<PAGE>
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:
/X/ Preliminary Proxy Statement
/ / 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):
/X/ $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:
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4) Proposed maximum aggregate value of transaction:
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/ / 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
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2) Form, Schedule or Registration Statement No.
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3) Filing Party:
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4) Date Filed:
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Set forth the amount on which the filing fee is calculated and state how it was
determined.
<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
1995 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,
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 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") increasing
the number of shares of Common Stock available for awards
under the 1991 Option Plan and making certain other revisions
thereto;
IV. To consider and vote upon a proposal to extend the Company's
1995 Management 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")
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")
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 GREEN STRIPE for use by the holders of the
Series B Preferred Stock are enclosed herewith. Properly executed proxies will
be voted in accordance with the instructions therein. In the absence of
instruction, the shares of Common Stock 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 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") increasing the number of shares of Common Stock available for awards
under the 1991 Option Plan and making certain other revisions thereto; (iii) FOR
the proposal to extend the Company's 1995 Management Incentive Plan and 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 fiscal 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.
-1-
<PAGE>
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. The holders of the Series B
Preferred Stock shall not be entitled to vote for the election of Directors.
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.
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.
-3-
<PAGE>
Constantinos I. Costalas.................... Constantinos I. Costalas, age 60, has been the Vice Chairman of
the Company since September 1994 and the Senior Financial
Officer since April 1995. Until February 11, 1994, he served as
Chairman of the Board, President and Chief Executive Officer
of Glendale Bancorporation and as Chairman of the Board,
President and Chief Executive Officer of Glendale National
Bank of New Jersey, which positions were held since 1985 and
1976, respectively. 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 (as
Chairman), the Business Committee for the Arts, the Center for
International Leadership, the Madison Square Boys & Girls
Club, the United Way of New York City, the Cortland Trust, the
American Scandinavian Foundation (as Chairman), the
American Intercultural Student Exchange, the American Institute
for Public Service and the Swedish American Chamber of
Commerce. Mr. Dowden has served as a Director of the
Company since August 1995.
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., Crusader Savings and Loan
Association, and The Franklin Institute and is the Chairman of
the Pennsylvania Chapter of the American Electronics
Association. Prior to such time, Mr. Emmi held various
positions with General Electric Information Services Company
(GEISCO), a unit of General Electric Company and other
subsidiaries of General Electric Company, most recently as
Senior Vice President, Marketing and U.S. Sales of GEISCO,
from February 1982 to May 1985. 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 is also a Director of Integra
LifeSciences Corporation. Mr. Goldstein specializes in federal
taxation, securities law and general corporate law. From 1978
until 1982, he was Vice Chairman of the Tax Section and
Chairman of the Finance Committee of the law firm of Morgan,
Lewis & Bockius. He previously held the position of Deputy
Assistant Secretary for Tax Policy with the United States
Department of Treasury. Mr. Goldstein has served as a Director
of the Company since April 1996.
Frederick S. Hammer(1)(3)................... Frederick S. Hammer, age 59, has been Vice Chairman of
Tri-Arc Financial Services, Inc., a provider of specialized
-4-
<PAGE>
insurance products to the financial services industry, since June
1994. From February 1993 to June 1994, Mr. Hammer was
Chairman of Mutual of America Capital Management
Corporation. From 1989 until 1993, Mr. Hammer was President
of the SEI Asset Management Group in Wayne, Pennsylvania.
From 1989 until 1991, Mr. Hammer was Mazur Fellow at the
Wharton School of the University of Pennsylvania. Mr.
Hammer presently serves on the Board of Directors of Alco
Standard Corporation and was previously a director of Meritor
Savings Bank. Mr. Hammer has served as a Director of the
Company since October 1994.
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. From December 1991 to April
1993 Mr. Hershhorn was President and Chief Operating Officer
of the Company. From April 1990 until December 1991,
Mr. Hershhorn was Senior Vice President of Food Operations
and Joint Ventures for Nutri/System, Inc. Prior to assuming the
position with Nutri/System, Inc., he acted as a consultant for J.
Crew, Inc. from January through April 1990. From 1985 to
January 1990, Mr. Hershhorn was an executive with The
Franklin Mint in Philadelphia, Pennsylvania, serving as Vice
President and Chief Financial Officer, as well as a Director. 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.
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 and was 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., an advertising and marketing
company. He is also a Director of Crusader Savings and Loan
Association and served on the Board of the Council of the Better
Business Bureau and on the Marketing and Advertising Review
Committee until November 1995. He also serves on the Board
of Directors of the PenJerDel Council and is Chairman of its
Telecommunications Committee. 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.
-5-
<PAGE>
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.
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
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.
-6-
<PAGE>
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 May 31, 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.
Number of Issued and Outstanding
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>
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 outstanding as of May 31, 1996 as determined
in accordance with Rule 13d-3.
(7) Based on 20,857,008 shares 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, but does not include options
to purchase Common Stock or warrants exercisable into Common Stock
which do not have voting rights.
(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.
-7-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information at May 31, 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 Issued and Outstanding
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........... 1,411,400 0 1,411,400 7.2% 6.8%
& 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,.... 2,250,000 50,000 2,750,000 12.3% 2.4%
Inc.(9)(10)
(b) Technology Leaders........ 850,000 25,000 1,100,000 5.3% 1.2%
II Management
L.P.(9)(11)............
(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.
-8-
<PAGE>
(5) Based on 19,612,008 shares outstanding as of May 31, 1996 as determined
in accordance with Rule 13d-3.
(6) Based on 20,857,008 shares 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, but does not include options
to purchase Common Stock and warrants exercisable into Common Stock
which do not have voting rights.
(7) Based on information contained in a Schedule 13G dated February 20,
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.
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 Collectible 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, serves as Executive Vice President of the
Company and President and Chief Operating Officer of the Company's North
American Operations. Mr. Jernigan was promoted to the position of President of
the Company's North American Operations in January 1996. Mr. Jernigan served as
Executive Vice President of the Company and Chief Operating Officer for North
American Operations since September 1994. From June 1994 until September 1994,
he served as Senior Vice President and Chief Operating Officer of the Company.
From January 1992 until June 1994, Mr. Jernigan was Vice President,
Manufacturing, Sourcing and Distribution of the Company. He was Vice President
of Sourcing and International Operations at The Franklin Mint from December 1987
to January 1992.
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 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.
-9-
<PAGE>
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. In
1985, he found California Cosmetics, one of the first direct response companies
to use a telemarketing strategy in conjunction with print and television
advertising. In addition to doing creative work for the company, Mr. Levey set
up the fulfillment center, Pacific Order Processing, and the advertisement and
buying operations. From 1975 to 1985, Mr. Levey was employed by Management
Recruiters (now SearchWest). His responsibilities included training
telemarketing personnel.
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 reelect each officer.
-10-
<PAGE>
PROPOSAL II
APPROVAL OF AN 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
On May 20, 1996, the Board of Directors unanimously adopted a
resolution approving a proposal to amend 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 used, 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 ___ shares of Common Stock were reserved or allocated for issuance
by the Company (i) upon exercise of options granted 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
transactions and other business completed by the Company; (iii) upon conversion
of issued and outstanding Series B Preferred Stock; (iv) pursuant to its 1995
Management Incentive Plan and Director's Stock Grant Plan; and (v) in connection
with the proposed transactions described below.
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 only ____
shares of Common Stock which remain unreserved for issuance. 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.
-11-
<PAGE>
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.
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
increasing the number of shares covered by the 1991 Stock Option Plan, as
heretofore amended (the "1991 Option Plan"), by 3,000,000 shares and making
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, 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 has 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.
-12-
<PAGE>
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 comparative
companies. Ernst & Young LLP further reported that executive stock ownership at
comparative 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 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 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.
-13-
<PAGE>
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>
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 50,000 (4)
Relations
Executive Group 1,445,500 (4)
Non-Executive Director Group 300,000 (4)
Non-Executive Officer Employee Group 744,500 (4)
</TABLE>
<PAGE>
(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.
(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.
-14-
<PAGE>
Vote Required for Approval
The proposal to approve the issuance and grants of up to 3,000,000
additional shares of Common Stock under the 1991 Option Plan and the other
revisions to the 1991 Option Plan described above require 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.
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 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 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 terms of the
current 1991 Option Plan, options to purchase 3,565,000 shares of Common Stock
are available for issuance. Approval of the proposed 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 are "disinterested
persons" under Rule 16b-3 of the Securities Exchange Act of 1934 (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 in
effect, each Director who was not an employee of the Company (a "Non-Employee
Director") at the time he or she is first elected by the stockholders was
entitled to receive the 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) was entitled to receive, on the date of the annual meeting of
stockholders at which the 1991 Option Plan was approved, the grant of options to
purchase 5,000 shares. Such options were immediately exercisable on the date of
grant. The 1991 Option Plan, if approved, provides that each Non-Employee
Director, will receive, upon the receipt of stockholder approval, the grant of
options to purchase 50,000 shares and each Non-Employee Director elected
-15-
<PAGE>
to the Board of Directors by stockholders for the first time after the Meeting
will be eligible to receive a grant of options 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. The 1991 Option Plan shall be 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.
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.
PROPOSAL IV
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1995 MANAGEMENT INCENTIVE PLAN
The Proposal
At the Meeting, there will be presented to the stockholders a proposal
to extend the Company's 1995 Management Incentive Plan indefinitely and to make
certain revisions related to the eligibility for participation and form of
payment provisions contained therein.
In order to attract and retain qualified management to serve the
Company, the Board of Directors has utilized the 1995 Management Incentive Plan
(as proposed to be amended, the "Incentive Plan"). All capitalized terms
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<PAGE>
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 an 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. This revision 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.
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 the 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 the termination date of 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.
Description of the 1995 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 Amendment to the 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 and to 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. Prior to the beginning of 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
for that Plan Year. 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 Board will determine,
after consultation with Company management and the Committee, 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 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.
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<PAGE>
Individual Units. At the end of a Plan Year, the Board will determine,
after consultation with Company management and the Committee, 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. If all the Corporate
Goals for a Plan Year are met, the Individual Unit Percentage shall be at least
100%. 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 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 Award Agreement, multiplied by the Corporate
Unit Value for the Plan Year. The amount earned by the Participant based on his
individual performance for a Plan Year shall be the number of Individual Units
granted under his 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.
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.
End of Year Employment Requirement. Subject to the discretion of the
Committee, a Participant will not be entitled to any amounts under an Award if
he is not on the payroll of the Company or a Subsidiary as of the last day of
the Plan Year covered by such Award, 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.
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<PAGE>
Participants. Individuals employed 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.
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 is 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.
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.
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<PAGE>
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.
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<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> <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.
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<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 prime 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 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. 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.
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<PAGE>
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 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.
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<PAGE>
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.
<PAGE>
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 maximum extent permitted by law and to make advances to Mr. Hershhorn for
his expenses (including attorneys' fees) incurred in defending any civil,
criminal, administrative or investigative action, suit or proceeding upon
receipt by the Company 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.
-24-
<PAGE>
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 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.
-25-
<PAGE>
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 Gran 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>
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
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.
-26-
<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 $16.50.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
FY-End(#) at FY-End ($)(1)
Shares ------------------------- --------------------------
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
fee of $25,000 a year for his or her service as a Director, and an additional
$1,000 per calendar quarter for each committee on which he or she serves,
subject to an adjustment based on attendance at committee meetings during each
quarter. A Director may also receive an additional $2,000 a year for service as
a committee chairman, over and above the payment for committee service.
Directors who are employees of the Company do not receive additional
compensation for their service on the Board or on any committee thereof.
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.
-27-
<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.
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.
-28-
<PAGE>
1995 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 an Amendment to the Company's 1995 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.
The Compensation Committee of National Media Corporation
Jon W. Yoskin II
Albert R. Dowden
-29-
<PAGE>
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.
Cumulative Total Return
-----------------------
3/91 3/92 3/93 3/94 3/95 3/96
National Media Corporation 100 136 350 300 282 600
Peer Group 100 125 156 243 125 126
Russell 2000 100 121 139 154 163 211
-30-
<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 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.
-31-
<PAGE>
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.
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
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<PAGE>
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). Certain of the Company's
current and former executive officers have outstanding balances on Notes issued
to the Company.
John J. Turchi, Jr.
See "Separation Agreement - John J. Turchi, Jr."
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, on
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. The Note bears interest at a rate
of 5.50% per annum and is payable on the earlier of (i) the sale of any of the
shares of Common Stock acquired upon such option exercise, or (ii) the
termination of Mr. Carman's employment with the Company or any subsidiary of the
Company.
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.
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<PAGE>
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-ValueVision Warrants." 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 exercisability 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.
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.
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<PAGE>
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.
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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<PAGE>
NATIONAL MEDIA CORPORATION
COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
I hereby constitute and appoint Marshall A. Fleisher, Esq. and James M.
Gallagher, and each of them acting individually, my true and lawful agents and
proxies, with full power of substitution in each, to vote all shares held of
record by me at the Annual Meeting of Stockholders of National Media Corporation
to be held on July 25, 1996 and any adjournments or postponements thereof. I
direct said proxies to vote as specified on the reverse side.
UNLESS OTHERWISE SPECIFIED, ALL SHARES WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES LISTED AND FOR EACH OF THE PROPOSALS TO BE ACTED UPON AT THE MEETING.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OF
POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY.
[Reverse Side]
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors
To withhold authority to vote for any
FOR all nominees listed (except WITHHOLD individual nominee, strike a line
through as indicated to the contrary below) AUTHORITY the nominee's name listed
below:
/ / / /
David J. Carman Frederick S. Hammer
Constantinos I. Costalas Mark P. Hershhorn
Albert R. Dowden Brian McAdams
Michael J. Emmi Jon W. Yoskin II
William M. Goldstein, Esq. Ira M. Lubert
2. Proposal II to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal III to approve an amendment 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.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE>
4. Proposal IV to approve the extension of the Company's 1995 Management
Incentive Plan and certain other revisions thereto.
FOR AGAINST ABSTAIN
/ / / / / /
5. Proposal 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 ended March 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
THE UNDERSIGNED HEREBY REVOKES ALL
PREVIOUS PROXIES FOR THE MEETING
AND ACKNOWLEDGES RECEIPT OF THE
NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT OF NATIONAL MEDIA
CORPORATION
Date:________________________, 1996
-----------------------------------
-----------------------------------
By:________________________________
NOTE: Please sign this proxy exactly
as name(s) appear in address. When
signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please add your title
as such.
<PAGE>
NATIONAL MEDIA CORPORATION
SERIES B PREFERRED STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
I hereby constitute and appoint Marshall A. Fleisher, Esq. and James M.
Gallagher, and each of them acting individually, my true and lawful agents and
proxies, with full power of substitution in each, to vote all shares held of
record by me at the Annual Meeting of Stockholders of National Media Corporation
to be held on July 25, 1996 and any adjournments or postponements thereof. I
direct said proxies to vote as specified on the reverse side.
UNLESS OTHERWISE SPECIFIED, ALL SHARES WILL BE VOTED FOR THE ELECTION OF THE
NOMINEE LISTED AND FOR EACH OF THE PROPOSALS TO BE ACTED UPON AT THE MEETING.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OF
POSTPONEMENT THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY.
[Reverse Side]
<TABLE>
<CAPTION>
<S> <C> <C>
1. Proposal II to approve an amendment to the Company's Certificate of Incorporation increasing the number
of authorized shares of Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
2. Proposal III to approve a proposal to amend 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.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal IV to approve the extension of the Company's 1995 Management Incentive Plan and certain other
revisions thereto.
FOR AGAINST ABSTAIN
/ / / / / /
4. Proposal 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 ended March 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
<PAGE>
THE UNDERSIGNED HEREBY REVOKES ALL
PREVIOUS PROXIES FOR THE MEETING
AND ACKNOWLEDGES RECEIPT OF THE
NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT OF NATIONAL MEDIA
CORPORATION
Date:________________________, 1996
-----------------------------------
-----------------------------------
By:________________________________
NOTE: Please sign this proxy exactly
as name(s) appear in address. When
signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please add your title as such.
<PAGE>
EXHIBIT A
NATIONAL MEDIA CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
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.
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<PAGE>
(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).
(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 cancelled 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
-2-
<PAGE>
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.
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.
-3-
<PAGE>
(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 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.
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(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.
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.
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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. Notwithstanding 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.
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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 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.
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
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(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.
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.
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<PAGE>
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 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.
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
AMENDMENT TO THE
NATIONAL MEDIA CORPORATION
1995 MANAGEMENT INCENTIVE PLAN
WHEREAS, National Media Corporation (the "Company") established the
National Media Corporation 1995 Management Incentive Plan (the "Plan"),
effective April 1, 1995; and
WHEREAS, the Company desires to amend the Plan to extend the duration of
the Plan and to make certain other changes;
NOW, THEREFORE, the Company hereby amends the Plan, effective April 1,
1996, as follows:
1. Section 2(t) shall be amended to include General Managers as Plan
Participants and to give the Committee discretion to name additional
Participants. Therefore, ss.2(t) is hereby amended in its entirety to read as
follows:
"Participant" shall mean individuals employed by the Company and 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
as Participants for one or more Plan Years.
2. Sections 6(d)(1) and (2) shall be amended to provide that Participants
may elect to receive up to 100% of an Award payment in Company stock. Therefore,
ss.ss.6(d)(1) and (2) are hereby amended in their entirety to read 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
ss.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.
3. Section 14 shall be amended to permit the Plan to continue
indefinitely. Therefore, the final sentence of ss.14, providing that no Awards
shall be made under the Plan for Plan Years beginning after March 31, 1997, is
hereby deleted.
4. Except as expressly provided herein, the provisions of the Plan
continue in full force and effect.
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