common Stock to which such Restriction
Period applies except to a Successor Grantee pursuant to Section 8 below.
Each certificate representing a share of Common Stock issued or transferred
under a Restricted Stock Grant shall contain a legend giving appropriate
notice of the restrictions in the Grant. The Grantee shall be entitled to
have the legend removed from the stock certificate or certificates
representing any such shares as to which all restrictions have lapsed.
7. STOCK APPRECIATION RIGHTS
(a) General Provisions. The Committee may grant stock appreciation rights
("SARs") to any Grantee in tandem with any Stock Option, for all or a portion
of the applicable Stock Option, either at the time the Stock Option is
granted or at any time thereafter while the Stock Option remains outstanding.
(b) Number of SARs. The number of SARs granted to a Grantee which shall be
exercisable during any given period of time shall not exceed the number of
shares of Common Stock which the Grantee may purchase upon the exercise of
the related Stock Option during such period. Upon the exercise of a Stock
Option, the SARs relating to the Common Stock covered by the Stock Option
shall terminate. Upon the exercise of any SARs, the related Stock Option
shall terminate to the extent of an equal number of shares of Common Stock.
(c) Settlement Amount. Upon a Grantee's exercise of some or all of the
Grantee's SARs, the Grantee shall receive in settlement of such SARs an
amount equal to the stock appreciation (as defined herein) for the number of
SARs exercised, payable in cash, Common Stock or a combination thereof. The
"stock appreciation" for an SAR is the difference between the option price
specified for the related Stock Option and the fair market value of the
underlying Common Stock on the date of exercise of the SAR.
(d) Settlement Election. Upon the exercise of any SARs, the Grantee shall
have the right to elect the portions of the settlement amount that the
Grantee desires to receive in cash and shares of Common Stock, respectively.
For purposes of calculating the number of shares of Common Stock to be
received upon settlement, shares of Common Stock shall be valued at their
fair market value on the date of exercise of the SARs. Notwithstand
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ing the foregoing, the Committee shall have the right (i) to disapprove a
Grantee's election to receive such settlement in whole or in part in cash,
and to require that shares of Common Stock be delivered in lieu of cash or
(ii) to require that settlement be made in cash if the Company does not or
may not in the future have sufficient shares authorized for issuance. If
shares of Common Stock are to be received upon exercise of an SAR, cash shall
be delivered in lieu of any fractional share.
(e) Exercise. An SAR is exercisable only during the period when the Stock
Option to which it is related is also exercisable. No SAR may be exercised,
in whole or in part, by any person who is subject to Section 16 of the
Exchange Act except in accordance with Rule 16b-3(e) under the Exchange Act.
8. TRANSFERABILITY OF OPTIONS AND GRANTS
Only a Grantee (or, in the case of an individual Grantee, his or her
authorized legal representative) may exercise rights under a Grant. No
individual Grantee may transfer those rights except by will or by the laws of
descent and distribution or, if permitted under Rule 16b-3 of the Exchange
Act and by the Committee in its sole discretion, pursuant to a qualified
domestic relations order as defined under the Code or Title I of ERISA or the
rules thereunder. Upon the death of an individual Grantee, the personal
representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee
shall furnish proof satisfactory to the Company of such person's right to
receive the Grant under the Grantee's will or under the applicable laws of
descent and distribution.
9. CHANGE OF CONTROL OF THE COMPANY
As used herein, a "Change of Control" shall be deemed to have taken place
if: (i) any Person (including any individual, firm, corporation, partnership
or other entity except the Company or any employee benefit plan of the
Company or of any Affiliate or Associate (each as defined in Rule 12b-2 under
the Exchange Act), any Person or entity organized, appointed or established
by the Company for or pursuant to the terms of any such employee benefit
plan), together with all Affiliates and Associates of such Person, shall
become the beneficial owner in the aggregate of 20% or more of the Common
Stock of the Company then outstanding, except that no "Change of Control"
shall be deemed to occur during any period in which any such Person, and its
Affiliates and Associates, are bound by the terms of a standstill agreement
under which such parties have agreed not to acquire more than 30% of the
Common Stock of the Company then outstanding or to solicit proxies; or (ii)
during any 24 month period, individuals who at the beginning of such period
constituted the Board cease for any reason to constitute a majority thereof,
unless the election, or the nomination for election by the Company's
stockholders, of at least 75% of the directors who were not directors at the
beginning of such period was approved by a vote of at least 75% of the
directors in office at the time of such election or nomination who were
directors at the beginning of such period.
10. CERTAIN CORPORATE CHANGES
(a) Sale or Exchange of Assets, Dissolution or Liquidation or Merger or
Consolidation Where the Company Does Not Survive. If all or substantially all
of the assets of the Company are to be sold or exchanged, the Company is to
be dissolved or liquidated, or the Company is a party to a merger or
consolidation with another corporation in which the Company will not be the
surviving corporation, then, at least ten days prior to the effective date of
such event, the Company shall give each Grantee with any outstanding Grants
written notice of such event. Each such Grantee shall thereupon have the
right to exercise in full any installments of such Grants not previously
exercised (whether or not the right to exercise such installments has accrued
pursuant to such Grants), within ten days after such written notice is sent
by the Company. Any installments of such Grants not so exercised shall
thereafter lapse and be of no further force or effect.
(b) Merger or Consolidation Where the Company Survives. If the Company is
a party to a merger or consolidation in which the Company will be the
surviving corporation, then the Committee may, in its sole discretion, elect
to give each Grantee with any outstanding Grants written notice of such
event. If such notice is given, each such Grantee shall thereupon have the
right to exercise in full any installments of such Grants not previ
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ously exercised (whether or not the right to exercise such installments has
accrued pursuant to such Grants), within ten days after such written notice
is sent by the Company. Any installments of such Grants not so exercised
shall thereafter lapse and be of no further force or effect.
11. STOCKHOLDER APPROVAL
This Plan is subject to and no Options shall be exercisable hereunder
until after approval by holders of a majority of the shares of the stock of
the Company present or represented by a proxy in a separate vote at a duly
held meeting of the stockholders of the Company within twelve months after
the date of the adoption of the Plan by the Board. If the Plan, as herein
amended, is not so approved by stockholders, the Plan as previously approved
shall continue in effect.
12. APPROVAL BY OUTSIDE DIRECTORS
This Plan is subject to and no Options shall be exercisable hereunder
until after approval by a compensation committee (the "Compensation
Committee") of the Board of Directors which is comprised solely of two or
more directors ("Outside Directors") who are (i) not presently employees of
the Company (or related entities); (ii) not former employees still receiving
compensation for prior services (other than benefits under a tax-qualified
pension plan); (iii) not officers of the Company (or related entities) at any
time; and (iv) not currently receiving compensation for personal services in
any capacity other than as a director.
13. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time,
subject to the following limitations:
(1) the approval by the stockholders of the Company and approval by the
Compensation Committee shall be required in respect of any amendment that
(A) materially increases the benefits accruing to Eligible Participants
under the Plan, (B) increases the aggregate number of shares of Common
Stock that may be issued or transferred under the Plan (other than by
operation of Section 3(b) above), (C) increases the maximum number of
shares of Common Stock for which any Grantee may be granted options under
this Plan; (D) materially modifies the requirements as to eligibility for
participation in the Plan; or (E) modifies the provisions for determining
the fair market value of a share of Common Stock; and
(2) the Board shall not amend the Plan if such amendment would cause
the Plan, any Grant or the exercise of any right under the Plan to fail to
comply with the requirements of Rule 16b-3 under the Exchange Act, or if
such amendment would cause the Plan or the Grant or exercise of an
Incentive Stock Option to fail to comply with the requirements of Section
422 of the Code including, without limitation, a reduction of the option
price set forth in Section 5(b) above or an extension of the period during
which an Incentive Stock Option may be exercised as set forth in Section
5(c) above.
(b) Termination of Plan. The Plan shall terminate on the tenth anniversary
of its effective date (as set forth in Section 20 below) unless earlier
terminated by the Board or unless extended by the Board with the approval of
the stockholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not result in
the termination or amendment of the Grant unless the Grantee consents or
unless the Committee acts under Section 21(b) below. The termination of the
Plan shall not impair the power and authority of the Committee with respect
to an outstanding Grant. Whether or not the Plan has terminated, an
outstanding Grant may be terminated or amended under Section 21(b) below or
may be amended by agreement of the Company and the Grantee which is
consistent with the Plan.
(d) Employees in Foreign Countries. The Board shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Subsidiaries may operate to assure the viability of
benefits from Grants made to participants employed in such countries and to
meet the objectives of the Plan.
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14. FUNDING OF THE PLAN
The Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Grants under the Plan. In no event shall interest
be paid or accrued on any Grant, including unpaid installments of Grants.
15. RIGHTS OF ELIGIBLE PARTICIPANTS
Nothing in the Plan shall entitle any Eligible Participant or other person
to any claim or right to any Grant under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Eligible Participant
or Grantee any rights to be retained by the Company in any capacity, whether
as an employee, non- employee member of the Board, independent contractor,
consultant or otherwise.
16. WITHHOLDING OF TAXES
The Company shall have the right to deduct from all Grants paid in cash
any federal, state or local taxes required by law to be withheld with respect
to such Grants paid in cash. In the case of Grants paid in Common Stock, the
Company shall have the right to require the Grantee to pay to the Company the
amount of any taxes which the Company is required to withhold in respect of
such Grants or to take whatever action it deems necessary to protect the
interests of the Company in respect of such tax liabilities, including,
without limitation, withholding a portion of the shares of Common Stock
otherwise deliverable pursuant to the Plan. The Company's obligation to issue
or transfer shares of Common Stock upon the exercise of a Stock Option or SAR
or the acceptance of a Restricted Stock Grant shall be conditioned upon the
Grantee's compliance with the requirements of this section to the
satisfaction of the Committee.
17. AGREEMENTS WITH GRANTEES
Each Grant made under the Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve.
18. REQUIREMENTS FOR ISSUANCE OF SHARES
No Common Stock shall be issued or transferred under the Plan unless and
until all applicable legal requirements have been complied with to the
satisfaction of the Committee. The Committee shall have the right to
condition any Stock Option, Restricted Stock Grant or SAR on the Grantee's
undertaking in writing to comply with such restrictions on any subsequent
disposition of the shares of Common Stock issued or transferred thereunder as
the Committee shall deem necessary or advisable as a result of any applicable
law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
19. HEADINGS
The section headings of the Plan are for reference only. In the event of a
conflict between a section heading and the content of a section of the Plan,
the content of the section shall control.
20. EFFECTIVE DATES
(a) Effective Date of the Plan. The Plan as described herein shall be
effective as of April 25, 1996, subject to the approval of the Company's
stockholders within 12 months after such effective date.
(b) Effectiveness of Section 16 Provisions. The provisions of the Plan
that refer to, or are applicable to persons subject to, Section 16 of the
Exchange Act shall be effective, if at all, upon the registration of the
Common Stock under the Exchange Act, and shall remain in effect thereafter
for so long as the Common Stock is registered under the Exchange Act.
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21. MISCELLANEOUS
(a) Substitute Grants. The Committee may make a Grant to an employee, a
non-employee director, or an independent contractor or consultant of another
corporation, if such person shall become an Eligible Participant by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or a Subsidiary
Corporation and such other corporation. Any such Grant shall be made in
substitution for a stock option or restricted stock grant granted by the
other corporation ("Substituted Stock Incentives"), but the terms and
conditions of the substitute Grant may vary from the terms and conditions
required by the Plan and from those of the Substituted Stock Incentives. The
Committee shall prescribe the provisions of the substitute Grants.
(b) Compliance with Law. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and required approvals by any
governmental or regulatory agencies. With respect to persons subject to
Section 16 of the Exchange Act, it is the intent of the Company that the Plan
and all transactions under the Plan shall comply with all applicable
conditions of Rule 16b-3 or any successor provisions under the Exchange Act.
The Committee may revoke any Grant if it is contrary to law or modify any
Grant to bring it into compliance with any valid and mandatory government
regulations. The Committee may also adopt rules regarding the withholding of
taxes on payments to Grantees. The Committee may, in its sole discretion,
agree to limit its authority under this section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a stockholder with respect to any shares of Common Stock covered by
a Grant until the shares are issued or transferred to the Grantee or
Successor Grantee on the stock transfer records of the Company.
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EXHIBIT B
NATIONAL MEDIA CORPORATION
MANAGEMENT INCENTIVE PLAN
(ORIGINALLY EFFECTIVE APRIL 1, 1995)
(AS AMENDED AND RESTATED, EFFECTIVE APRIL 1, 1996,
PURSUANT TO SHAREHOLDER VOTE ON JULY 25, 1996)
SECTION 1. PURPOSE
The purpose of the National Media Corporation Management Incentive Plan is
to promote the interests of the Company by relating the compensation of
certain key employees to the Company's performance, and to reward these key
employees by affording them the opportunity to earn incentive compensation
under the Plan based upon the attainment of specified Corporate and
Individual Goals established by the Company.
SECTION 2. DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meanings specified below, unless the context clearly indicates to the
contrary.
(a) "Award" shall mean an incentive award subject to the requirements of
Section 6 granted in accordance with the terms of the Plan.
(b) "Award Agreement" shall mean the document provided to a Participant to
evidence an Award under the Plan.
(c) "Beneficiary" shall mean the individual designated by the Participant
as his beneficiary under the Company's group life insurance plan.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Chairman" shall mean the Chairman of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Compensation Committee of the Board or such
other committee as may be designated by the Board to administer the Plan.
(h) "Company" shall mean National Media Corporation.
(i) "Corporate Goals" shall mean the goals related to the performance of
the Company during a Plan Year, which shall be established by the Committee
after consultation with Company management and ratified by the Board prior to
the beginning of the Plan Year. Only goals that will enhance shareholder
value shall be Corporate Goals under the Plan.
(j) "Corporate Unit" shall mean a Company performance unit.
(k) "Corporate Unit Percentage" shall mean a percentage determined
annually by the Committee based on the Company's performance pursuant to
Section 6(c)(1).
(l) "Corporate Unit Value" shall mean the annual value assigned to
Corporate Units in accordance with Section 6(c)(1).
(m) "Disability" shall mean the incapacity of a Participant to perform his
usual and customary duties as an employee by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long continued or indefinite duration. The permanence and
degree of such impairment shall be supported by medical evidence satisfactory
to the Committee.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" shall mean: (i) if the principal market for the
Stock is a registered securities exchange, the mean between the highest and
lowest quoted selling prices of the shares on the applicable date,
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or, if there are no such reported sales on that date, then on the last
previous date (within a reasonable period prior to the applicable date) on
which there were such reported sales; or (ii) such other method of
determining fair market value as shall be authorized by the Code, or the
rules or regulations thereunder, and adopted by the Committee.
(p) "Individual Goals" shall mean goals related to the performance of the
Participant during the Plan Year covered by an Award. Such goals will be
established by the Committee after consultation with Company management. The
Board shall ratify the goals of Participants whose annual base pay is
$100,000 or more, and those of certain other Participants as it deems
necessary.
(q) "Individual Unit" shall mean an individual performance unit.
(r) "Individual Unit Percentage" shall mean a percentage determined
annually by the Committee based on the Company's performance, and other
factors, pursuant to Section 6(c)(2).
(s) "Individual Unit Value" shall mean the annual value assigned to
Individual Units in accordance with Section 6(c)(2).
(t) "Participant" shall mean individuals employed or otherwise retained as
independent contractors by the Company and/or its Subsidiaries in the
following positions:
Chairman
Vice-Chairman
President
Executive Vice-President
Senior Vice-President
General Manager
Vice-President
Director
Manager
The Committee shall also have the discretion to name other salaried
employees (or consultants) as Participants for one or more Plan Years as it
may see fit.
(u) "Plan" shall mean the NATIONAL MEDIA CORPORATION MANAGEMENT INCENTIVE
PLAN.
(v) "Plan Year" shall mean the twelve month period ending each March 31.
(w) "Stock" shall mean the common stock, $.01 par value, of the Company.
(x) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, other
than the last corporation in the unbroken chain, then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
As used in the Plan, the masculine pronoun shall include the feminine and
neuter, and the singular shall include the plural, where the context so
indicates.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall consist of
not less than two persons, all of whom shall be "disinterested persons" as
defined under Rule 16b-3 under the Exchange Act.
The Committee shall have full authority to construe and interpret the
Plan, and, subject to the provisions of the Plan: (i) to establish, amend and
rescind appropriate rules and regulations relating to the Plan; (ii) to grant
Awards and set the terms and conditions thereof; (iii) to waive any
supplemental terms and conditions imposed upon Awards by the Committee; (iv)
to make recommendations to the Board concerning the Plan; and (v) to take
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all such steps and make all such determinations in connection with the Plan
and the Awards granted hereunder as it may deem necessary or advisable. All
such rules, regulations, determinations and interpretations of the Committee
shall be final, conclusive and binding on all persons.
Each member of the Committee shall be indemnified and held harmless by the
Company against any cost or expense (including counsel fees) reasonably
incurred by him or her, or liability (including any sum paid in settlement of
a claim with the approval of the Company) arising out of any act or omission
to act in connection with the Plan, unless arising out of such member's own
fraud or bad faith, to the extent permitted by applicable law. Such
indemnification shall be in addition to any rights of indemnification the
members may have as directors or otherwise under the Certificate of
Incorporation or By- Laws of the Company, and any agreement of stockholders
or disinterested directors or otherwise.
SECTION 4. STOCK SUBJECT TO THE PLAN
The number of shares of Stock authorized for issuance under the Plan shall
be 750,000 shares, subject to adjustment as provided herein. Such shares may
be authorized and unissued shares or treasury shares, as the Board shall
determine.
SECTION 5. ELIGIBILITY TO RECEIVE AWARDS
Subject to the eligibility requirements set forth herein or established by
the Committee, all Participants shall be eligible to receive an Award under
the Plan for each Plan Year the Plan is in effect.
SECTION 6. AWARDS
Awards shall entitle Participants to compensation based upon the
achievement of pre-established Corporate and Individual Goals during a Plan
Year. For each Plan Year for which a Participant receives an Award, he shall
receive an Award Agreement which shall include, or incorporate by reference,
the terms of the Award and the Plan and such other terms and conditions, not
inconsistent with the Plan, as the Committee shall determine from time to
time. If a Participant receives an Award for one Plan Year and is
subsequently granted an Award for the following Plan Year, the Committee may,
in lieu of issuing a new Award Agreement, amend or renew the Participant's
Award Agreement for the previous Plan Year. Awards shall be subject to the
following terms and conditions:
(a) Goals for Plan Year. Each Award Agreement shall state the applicable
Corporate and Individual Goals and the Plan Year covered by the Award. The
Goals will be subject to changes made by the Committee and ratified by the
Board during the Plan Year. Any such change shall be reflected in a revised
Award Agreement and shall be communicated to the Participant.
(b) Number of Units. Each Award Agreement shall state the number of
Corporate and Individual Units granted under the Award. The Committee will
determine the number of Corporate and Individual Units for each Award based
on the Participant's position and responsibilities, but in no event shall the
total number of Corporate and Individual Units granted under an Award exceed
300.
(c) Amount Earned Under Award. As promptly as practicable following the
conclusion of each Plan Year, the Committee will calculate the amounts earned
under an Award as follows:
(1) Corporate Units. At the end of the Plan Year, after consultation
with Company management, the Committee will determine, and the Board will
ratify, a Corporate Unit Percentage for the Plan Year, ranging from 0% to
150%, depending on the extent to which the Corporate Goals for the Plan
Year were achieved. If all of the Corporate Goals for the Plan Year are
met, the Corporate Unit Percentage for the Plan Year shall be at least
100%. If all of the Corporate Goals for the Plan Year are not met, the
Corporate Unit Percentage shall be less than 100%. The Corporate Unit
Value for the Plan Year shall be $1,000 multiplied by the Corporate Unit
Percentage.
The amount earned by a Participant based on the Company's performance
for a Plan Year shall be the number of Corporate Units granted under his
Award multiplied by the Corporate Unit Value for the Plan Year.
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(2) Individual Units. At the end of the Plan Year, after consultation
with Company management, the Committee will determine, and the Board will
ratify, an Individual Unit Percentage for the Plan Year, ranging from 0%
to 150%. In arriving at the Individual Unit Percentage, the Committee will
consider the extent to which the Corporate Goals for the Plan Year were
achieved, and the contributions of the Plan Participants in achieving
these Goals. The Individual Unit Value for the Plan Year shall be $1,000
multiplied by the Individual Unit Percentage.
Company management will recommend to the Committee a Performance Factor
for each Participant granted an Award for the Plan Year. The Performance
Factor shall range between 0 and 1.5, depending on the extent to which the
Participant achieved his Individual Goals for the Plan Year. After
consideration of the recommendations of Company management, the Committee
will determine the Performance Factors for such Participants. The Board
shall ratify the Performance Factor of Participants whose annual base pay
is $100,000 or more, and those of certain other Participants as it deems
necessary.
The amount earned by a Participant based on his individual performance
for a Plan Year shall be the number of Individual Units granted under his
Award, multiplied by the Individual Unit Value for the Plan Year,
multiplied by the Participant's Performance Factor for the Plan Year.
(3) Employment Requirement. Notwithstanding the foregoing, except as
provided in the following sentence and in Section 6(e) and Section 13
below, a Participant will not be entitled to any amounts under an Award if
he is not on the payroll of, or under an active independent consultant
contract with, the Company or a Subsidiary as of the day on which Awards
for the Plan Year are actually delivered to Participants ("Distribution
Date"). The Committee may, in its sole discretion depending upon the facts
and circumstances, waive the requirement of this paragraph (3) and approve
a pro rata payment to a Participant who is not on the payroll of, or under
an active independent consultant contract with, the Company or a
Subsidiary as of such date.
(d) Payment of Amounts Earned Under Award. Subject to Section 6(g) below,
payment of any amounts earned under an Award shall be made as promptly as
practicable following the end of the Plan Year to the Participant, or to his
Beneficiary if the Participant is dead or incapacitated at the time of
payment. Payments shall be made as follows:
(1) Chairman, Vice-Chairman, President and Executive Vice Presidents.
The Chairman, Vice- Chairman, President and Executive Vice-Presidents of
the Company shall receive 50% of their payment in cash and 50% in Stock.
However, each year such Participants may elect, under terms and conditions
prescribed by the Committee, to receive, instead of 50% in Stock, 60% to
100% (in 10% increments) of their payment in Stock, with the remainder
payable in cash.
(2) Other Participants. Participants other than those described in
Section 6(d)(1) above, shall receive 90% of their payment in cash and 10%
in Stock. However, each year such Participants may elect, under terms and
conditions prescribed by the Committee, to receive, instead of 10% in
Stock, 20% to 100% (in 10% increments) of their payment in Stock, with the
remainder payable in cash.
(e) Death or Disability. In the event that a Participant ceases to be
employed, or actively retained, by the Company and its Subsidiaries prior to
the Distribution Date for a Plan Year to which an Award relates by reason of
death or Disability, any amounts earned under such an outstanding Award shall
be payable in cash within 60 days of the date of death or Disability to the
Participant or his Beneficiary. The Committee shall determine the amount, if
any, earned under the Award based on the Participant's performance and the
Company's performance during the Plan Year prior to the date of death or
Disability.
(f) New Participants. Any individual who becomes a Participant after the
start of a Plan Year shall receive an Award for such Plan Year and an Award
Agreement as soon as practicable. Such an Award Agreement shall specify that,
in addition to the other conditions of this Section 6, the amount earned
under such an Award will be equal to an amount calculated under the terms of
Section 6(c), multiplied by the fraction of the Plan Year the individual was
a Participant. For purposes of calculating this fraction, the numerator shall
be the number of months (not including the month the individual became a
Participant) worked by the individual as a Participant in the Plan Year, and
the denominator shall be twelve.
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(g) Forfeiture. No amount earned under an Award shall be paid if the
Committee determines that the Participant has violated Company policies, that
the Participant's performance was documented as unsatisfactory, or that
similar circumstances exist. The Board shall ratify any decision by the
Committee resulting in a forfeiture under this Section 6(g).
SECTION 7. GENERAL RESTRICTIONS
Each Award shall be subject to the requirement that if at any time the
Committee shall determine that the listing, registration or qualification of
the Plan or the Stock subject or related thereto upon any securities exchange
or under the applicable laws of any jurisdiction; the consent or approval of
any court or government regulatory body; or an agreement with a Participant
with respect to the disposition of shares of Stock is necessary or desirable
as a condition of, or in connection with, the granting of such Award or the
issuance of Stock thereunder, such Award shall not be consummated, in whole
or in part, unless such listing, registration, qualification, consent,
approval or agreement, as the case may be, shall have been effective or
obtained on conditions acceptable to the Committee. Each Participant or his
legal representative or Beneficiary also may be required to give satisfactory
assurance that shares of Stock received under an Award are being acquired for
investment and not with a view to distribution, and certificates representing
such shares may be legended accordingly.
SECTION 8. RIGHTS OF A SHAREHOLDER
The grant of any Award shall not entitle the holder thereof to any rights
as a shareholder of the Company with respect to any shares of Stock which may
be issuable pursuant thereto until certificates representing such Stock
actually are issued pursuant thereto.
SECTION 9. RIGHT TO TERMINATE EMPLOYMENT
Nothing in the Plan or in any Award Agreement under the Plan shall confer
upon any Participant the right to continue in the employ of the Company or
any Subsidiary or affect any right which the Company or any Subsidiary may
have to terminate the employment of such Participant, whether or not such
termination might result in a partial or total termination of the
Participant's outstanding Award.
SECTION 10. WITHHOLDING AND USE OF STOCK TO SATISFY TAX OBLIGATIONS
The obligations of the Company to make payment and/or deliver shares of
Stock pursuant to Awards shall be subject to applicable tax withholding and
similar requirements.
If such payment or delivery is subject to the withholding requirements of
applicable federal, state or local income tax, employment tax or similar tax
laws, the Committee, in its discretion (and subject to such withholding rules
as may be adopted by the Committee), may permit Participants to satisfy such
withholding taxes, in whole or in part, by electing to have the Company
withhold shares of Stock issuable pursuant to the Award or by returning to
the Company other shares of Stock. Such shares shall be valued, for this
purpose, at their Fair Market Value on the date the amount of tax required to
be withheld is determined (the "Determination Date"). In the event shares of
Stock acquired under the exercise of incentive stock options are returned to
the Company to satisfy such withholding requirement, such shares of Stock
must have been held by the Participant for a period of not less than the
holding period described in section 422(a)(1) of the Code on the
Determination Date.
SECTION 11. NON-ASSIGNABILITY
No Award under the Plan shall be assignable or transferable by the
Participant except by will or by the laws of descent and distribution.
SECTION 12. NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan (including, without
limitation, the form, amount, timing and possible acceleration of such
Awards; and the establishment or waiver of the terms and provisions of such
Awards and the Award Agreements evidencing such Awards) need not be uniform
and may be made selectively among Participants, whether or not such
Participants are similarly situated. Determinations as to Individuals Goals
and Performance Factors need not be uniform and similarly situated
Participants need not be treated the same.
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SECTION 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGERS AND OTHER
EVENTS
Notwithstanding any other provision of the Plan, the number of shares of
Stock authorized for issuance under the Plan, and the terms and conditions of
Awards under the Plan, shall be subject to adjustment as set forth in this
Section 13.
(a) Changes in Capitalization. In the event there is a stock dividend,
stock split, share combination, or similar change in the capitalization of
the Company: (i) the number of shares of Stock which may be issued under the
Plan, as provided in Section 4 hereof, shall be appropriately adjusted, as
determined by the Committee (which determination shall be subject to
ratification by the Board), to reflect such change; and (ii) the Committee,
in its discretion, may make adjustments to previously established Corporate
or Individual Goals or other terms and conditions of outstanding Awards,
including, without limitation, adjustment of underlying measures of financial
performance by the Company, its Subsidiaries, divisions or other business
units, appropriate to reflect such change.
(b) Material Extraordinary, Unusual or Non-Recurring Events. In the event
of any material extraordinary, unusual or non-recurring event, including,
without limitation, material changes in applicable laws or regulations,
accounting practices, accounting credits or charges, or mergers, acquisitions
or divestitures not adjusted pursuant to other subsections of this Section
13, the Committee, in its discretion, may make appropriate adjustments to
outstanding Awards, such as those described in Section 13(a)(ii) above.
(c) Liquidations and Corporate Transactions. In the event the Company is
liquidated or a corporate transaction (as that term is described in section
424(a) of the Code and the regulations issued thereunder, including, for
example, a merger, consolidation, acquisition of property or stock,
separation or reorganization) occurs, each outstanding Award shall become
payable, to the extent hereinafter provided, on such date (the "Accelerated
Date"), not later than the effective date of the liquidation or corporate
transaction, as the Committee shall determine. The amount payable pursuant to
Awards shall be determined based upon the results of completed months in the
Plan Year up to the Accelerated Date.
Notwithstanding any other provision of the Plan, in the event of any
actual or proposed liquidation or corporate transaction, or in the event the
Committee determines that a change in control of the Company has occurred or
is likely to occur, the Committee, in its discretion, may: (i) determine any
or all outstanding Awards to have been earned in full or in part, even if the
Goals for such Awards have not been met; and (ii) accelerate the date of
payment of any such Awards.
SECTION 14. AMENDMENT AND TERMINATION
Pursuant to a written resolution, the Board may terminate or amend the
Plan at any time, except that, without shareholder approval, no such
amendment may: (a) increase the maximum number of shares of Stock which may
be issued under the Plan (other than as permitted under Section 13 hereof);
or (b) materially modify the requirements for eligibility for participation
in the Plan.
SECTION 15. EFFECT ON OTHER PLANS
Except as provided in Section 3, nothing herein shall preclude a
Participant from participating in any other benefit or incentive plans or
programs of the Company or Subsidiaries for which such Participant may be
eligible. All Participants are eligible to participate in the same benefit
plans as other employees of the Company and the Subsidiaries.
SECTION 16. GOVERNING LAW
The Plan shall be governed by, and interpreted in accordance with, the
laws of the Commonwealth of Pennsylvania, to the extent not superseded by
Federal law.
SECTION 17. EFFECTIVE DATE
The Plan was originally effective April 1, 1995. The Plan, as amended and
restated herein, shall become effective April 1, 1996, subject to shareholder
approval.
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