0000950116-95-000371.txt : 19950815 0000950116-95-000371.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950116-95-000371 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL MEDIA CORP CENTRAL INDEX KEY: 0000070412 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 132658741 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06715 FILM NUMBER: 95562577 BUSINESS ADDRESS: STREET 1: 1700 WALNUT ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2157725000 MAIL ADDRESS: STREET 1: 1700 WALNUT STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL PARAGON CORP DATE OF NAME CHANGE: 19870827 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended June 30, 1995 OR | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________to__________. Commission File Number 1-6715 NATIONAL MEDIA CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-2658741 -------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1700 Walnut Street, Philadelphia, PA 19103 ------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 772-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No | | There were 14,552,998 issued and outstanding shares of the registrant's common stock, par value $.01 per share, at July 31, 1995. In addition there were 686,710 shares of treasury stock as of such date. NATIONAL MEDIA CORPORATION AND SUBSIDIARIES INDEX
Page ---- Facing Sheet......................................................................................................1 Index.............................................................................................................2 Part I. Financial Information Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets at June 30, 1995 and March 31, 1995..............................................................3 Condensed Consolidated Statements of Operations Three months ended June 30, 1995 and 1994....................................................4 Condensed Consolidated Statements of Cash Flows Three months ended June 30, 1995 and 1994.....................................................5 Notes to Condensed Consolidated Financial Statements...........................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................................................................9 Part II. Other Information Item 1. Legal Proceedings..............................................................................12 Item 6. Exhibits and Reports on Form 8-K ..............................................................12 Signatures.......................................................................................................13
-2- Part 1. Financial Information NATIONAL MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except number of shares and per share amounts)
June 30, March 31, 1995 1995 ---------- ---------- (Unaudited) (Note) Current assets: Cash and cash equivalents .................................................................... $ 17,517 $ 13,467 Accounts receivable (net) .................................................................... 17,862 14,344 Inventories .................................................................................. 17,357 15,387 Prepaid media ................................................................................ 2,192 2,660 Prepaid show production ...................................................................... 3,409 3,463 Deferred costs ............................................................................... 704 1,820 Prepaid expenses and other assets ............................................................ 1,093 1,228 Deferred income taxes ........................................................................ 1,782 1,782 -------- -------- Total current assets ....................................................................... 61,916 54,151 Property and equipment (net) ................................................................... 4,490 4,413 Excess of cost over net assets of acquired businesses and other intangible assets (net) ................................................................ 4,573 4,659 Other assets ................................................................................... 908 920 -------- -------- Total assets ............................................................................... $ 71,887 $ 64,143 ======== ======== Current liabilities: Accounts payable ............................................................................. $ 10,903 $ 12,093 Accrued expenses ............................................................................. 23,472 17,786 Deferred revenue ............................................................................. 265 279 Income taxes payable ......................................................................... 300 300 Deferred income taxes ........................................................................ 1,936 1,428 Current portion of long-term debt and capital lease obligations .................................................................................. 79 184 -------- -------- Total current liabilities .................................................................. 36,955 32,070 Long-term debt and capital lease obligations.................................................... 3,681 3,613 Deferred income taxes .......................................................................... 354 354 Other liabilities .............................................................................. 1,450 1,481 Shareholders' equity: Preferred stock, $.01 par value; authorized 10,000,000 shares; issued 255,796 Series B convertible preferred stock ........................................ 3 3 Common stock, $.01 par value; authorized 50,000,000 shares; issued 14,928,042 and 14,879,542 shares, respectively ...................................... 149 149 Additional paid-in capital ................................................................... 31,956 31,877 Retained earnings ............................................................................ 2,592 (10) Treasury stock, 686,710 shares at cost ....................................................... (3,791) (3,791) Notes receivable, directors, officers, employees, consultants and others ..................................................................... (1,615) (1,868) Foreign currency translation adjustment ...................................................... 153 265 -------- -------- Total shareholders' equity ................................................................. 29,447 26,625 -------- -------- Total liabilities and shareholders' equity ................................................. $ 71,887 $ 64,143 ======== ========
Note: The balance sheet at March 31, 1995 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. -3- NATIONAL MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except number of shares and per share amounts)
Three months ended June 30, -------------------------- 1995 1994 ----------- ----------- Revenues: Product sales ...................................... $ 63,798 $ 38,425 Retail royalties ................................... 1,158 1,580 Sales commissions and other revenues ............... 89 392 ----------- ----------- Net revenues ..................................... 65,045 40,397 Operating costs and expenses: Media purchases .................................... 20,683 13,018 Direct costs ....................................... 33,983 21,348 Selling, general and administrative ................ 7,029 5,073 Unusual charges .................................... -0- 335 Interest expense ................................... 240 124 ----------- ----------- Total operating costs and expenses ............... 61,935 39,898 ----------- ----------- Income before income taxes ........................... 3,110 499 Income taxes ......................................... 508 28 ----------- ----------- Net income ........................................... $ 2,602 $ 471 =========== =========== Income per common and dilutive common equivalent share $ .13 $ .03 =========== =========== Weighted average number of common shares outstanding ........................................ 22,113,000 13,933,000 =========== ===========
See notes to condensed consolidated financial statements. -4- NATIONAL MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
Three months ended June 30, --------------------------- 1995 1994 --------- --------- Cash flows from operating activities: Net income .................................................................................... $ 2,602 $ 471 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ............................................................. 388 418 Changes in operating assets and liabilities ............................................... 1,285 1,113 Other ..................................................................................... 71 295 -------- ------- Net cash provided by operating activities ....................................................... 4,346 2,297 Cash flows from investing activities: Additions to property and equipment ........................................................... (379) (88) -------- ------- Net cash used in investing activities ........................................................... (379) (88) Cash flows from financing activities: Payments on long-term debt .................................................................... (127) (378) Net repayments under lines of credit .......................................................... -0- (950) Exercise of stock options ..................................................................... 79 240 Payments received on notes receivable ......................................................... 253 492 -------- ------- Net cash provided by (used in) financing activities ............................................. 205 (596) Effect of exchange rate changes on cash and cash equivalents .................................... (122) 83 -------- ------- Net increase in cash and cash equivalents ....................................................... 4,050 1,696 Cash and cash equivalents at beginning of period ................................................ 13,467 1,595 -------- ------- Cash and cash equivalents at end of period ...................................................... $ 17,517 $ 3,291 ======== =======
See notes to condensed consolidated financial statements. -5- NATIONAL MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) June 30, 1995 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ending March 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended March 31, 1995. 2. Per Share Amounts Income per share amounts have been computed based upon the weighted average number of common shares and dilutive common equivalent shares (stock options, warrants, and preferred stock) outstanding using the "if converted method" for the three month period ended June 30, 1995 and the treasury stock method for the three month period ended June 30, 1994. The difference between primary and fully diluted net income per share and weighted average number of shares outstanding was not significant or was antidilutive, and therefore, is not shown separately. 3. Unusual Charges Unusual charges of $335,000 for the three months ended June 30, 1994 were comprised primarily of costs related to the settlement of litigation and associated legal fees including $225,000 associated with the terminated tender offer and merger agreement with ValueVision International, Inc. ("ValueVision Terminated Tender Offer") as discussed in Note 4 (Contingent Matters) below. 4. Contingent Matters Shareholders' Federal Class Actions In June 1993, a class action complaint was filed in federal court against the Company and certain of its former executive officers. Five similar lawsuits subsequently were filed in the same court. The six actions were consolidated and an amended and consolidated complaint (the "complaint") was filed in October 1993. The complaint involved allegations concerning disclosure by the Company of its ongoing relationship with Positive Response Television, Inc., an infomercial producer, and Ronic, S.A., a supplier of the Company. The parties reached a settlement of this action, calling for cash payment by the Company's insurer of $2.175 million and the issuance, subject to adjustment, of 145,000 shares of common stock. Subsequent to June 30, 1995, the Company fulfilled its obligations under the settlement agreement through the issuance of 106,000 shares of its common stock. The Company's financial statements for the year ended March 31, 1995 included a charge of approximately $725,000 in connection with the settlement. -6- Terminated Tender Offer and Merger Agreement with ValueVision International, Inc. On April 22, 1994, the Company filed suit in federal court against ValueVision International, Inc. ("ValueVision") alleging that ValueVision had wrongfully terminated its amended tender offer to acquire the Company. In May 1994, ValueVision answered the Company's complaint and set forth various counterclaims. On April 17, 1995, the Company, ValueVision, and all other parties to this litigation entered into a settlement agreement, pursuant to which the parties agreed to dismiss with prejudice all claims and counterclaims. In connection with the settlement agreement, the Company and ValueVision executed a Telemarketing, Production and Post-Production Agreement (the "Telemarketing Agreement") and a Joint Venture Agreement. The settlement agreement shall become effective upon the earlier to occur of (i) the date upon which the shareholder approval required by the applicable New York Stock Exchange rules and regulations in order to consummate the Telemarketing Agreement has been obtained or (ii) the date the Telemarketing Agreement becomes effective. In the event the settlement agreement is not effective by August 31, 1995, the settlement agreement shall become null and void in its entirely. Pursuant to the Telemarketing Agreement, ValueVision is obligated to provide to the Company over a three-year period inbound telephone call-taking services at rates more favorable than those currently being paid by the Company. ValueVision is also obligated to provide to the Company certain productions and post-production services. As additional consideration for the services to be provided by ValueVision under the Telemarketing Agreement, the Company is obligated to grant to ValueVision, on the effective date, warrants (the "Warrants") to purchase up to 500,00 shares of the Company's common stock at a price of $8.865 per share (subject to adjustment pursuant to the antidilution provisions of the Warrants). This price was based on a premium over the average 20-day market value prior to the date of settlement. The Warrants will vest with respect to an equal number of shares on each of the thirteen-month, 2-year and 3-year anniversaries of the effective date provided that ValueVision satisfies certain conditions. The Warrants will expire on the tenth anniversary of the effective date. The Telemarketing Agreement shall become effective upon the later to occur of the stockholder approval date and the certification date. In the event the stockholder approval date does not occur on or prior to August 31, 1995, either the Company or ValueVision may terminate the Telemarketing Agreement. Upon such a termination, the settlement agreement shall become null and void. In the event the certification date has not occurred by the sixtieth day following the stockholder approval date, the Company may terminate the Telemarketing Agreement. Upon such a termination, the Company will be entitled to receive liquidated damages in the amount of $3,000,000. The Company will also be entitled to liquidated damages at a lesser amount for certain other material breaches under the Telemarketing Agreement. In connection with the matters discussed above, the Company reimbursed its former Chairman $50,000 for certain legal fees and associated costs he incurred in connection with the litigation with ValueVision and certain other legal matters to which the Company is a party and accelerated the payment of $278,000 under a Consulting Agreement with the former Chairman. In addition, the Company exercised its option to terminate, effective October 31, 1997, a lease dated February 25, 1992 between the Company and Mergren Associates, a real estate company owned by the former Chairman. Pursuant to the terms of the Lease, the Company paid the sum of $220,000 in connection with the exercise of its right of early termination. The issuance of the Warrants to ValueVision required the prior consent of the holders of the Company's promissory notes issued pursuant to the Note and Warrant Purchase Agreement, dated October 19, 1994. As an inducement to the Noteholders to permit the issuance of the Warrants, the Company agreed to issue the Noteholders warrants (the "Waiver Warrants") to purchase 500,000 shares of the Company's common stock at a price of $10.00 per -7- share. These warrants expire on the earlier of 12 months after the notes are paid in full or upon the Noteholders no longer being guarantors of the notes. The issuance of the Waiver Warrants and the aforementioned Telemarketing Agreement are subject to the approval of the Company's stockholders at the Company's annual meeting scheduled to occur on August 30, 1995. Shareholders' Delaware and LaChance and Effron and Cohen Class Actions In 1994, class action lawsuits were filed in Federal Court and in Delaware Chancery Court against the Company and certain of its present and former officers and directors in connection with a proposed merger transaction with ValueVision. On April 17, 1995, the Company and other parties to the litigation entered into agreements in principal to settle these actions. The Company expects that following stockholder approval of the Telemarketing Agreement, it will submit these settlement agreements to the court for approval. These agreements provide for cash payments of $1.5 million, 75% of which will be paid by the Company's insurer. The Company's financial statements for the year ended March 31, 1995 included a charge of $375,000 for its portion of the settlement. Consumer Product Safety Commission Investigation On February 24, 1994, the staff of the Consumer Product Safety Commission (CPSC) notified the Company that it had made a preliminary determination that a particular model of the Company's Juice Tiger(R) product presents a "substantial product hazard" under the Consumer Product Safety Act. The CPSC staff requested the Company to take voluntary corrective action to ameliorate such alleged product hazard. While the Company has disputed that the model in question presents a substantial product hazard, the Company and the CPSC staff are presently discussing the form and nature of voluntary action proposed by the Company to assuage the CPSC staff's concerns. The CPSC staff has also indicated that, upon agreement on the implementation of a corrective action plan, it may investigate and assess whether the Company failed to comply with reporting requirement under the Consumer Product Safety Act such as to warrant imposition of a civil penalty. Management believes that it is not yet possible to determine whether the cost of implementing any such corrective action plan and the amount of any such civil penalty, alone or together, would have a material adverse effect on the Company's results of operations and financial conditions. Campbell v. National Media Corporation In July 1994, a former officer of the Company filed a complaint in federal court against the Company and its former Chairman and Chief Executive Officer containing various allegations, including a claim that the Company and the former Chairman fraudulently induced him to purchase the Company's common stock through the exercise of stock options and to forebear from selling his shares of common stock. The former officer seeks to recover compensatory damages in excess of $1.3 million as well as punitive damages and to rescind all alleged debts owed to the Company by him (approximately $238,000). The Company and its former Chairman filed motions to dismiss and/or for summary judgment, which motions were denied by the Court on November 3, 1994. The parties have informally reached a confidential settlement of the action, and on December 9, 1994, the court dismissed the case with prejudice. The court has retained jurisdiction of the case, however, in the event that any party seeks to have the dismissal vacated, modified, or stricken should the parties fail to execute and deliver a definitive settlement agreement. Although the Company has no reason to expect that such a definitive settlement agreement will not be executed by all parties, there can be no assurance that the settlement will be so finalized. Management of the Company believes that the definitive settlement, if implemented on substantially the terms of the informal settlement, would not be likely to have a material adverse effect on the financial position or results of operations of the Company. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company is engaged in the direct marketing of consumer products, primarily through the use of infomercials in both the domestic and international marketplace. The Company's operating results continue to depend upon its ability to introduce and sell new products. The Company is generally dependent on its most successful products to generate a significant portion of its net revenue. The Company continues to take actions designed to reduce the risk associated with relying on a limited number of successful products for a disproportionate amount of its revenues by expanding its presence in the international marketplace, thereby creating new markets for its products, and joining forces with strategic partners to increase its product base. International expansion has resulted in a greater percentage of the Company's revenues being generated from the international infomercial market. As the Company enters new markets overseas, it is able to air shows from its existing library, thus reducing its dependence on new show productions. The Company is taking advantage of the product awareness created by its infomercials by extending the sales life of its infomercial products through non-infomercial distribution channels, such as retail arrangements and by entering into agreements with manufacturers of consumer products in which the Company's strategic partner will supply new products and retail distribution channels for product sales. Results of Operations The following table sets forth the operating data of the Company as a percentage of net revenues for the period indicated below. Three Months Ended June 30, --------------------------- 1995 1994 --------- --------- Statement of Operations Data: Net revenues .................................... 100.0% 100.0% Operating costs and expenses: Media purchases .............................. 31.8 32.2 Direct costs ................................. 52.2 52.9 Selling, general and administrative .......... 10.8 12.6 Unusual charges .............................. .8 Interest expense ............................. .4 .3 ----- ----- Total operating costs and expenses ........ 95.2 98.8 ----- ----- Income before income taxes ...................... 4.8 1.2 ----- ----- Net income ...................................... 4.0% 1.2% ===== ===== -9- Three months ended June 30, 1995 compared to three months ended June 30, 1994 Net revenues Net revenues were $65.0 million for the three months ended June 30, 1995 as compared to $40.4 million for the three months ended June 30, 1994, an increase of $24.6 million or 60.9%. Domestic net revenues. Domestic net revenues were $30.7 million for the three months ended June 30, 1995 as compared to $28.4 million for the three months ended June 30, 1994, an increase of $2.3 million or 8.1%. Domestic infomercial net revenues increased by $3.2 million or 12.8% due principally to an increase in the number of airings during the three months ended June 30, 1995 as compared to the three months ended June 30, 1994. Approximately 52.6% and 29.9% of the Company's domestic revenues for the three months ended June 30, 1995 were generated from sales of the E-Force and Touchless Car Care System, respectively. Non-infomercial net revenue decreased by $.9 million due to a decline in both royalty revenues and retail product sales. Foreign net revenues. Foreign net revenues were $34.3 million for the three months ended June 30, 1995 as compared to $12.0 million for the three months ended June 30, 1994, an increase of $22.3 million or 185.8%. This increase was primarily due to the current three month period including approximately $19.5 of revenues from the airing of infomercials in the Japanese market which the Company entered in July 1994. Japanese revenues accounted for 87.4% of the increase in foreign revenues. The Company recently announced that three new stations in Japan have agreed to air the Company's infomercials increasing the potential audience in that country by approximately 30 percent. Foreign net revenues for the three month period ended June 30, 1995, excluding Japan, increased by $2.8 million or 23.3% as compared to the three month period ended June 30, 1994 primarily due to increased airings of the Company's shows in the international marketplace and an increase in the average selling price. Operating costs Total operating costs and expenses were $61.9 million for the three months ended June 30, 1995 as compared to $39.9 million for the three months ended June 30, 1994, an increase of $22.0 million or 55.1%. Media purchases. Media purchases were $20.7 million (net of $3.6 million in media sales) for the three months ended June 30, 1995 as compared to $13.0 million (net of $2.5 million in media sales) for the three months ended June 30, 1994, an increase of $7.7 million or 59.2%. The ratio of media purchases to net revenues decreased from 32.2% in the three months ended June 30, 1994 to 31.8% in the three months ended June 30, 1995. This decrease in the ratio of media purchases reflects the higher proportion of international net revenues in the three month period ended June 30, 1995 as compared to the three month period ended June 30, 1994. Revenues generated in the international marketplace are generally subject to more effective media costs. Direct costs. Direct costs consist of the cost of materials, freight, infomercial production, commissions and royalties, fulfillment, inbound telemarketing, credit card authorization, and warehousing. Direct costs were $34.0 million for the three months ended June 30, 1995 as compared to $21.3 million for the three months ended June 30, 1994, an increase of $12.7 million or 59.6%. This is reflective of the 60.9% increase in net revenues during the three months ended June 30, 1995 as compared to the three months ended June 30, 1994. The ratio of directs costs to net revenues decreased slightly from 52.9% in the three months ended June 30, 1994 to 52.2% in the three months ended June 30, 1995. Both domestically and internationally, direct costs declined as a percentage of net revenue. The decline in domestic direct costs was primarily due to lower production costs for the three months ended June 30, 1995 while the decline internationally was primarily due to lower commission costs for the three months ended June 30, 1995. -10- Selling, general and administrative Selling, general and administration expenses increased approximately 37.3% from $5.1 million for the three months ended June 30, 1994 to $7.0 million for the three months ended June 30, 1995, primarily due to costs associated with international expansion. Selling, general and administrative expenses as a percentage of net revenues decreased from 12.6% for the three month period ended June 30, 1994 to 10.8% for the three month period ended June 30, 1995. This was a direct result of the Company realizing the benefits of significant increases in international net revenues. Unusual charges Unusual charges of $335,000 for the three months ended June 30, 1994 were comprised primarily of costs related to the settlement of litigation and associated legal fees including $225,000 associated with the ValueVision Terminated Tender Offer. There were no unusual charges in the current period. Interest expense Interest expense was $240,000 for the three months ended June 30, 1995 as compared to $124,000 for the three months ended June 30, 1994, an increase of $116,000. This increase is due to an increase in the Company's average outstanding debt balance, higher interest rates during the current period, as well as $90,000 of amortization related to the discount on the Company's $5.0 million term loan. Income taxes The Company's effective tax rate is 16.3% for the three months ended June 30, 1995, as compared to 5.6% for the three months ended June 30, 1994. Liquidity and Capital Resources The Company's working capital was $25.0 million at June 30, 1995 compared to $22.1 million at March 31, 1995, an increase of $2.9 million. This was principally due to an increase in accounts receivable and inventory associated with the Company's increased sales volume during the period. Cash flow from operations increased from $2.3 million for the three months ended June 30, 1994 to $4.3 million for the three months ended June 30, 1995 primarily as a result of the $2.0 million increase in net income during the current three month period. The Company recently established a letter of credit facility with a bank under which it has letter of credits currently outstanding in the approximate amount of $300,000. The Company expects that available cash, cash from operations and its existing term loan will be sufficient to meet its normal operating requirements over the near term. -11- PART II. OTHER INFORMATION Item 1. Legal Proceedings The information contained in Note 4 (Contingent Matters) to the Condensed Consolidated Financial Statements in Part I of this report beginning on page 6 is incorporated herein by reference. All of the matters referred to in Note 4 (Contingent Matters) have been the subject of disclosure in prior reports on Form 10-Q or 10-K. As a result of prior settlements with the Federal Trade Commission (FTC), the Company has agreed to two consent orders which, among other things, require the Company to submit compliance reports to the FTC staff. The Company has submitted the compliance reports as well as additional information requested by the FTC staff. In connection with one of these orders, the Company recently received a request from the FTC for certain information regarding the Company's infomercials in order to determine whether the Company is in compliance with such order. The Company is cooperating with such request and as of the current date believes itself to be in compliance with the consent orders and other FTC requirements. Other Matters The Company in the normal course of its business is a party to litigation relating to trademark and copyright infringement, product liability, contract-related disputes, and other actions. It is the Company's policy to vigorously defend all such claims and to enforce its rights in these areas. Except as disclosed herein, the Company does not believe any of these actions, either individually or in the aggregate, will have a material adverse effect on the Company's results of operations or financial condition. Item 6 Exhibits and Reports on Form 8-K (a) The following exhibits are included herein: 10.1 Letter Agreement between Registrant and David J. Carman dated July 17, 1995. 10.2 Amendment to the Employment Agreement between Registrant and David J. Carman dated as of October 1, 1994. 10.3 Amendment to the Employment Agreement between Quantum International Limited and David J. Carman dated as of October 1, 1994. 10.4 Modification Agreement between Registrant, Media Arts International, Ltd., Quantum International Limited, Safeguard Scientifics (Delaware), Inc. and Meridian Bank dated as of April 20, 1995. 11.1 Statement RE: Computation of Per Share Earnings. 27.1 Financial Data Schedule (b) The Company filed the following reports on Form 8-K: Form 8-K dated April 13, 1995 Item 5. Other Events - Announcement by the Company of the following: execution of a settlement agreement concerning all claims involved in the Company's Federal Shareholders' Class Action litigation pending since October 1993 and notification of the Company being served with a copyright infringement suit. -12- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL MEDIA CORPORATION Registrant Date: August 11, 1995 /s/Mark P. Hershhorn ---------------------------------------------- Mark P. Hershhorn President, Chief Executive Officer and Director Date: August 11, 1995 /s/Constantinos I. Costalas ---------------------------------------------- Constantinos I. Costalas Vice Chairman of the Board, Principal Financial Officer and Director -13- Index to Exhibits Exhibit No. 10.1 Letter Agreement between Registrant and David J. Carman dated July 17, 1995. 10.2 Amendment to the Employment Agreement between Registrant and David J. Carman dated as of October 1, 1994. 10.3 Amendment to the Employment Agreement between Quantum International Limited and David J. Carman dated as of October 1, 1994. 10.4 Modification Agreement between Registrant, Media Arts International, Ltd., Quantum International Limited, Safeguard Scientifics (Delaware), Inc. and Meridian Bank dated as of April 20, 1995. 11.1 Statement RE: Computation of Per Share Earnings. 27.1 Financial Data Schedule -14- EX-10.1 2 AGREEMENT LETTER Mark P. Hershhorn President and Chief Executive Officer Direct Dial: 215/772-5016 Fax: 215/772-5013 July 17, 1995 David J. Carman Quantum International, Ltd. Manor House - 21 Soho Square London W1V 5FD, England Re: Letter Agreement Dear David: National Media Corporation (the "Company") and David Carman (the "Executive") are parties to an Employment Agreement dated June 1, 1993, as amended (the "Employment Agreement"), and a Side Letter Agreement dated as of June 1, 1993 (the "June 1993 Side Letter Agreement"). The Company and the Executive, intending to be legally bound hereby, wish to terminate the June 1993 Side Letter Agreement and replace it in its entirety by this new letter agreement. 1. Termination of June 1993 Side Letter Agreement. The June 1993 Side Letter Agreement is hereby deemed terminated and of no further force or effect. 2. Rent in the United Kingdom. (a) Generally. During the Term of the Employment Agreement, so long as the Executive shall continue to rent his principal residence in the London, England metropolitan area, the Company shall pay the monthly rental on such principal residence. (b) Change of Control. Upon a Change of Control (as that term is defined in the Employment Agreement), so long as the Executive shall continue to rent his principal residence in the London, England metropolitan area, the Company shall pay the monthly rental on such principal residence for the balance of the Term of the Employment Agreement. 3. Adjustments to Salary. Effective June 1, 1995, the base salary of the Executive under the Employment Agreement shall be adjusted from $140,000 to $190,000. Also effective June 1, 1995, the base salary of the Executive under the separate Employment Agreement between the Executive and Quantum International Limited dated as of June 1, 1993, as amended, shall be adjusted from $210,000 to $180,000 (notwithstanding anything to the contrary contained in such employment agreement or in any other document or agreement to which the Executive and/or the Company or any of its subsidiaries is a signatory, including, without limitation, the letter of Mark P. Hershhorn to the Executive dated July 7, 1995). 4. Pension. The Company shall fund on the Executive's behalf a personal pension plan with Clerical Medical International (or such other fund as the Executive may hereafter nominate). The Company shall make a contribution to such plan each month during the term equalling 25.32% of the Executive's Base Salary under the Employment Agreement for each such month. 5. Effective Date. Except as specifically provided in paragraph 3 hereof (with respect to the adjustments to the Executive's salary), this Side Letter Agreement shall be deemed effective as of October 1, 1994 and shall be retroactive to that date. Your signature in the space provided below will indicate your agreement to the terms of this letter agreement. Sincerely, /s/ Mark P. Hershhorn ------------------------------------- Mark P. Hershhorn for NATIONAL MEDIA CORPORATION MPH:maf ACCEPTED AND AGREED: /s/ David J. Carman ---------------------------- David J. Carman EX-10.2 3 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is dated as of October 1, 1994 and is between NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Company"), and DAVID CARMAN (the "Executive"). Background A. The Company and the Executive are parties to an Employment Agreement dated as of June 1, 1993 (the "Employment Agreement"). Terms capitalized and not otherwise defined herein shall have the meanings given to them, respectively, in the Employment Agreement. B. The Company and the Executive wish to amend the Employment Agreement in certain respects, as more particularly set forth herein. Covenants In consideration of the mutual covenants and agreements set forth herein and the mutual benefits to be derived herefrom, and intending to be legally bound hereby, the Company and the Executive agree as follows: 1. Amendments. The Agreement is hereby amended in the following respects: 1.1. Section 1(a) of the Employment Agreement is amended by (i) changing the Executive's title from "Vice President" to "Executive Vice President," (ii) adding the President of the Company to the list of persons who may assign duties to the Executive, (iii) changing "40%" to "60%" in line eleven thereof and (iv) adding the following sentence after the existing text of such section: "Furthermore, nothing contained herein shall be construed to prevent the Executive from serving on the board of directors of not more than one corporation unaffiliated with the Company (subject, however, to approval thereof by the Board, which shall not be unreasonably withheld)." As so amended, Section 1(a) of the Employment Agreement is restated in its entirety as follows: "(a) Duties. The Company shall employ the Executive, on the terms set forth in this Agreement, as Executive Vice President of the Company. No part of the Executive's duties hereunder shall be performed in the United Kingdom. The Executive accepts such employment with the Company and shall perform and fulfill such duties set forth in Schedule A hereto as are reasonably assigned to him hereunder by the President, Chief Executive Officer or the Board of Directors of the Company (the "Board"). The Executive shall devote his best efforts and up to 60% of his professional time and attention to the performance and fulfillment of his duties and to the advancement of the interests of the Company; provided, however that such percentage is subject to review by the Compensation Committee of the Board (the "Compensation Committee") from time to time as the circumstances of the Executive's responsibilities may change and may be increased or decreased with the written consent of the Executive. Nothing contained herein shall be construed, however, to prevent the Executive from trading in or managing, for his own account and benefit, stocks, bonds, securities, real estate, commodities or other forms of investments (subject to law and Company policy with respect to trading in Company securities. Furthermore, nothing contained herein shall be construed to prevent the Executive from serving on the board of directors of not more than one corporation unaffiliated with the Company (subject, however, to approval thereof by the Board, which shall not be unreasonably withheld)." 1.2. The Employment Agreement is hereby amended by deleting therefrom Section 4(d). 1.3. Section 12(a) of the Employment Agreement is hereby amended by deleting the name "John J. Turchi, Jr." from the address for notices to be given to the Company. 1.4. The Employment Agreement is hereby amended by adding thereto a new Section 14, as follows: "14. Change of Control. (a) Consequences of a Change of Control. Upon a Change of Control (as defined in Section 14(b) hereof), notwithstanding anything in this Agreement to the contrary, the following provisions shall apply: (1) Payment of Salary. The Executive shall receive an immediate lump sum payment (within 30 days of the Change of Control) of the greater of two years' Base Salary at the rate in effect as of the date of such Change of Control, or the Base Salary payable during the balance of the Term of this Agreement. -2- (2) Payment of Bonus. The Executive shall receive an immediate lump sum payment (within 30 days of the Change of Control) of the annual bonuses that the Executive would be entitled to through the remainder of the Term of this Agreement. For purposes of this Section 14(a)(2), the annual bonus that the Executive would be entitled to receive for each remaining year in the Term of this Agreement shall be equal to the last bonus the Executive received prior to the Change of Control. (3) Continuation of Benefits. All benefit plans and programs in which Executive is entitled to participate pursuant to Section 3(c) of this Agreement shall be continued in effect for the full Term of this Agreement. In the event that the Executive's participation in any such benefit plan or program is barred, the Company shall arrange to provide the Executive with benefits during such period which are substantially similar to those which the Executive is entitled to receive under such plans and programs. (4) Vesting of Options. All unvested and unexercised Options granted to the Executive under Section 6 of this Agreement, shall become immediately vested and exercisable by the Executive. (5) Inapplicability of Restrictive Covenants. The provisions of Section 10(a) (competition) of this Agreement shall no longer be applicable. (b) "Change of Control" Defined. For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred 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 Securities Exchange Act of 1934, as amended], or any Person or entity organized, -3- 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 then outstanding; provided, however, that no Change of Control shall be deemed to have occurred 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 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." 2. Miscellaneous. 2.1. Entire Agreement. The Employment Agreement, as amended by this Amendment, plus the Side Letter Agreement between the parties dated July 7, 1995, (the "Side Letter Agreement"), contain the entire understanding of the parties with respect to the subject matter thereof and supersede all prior agreements and understandings between them with respect to the subject matter thereof. The Employment Agreement may not be further modified except by a written agreement signed by the Executive and a duly authorized officer of the Company. 2.2. Inconsistency with Employment Agreement. Except as otherwise agreed in writing by the parties, in the event of any inconsistency between this Amendment and the Employment Agreement or the Side Letter Agreement, the terms and provisions of this Amendment shall control, and the terms and provisions of such other agreement shall be ineffective to the extent of such inconsistency. -4- 2.3. Governing Law. This Amendment shall be governed by and construed in accordance with the internal substantive and procedural laws of the Commonwealth of Pennsylvania without regard to conflict of laws principles. 2.4. Headings. The headings of sections and subsections have been included for convenience only and shall not be considered in interpreting this Amendment. 2.5. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same Amendment. 3. Ratification and Confirmation. All of the terms and conditions of the Employment Agreement, as modified hereby, shall remain in full force and effect and are hereby ratified and confirmed. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed on the date first written above. NATIONAL MEDIA CORPORATION By: /s/ Mark P. Hershhorn ------------------------------ Mark P. Hershhorn Chief Executive Officer DAVID CARMAN /s/ David Carman --------------------------------- -5- EX-10.3 4 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is dated as of October 1, 1994 and is between QUANTUM INTERNATIONAL LIMITED, an English company (the "Company"), and DAVID CARMAN (the "Executive"). Background A. The Company and the Executive are parties to an Employment Agreement dated as of June 1, 1993 (the "Employment Agreement"). Terms capitalized and not otherwise defined herein shall have the meanings given to them, respectively, in the Employment Agreement. B. The Company and the Executive wish to amend the Employment Agreement in certain respects, as more particularly set forth herein. Covenants In consideration of the mutual covenants and agreements set forth herein and the mutual benefits to be derived herefrom, and intending to be legally bound hereby, the Company and the Executive agree as follows: 1. Amendments. The Agreement is hereby amended in the following respects: 1.1. Section 1(a) of the Employment Agreement is amended by (i) changing the Executive's title from "Chief Operating Officer" to "Chief Executive Officer" (effective April 26, 1995), (ii) designating the Chairman (as opposed to the Chief Executive Officer) as the person who may assign duties to the Executive, and (iii) changing "60%" to "40%" in line ten thereof. As so amended, Section 1(a) of the Employment Agreement is restated in its entirety as follows: "(a) Duties. The Company shall employ the Executive, on the terms set forth in this Agreement, as an executive director of the Company with the job title of President and (effective April 26, 1995) Chief Executive Officer. The Executive accepts such employment with the Company and shall perform and fulfill such duties relating to the United Kingdom hereto as are reasonably assigned to him hereunder by the Chairman of the Company or the Board of Directors of the Company (the "Board"). The Executive shall devote his best efforts and up to 40% of his professional time and attention to the performance and fulfillment of his duties and to the advancement of the interests of the Company; provided, however that such percentage is subject to review by the Compensation Committee of the Board of Directors of National Media (the "Compensation Committee") from time to time as the circumstances of the Executive's responsibilities may change and may be increased or decreased with the written consent of the Executive. Nothing contained herein shall be construed, however, to prevent the Executive from trading in or managing, for his own account and benefit, stocks, bonds, securities, real estate, commodities or other forms of investments (subject to law and Company policy with respect to trading in National Media's securities. The Executive shall work hours in excess of those in clause 12(a) where his duties or the Company require." 2. Miscellaneous. 2.1. Entire Agreement. The Employment Agreement, as amended by this Amendment, contain the entire understanding of the parties with respect to the subject matter thereof and supersede all prior agreements and understandings between them with respect to the subject matter thereof. The Employment Agreement may not be further modified except by a written agreement signed by the Executive and a duly authorized officer of the Company. 2.2. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of England. 2.3. Headings. The headings of sections and subsections have been included for convenience only and shall not be considered in interpreting this Amendment. 2.4. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same Amendment. 3. Ratification and Confirmation. All of the terms and conditions of the Employment Agreement, as modified hereby, shall remain in full force and effect and are hereby ratified and confirmed. -2- IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed on the date first written above. QUANTUM INTERNATIONAL LIMITED By: /s/ Mark P. Hershhorn ------------------------------ Mark P. Hershhorn Chairman DAVID CARMAN /s/ David Carman --------------------------------- -3- EX-10.4 5 MODIFICATION AGREEMENT MODIFICATION AGREEMENT THIS MODIFICATION AGREEMENT ("Amendment") is made this 20th day of April, 1995 among NATIONAL MEDIA CORPORATION ("NMC"), MEDIA ARTS INTERNATIONAL, LTD. ("MAI"), QUANTUM INTERNATIONAL LIMITED ("Quantum"), SAFEGUARD SCIENTIFICS (DELAWARE), INC. ("Safeguard") and MERIDIAN BANK ("Meridian"). BACKGROUND A. NMC, MAI, Quantum and Safeguard previously entered into that certain Note and Warrant Purchase Agreement dated October 19, 1994 (the "Note and Warrant Agreement"). B. Pursuant to the terms of the Note and Warrant Agreement, NMC and its Subsidiaries (as defined therein) authorized the issuance of certain (i) Subordinated Secured Notes (collectively, the "Notes") and (ii) warrants for the purchase of NMC common stock (collectively, the "Warrants"), all as more particularly described in the Note and Warrant Agreement. C. On even date herewith, Meridian, Safeguard and the other holders of the Notes (collectively, together with Safeguard, the "Holders") have entered into that certain Purchase Agreement (the "Purchase Agreement") pursuant to which, inter alia, the Holders have agreed to sell, and Meridian has agreed to purchase, the Notes and the other Purchased Documents (as defined in the Purchase Agreement). Meridian is specifically not purchasing, and the Holders are not selling, the Warrants or any rights or interests with respect thereto. D. As a condition to Meridian entering into the Purchase Agreement, Holders agreed to cause certain modifications to be made to the Note and Warrant Agreement. E. All capitalized terms used herein and not otherwise defined shall have the meanings provided for such terms in the Note and Warrant Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Warrants. Holders have not sold to Meridian, and Meridian has not purchased from Holders, any of Holders' right, title or interest in, to or under any of the Warrants or any registration rights attached thereto. The Warrants and all rights and privileges with respect thereto shall remain the property of those parties currently entitled to the Warrants. All representations, warranties, powers, privileges, covenants, remedies and agreements relating to the Warrants set forth in the Note and Warrant Agreement, including, without limitation, the covenants set forth in Section 7 and the provisions contained in Sections 8.6, 9, 10, 11.1, 14.1 and 14.9, shall (a) remain in effect for the benefit of those parties currently entitled to the Warrants and are hereby ratified, confirmed and continued by NMC and the Subsidiaries and (b) be deemed incorporated herein solely for the benefit of those parties currently entitled to the Warrants and only such parties shall be entitled to enforce such -1- provisions against NMC and the Subsidiaries. Notwithstanding the foregoing, nothing contained herein shall be deemed to limit or release the representations, warranties, powers, privileges, covenants, remedies and agreements relating to the Notes set forth in the Note and Warrant Agreement, including, without limitation, the covenants set forth in Section 7 and the provisions contained in Sections 8 and 10. It is expressly agreed that these representations, warranties, powers, privileges, covenants, remedies and agreements may relate to both the Notes and the Warrants and are therefore enforceable by both Meridian, to the extent they apply to the Notes, and the holders of the Warrants, to the extent they apply to the Warrants. 2. Board Representative. Without in any way limiting the generality of Section 1 above, the rights provided to Safeguard in Section 7.11 of the Note and Warrant Agreement, if any, to appoint a member of the Board of Directors of NMC shall remain in effect for the benefit of the Holders. 3. Other Representations, Warranties and Covenants. NMC and the Subsidiaries acknowledge and agree that, except as set forth on Exhibit "A", there has been no material adverse change in the representations and warranties of NMC and its Subsidiaries set forth in the Note and Warrant Agreement not specifically relating to the Warrants, including, without limitation, those representations and warranties relating to the due authorization, organization and good standing of NMC and the Subsidiaries except to the extent any representations and/or warranties relate to a specific date. All such representations, warranties and covenants shall remain in full force and effect for the benefit of both the Holders and Meridian and are hereby ratified, confirmed and continued, except to the extent any representations and/or warranties relate to a specific date. 4. Safeguard's Representations and Warranties. NMC and the Subsidiaries expressly acknowledge and agree that the representations and warranties of Safeguard set forth in Section 3 of the Note and Warrant Agreement are those of Safeguard and shall not be attributed to Meridian nor shall Meridian be bound thereby. The determination that any such representations and warranties, or any other representations, warranties, covenants or agreements of any Holder set forth in the Note and Warrant Agreement or otherwise are untrue or have been violated shall not effect or impair the obligations of the Company or any of the Subsidiaries under the Notes or any of the other Purchased Documents. 5. Meridian Representations and Warranties. Meridian hereby represents and warrants to NMC and the Subsidiaries as follows: (a) Meridian was not organized for the specific purpose of purchasing Notes. (b) Meridian's principal place of business is located at 601 Penn Street, Reading, PA 19603. (c) Meridian is purchasing the Notes for its own account and not with a view to resale or distribution within the meaning of the 1933 Act and the rules and regulations therefor, and Meridian will not distribute the Notes in violation of the 1933 Act. -2- (d) Meridian (i) acknowledges that the Notes are not registered under the 1933 Act and that the Notes to be acquired by it must be held indefinitely by it unless they are subsequently registered under the 1933 Act or an exemption from registration is available, (ii) is aware that any routine sales under Rule 144 of the Securities and Exchange Commission under the 1933 Act of Notes may be made only in limited amounts and in accordance with the terms and conditions of that Rule and that in such cases where the Rule is not applicable, compliance with some registration exemption will be required, and (iii) is aware that Rule 144 is not presently available for use by Meridian for resale of any such Notes. (e) Meridian confirms that NMC has made available to it the opportunity to ask questions of and receive answers from NMC's officers and directors concerning the business and financial condition of NMC, and to acquire, and Meridian received to its satisfaction, such additional information, in addition to that set forth herein, about the business and financial condition of NMC as it has requested. (f) (i) Meridian is an "accredited investor" as such term is defined in Rule 501 promulgated under the 1933 Act, and an "institutional investor" within the meaning of the Pennsylvania Securities Act of 1972 and the regulations promulgated thereunder, (ii) its financial situation is such that it can afford to bear the economic risk of holding the Notes for an indefinite period of time and suffer complete loss of its investment in the Notes, and (iii) its knowledge and experience in financial and business matters are such that it is capable of evaluating the merits and risks of its purchase of the Notes. 6. No Registration Required. NMC and the Subsidiaries warrant and represent that neither the sale of the Purchased Documents to Meridian nor the modification of the Note and Warrant Agreement as set forth herein requires registration under the Securities Act of 1933 or under any other applicable Federal or state securities law, rule or regulation. 7. Modifications. The Note and Warrant Agreement is hereby further modified as follows: (a) Reporting Requirements. In addition to all other reporting requirements under the Note and Warrant Agreement, NMC and the Subsidiaries shall deliver to Meridian a borrowing base certificate in form and content satisfactory to Meridian on the fifteenth (15th) day of each calendar month commencing on April 15, 1995. (b) Audit. In addition to all other rights under the Note and Warrant Agreement, and in lieu of the fees due under Section 7.2 of the Note and Warrant Agreement, Meridian shall have the right to audit the books and records of NMC and the Subsidiaries on a quarterly basis at a cost of $2,500.00 per audit, which cost shall be borne by NMC and the Subsidiaries, provided that all such audit fees incurred in any year by NMC and the Subsidiaries shall not exceed $10,000.00, in the aggregate. (c) Negative Covenants. -3- (i) The word "from" on the third line of page 39 of the Note and Warrant Agreement shall be changed to the word "to". (ii) Safeguard and Meridian hereby consent to the issuance of warrants to (A) ValueVision International, Inc. to purchase 500,000 shares of the common stock of NMC, and (B) the Holders to purchase 500,000 shares of the common stock of NMC, in accordance with the Report on Form 8-K of NMC dated April 13, 1995, a copy of which is attached hereto as Exhibit"B". (d) Notices. All notices under the Note and Warrant Agreement to the "Purchaser" shall also be addressed as follows: Meridian Bank Great Valley Corporate Center, Suite 200 55 Valley Stream Parkway Malvern, PA 19335 Attention: Steven D. Hobman, Vice President (e) Substitute Financing. The transactions contemplated under the Purchase Agreement and that certain Repurchase Agreement of even date herewith by and between Safeguard, Safeguard Scientifics, Inc., Technology Leaders II L.P., Technology Leaders II Offshore C.V., Ira Lubert, Gary Erlbaum and Meridian (the "Repurchase Agreement") shall be the only "Third Party Financing" permitted under the Note and Warrant Agreement without NMC's consent. In giving consent to any Third Party Financing in the future, NMC shall not be required to pay points, financing charges, or similar fees that, when added to points, financing charges or similar fees paid by NMC to Meridian, exceed $50,000.00. In addition, any assignment, transfer or sale of the Notes by Meridian to any successor in interest of Meridian by way of merger or in connection with the acquisition of Meridian shall not be deemed a "Third Party Financing" requiring NMC's consent. (f) Restrictions on Transferability. NMC and the Subsidiaries agree to register the transfer of the Notes notwithstanding the provisions of Section 9.3 of the Note and Warrant Agreement, in accordance with the terms of the Repurchase Agreement without requiring any opinion of counsel. 8. Determination of Rights. It is the express intent of the parties hereto that all of the representations, warranties, covenants, agreements, rights, remedies, powers and privileges set forth in the Note and Warrant Agreement and the other Purchase Documents, except for those specifically dealing with the Warrants or otherwise expressly set forth herein, shall inure to the benefit of Meridian. Without in any way limiting the generality of the foregoing, the parties hereto acknowledge and agree that the final determination as to whether any specific representations, warranties, covenants, agreements, rights, remedies, powers or privileges set forth in any of the Purchased Documents inure to the benefit of Meridian shall be made by Meridian in its sole discretion. Safeguard, NMC and the Subsidiaries expressly acknowledge and agree that Meridian has not assumed nor shall Meridian be responsible for any obligations of Safeguard set forth in the Purchased Documents. -4- 9. Confirmation of Collateral. NMC and the Subsidiaries hereby confirm, acknowledge and agree that none of the collateral securing the Notes as specifically described on Exhibit "B" attached hereto (collectively, the "Collateral") shall be impaired by anything contained herein and all such Collateral shall continue to secure all present and future obligations under the Notes and the other Purchased Documents. Safeguard, NMC and the Subsidiaries further acknowledge and agree that the Collateral shall not secure any obligations related to the Warrants and that neither Safeguard nor any of the other Holders have any interest in the Collateral. 10. Further Agreements and Representations of NMC and the Subsidiaries. NMC and the Subsidiaries do hereby: (a) ratify, confirm and acknowledge that, as amended hereby, the Notes, the Note and Warrant Agreement and the other Purchased Documents are valid, binding and in full force and effect; (b) covenant and agree to perform all of their obligations under the Notes, the Note and Warrant Agreement and the other Purchased Documents, as amended; and (c) acknowledge and agree that nothing contained herein and no actions taken pursuant to the terms hereof is intended to constitute a novation of the Notes or any of the other Purchased Documents and does not constitute a release, termination or waiver of any of the liens, security interests, rights or remedies granted therein, which liens, security interests, rights and remedies are hereby ratified, confirmed, extended and continued. 11. Additional Documents; Further Assurances. NMC and the Subsidiaries covenant and agree to execute and deliver or cause to be executed and delivered to the Meridian contemporaneously herewith, at the sole cost and expense of NMC and the Subsidiaries and any and all documents, agreements, statements, resolutions, certificates, consents and information as Meridian may reasonably request in connection with the matters or actions described herein. NMC and the Subsidiaries further covenant and agree to execute and deliver to Meridian, or to cause to be executed and delivered to Meridian, at the sole cost and expense of NMC and the Subsidiaries, from time to time, any and all other documents, agreements, statements, certificates, and information as Meridian shall request to evidence or effect the terms of the Purchased Documents, as amended, or to enforce or protect Meridian's interest in the Collateral; provided, that neither NMC nor any Subsidiary shall be required to furnish to Meridian any additional collateral except as specifically required in Sections 7.7(f)(iv), 7.7(k)(c) and 7.15 of the Note and Warrant Agreement or in any of the documents described on Exhibit "B". All such documents, agreements, statements, certificates and information shall be in form and content acceptable to Meridian in its reasonable discretion. 12. No Waiver. Nothing contained herein constitutes an agreement or obligation by Meridian to grant any further amendments to any of the Purchased Documents and nothing contained herein constitutes a waiver or release by Meridian of any rights or remedies available to Meridian under the Purchased Documents or at law or in equity. -5- 13. Inconsistencies. To the extent of any inconsistency between the terms and conditions of this Amendment and the terms and conditions of the Note and Warrant Agreement or the other Purchased Documents, the terms and conditions of this Amendment shall prevail. All terms and conditions of the Note and Warrant Agreement and other Purchased Documents not inconsistent herewith shall remain in full force and effect and are hereby ratified and confirmed by NMC and the Subsidiaries. 14. Construction. All references to the Note and Warrant Agreement therein or in any of the other Purchased Documents shall be deemed to be a reference to the Note and Warrant Agreement as amended hereby. 15. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. 16. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 17. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same document. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed the day and year first above written. NATIONAL MEDIA CORPORATION By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President MEDIA ARTS INTERNATIONAL, LTD. By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President (SIGNATURES CONTINUED ON THE NEXT PAGE) -6- (SIGNATURES CONTINUED FROM THE PREVIOUS PAGE) QUANTUM INTERNATIONAL LIMITED By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President SAFEGUARD SCIENTIFICS (DELAWARE), INC. By: /s/ Gerald M. Wilk ----------------------------------- Name/Title: Vice President STRATEGIC ALLIANCES CORPORATION By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President NATIONAL MEDIA HOLDINGS, INC. By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President NATIONAL MEDIA MARKETING CORPORATION By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President (SIGNATURES CONTINUED ON NEXT PAGE) -7- (SIGNATURES CONTINUED FROM PREVIOUS PAGE) MULTI-MEDIA DISTRIBUTION CENTER, INC. By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President BUSINESS PUBLICATIONS, INC. By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President QUANTUM MARKETING INTERNATIONAL, INC. By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President N.P.A. REALTY CORP. By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President NATIONAL MEDIA MEDIA CORPORATION By: /s/ John J. Sullivan ----------------------------------- Name/Title: Senior Vice President MERIDIAN BANK By: /s/ Steven D. Hobman ----------------------------------- Steven D. Hobman, Vice President -8- EX-11.1 6 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended June 30, ------------------------------ 1995 1994 ----------- ----------- (In thousands, except per share data) Primary Average shares outstanding .......................................................... 14,224 13,689 Conversion of preferred stock ....................................................... 2,558 -- Net effect of dilutive common stock equivalents (2) (3) ............................. 5,331 244 --------- --------- Total ............................................................................... 22,113 13,933 ========= ========= Net income (loss) ................................................................... $ 2,602 $ 471 Adjustments to net income: Reduction of interest expenses (net of tax) related to retired debt .......................................................... 202 -- Increase in interest income (net of tax) from investment of excess proceeds in short-term paper ................................ 137 -- --------- --------- Adjusted net income ................................................................. $ 2,941 $ 471 ========= ========= Per share earnings: Net earnings (loss) ................................................................. $ .13 $ .03 ========= ========= Fully Diluted Average shares outstanding .......................................................... 14,224 13,689 Conversion of preferred stock ....................................................... 2,558 -- Net effect of dilutive common stock equivalents (2) (4) ............................. 5,331 114 --------- --------- Total ............................................................................... 22,113 13,803 ========= ========= Net income (loss) ................................................................... $ 2,602 $ 471 Adjustments to net income: Reduction of interest expense (net of tax) related to retired debt ........................................................... 202 -- Increase in interest income (net of tax) from investment of excess proceeds in short-term paper ................................. 95 -- --------- --------- Adjusted net income ................................................................. $ 2,899 $ 471 ========= ========= Per share earnings: Net earnings (loss) (1) ............................................................. $ .13 $ .03 ========= =========
(1) This calculation is submitted in accordance with the requirements of Regulation S-K although not required by APB Opinion No. 15 because it results in dilution of less than 3%. (2) Common stock equivalents include the effect of the exercise of stock options and warrants. (3) For the three months ended June 30, 1995, based on dilutive common stock equivalents using the if converted method. For the three months ended June 30, 1994, based on the treasury stock method using average market price. (4) For the three months ended June 30, 1995, based on dilutive common stock equivalent using the if converted method. For the three months ended June 30, 1994, based on the treasury stock method using the year-end market price, if higher than average market price. EX-27.1 7 FINANCIAL DATA SCHEDULE
5 0000070412 NATIONAL MEDIA CORP. 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 17,517 0 19,891 (2,029) 17,357 61,916 9,770 (5,280) 71,887 36,955 0 149 0 3 29,295 71,887 65,045 65,045 54,666 61,695 0 0 240 3,110 508 2,602 0 0 0 2,602 .13 .13