-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PH8WKMPhvphHcNrbakLmWAaUr8EZFAFNQ6AT7/9OcrHzIUl3qpNwoVMUZpOwnmP7 tkI+QsE1b0ZM5YWp0F6Qww== 0001047469-98-010426.txt : 19980323 0001047469-98-010426.hdr.sgml : 19980323 ACCESSION NUMBER: 0001047469-98-010426 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19980318 SROS: NYSE 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: S-3 SEC ACT: SEC FILE NUMBER: 333-48217 FILM NUMBER: 98568622 BUSINESS ADDRESS: STREET 1: ELEVEN PENN CTR STE 1100 STREET 2: 1835 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2159884600 MAIL ADDRESS: STREET 1: ELEVEN PENN CENTER SUITE 1100 STREET 2: 1835 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL PARAGON CORP DATE OF NAME CHANGE: 19870827 S-3 1 S-3 As filed with the Securities and Exchange Commission on March 18, 1998 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- NATIONAL MEDIA CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 13-2658741 (I.R.S. Employer Identification Number) Eleven Penn Center, Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 (Address of principal executive offices) Brian J. Sisko, Senior Vice President and General Counsel Eleven Penn Center, Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 (Name and address of agent for service) (215) 988-4600 (Telephone number, including area code, of agent for service) --------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, check the following box: / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest investment plans. Check the following box. /X/ If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
Title of Securities Amount to be Proposed Proposed Amount of to be Registered Registered Maximum Offering Maximum Aggregate Registration Price Per Share Offering Price Fee Common Stock, par value $.01 per share 15,000,000 (1)(2) $2.25/share(3) $33,750,000(3) $9,957.00(3)
(1) Consists of 14,500,000 shares of the Registrant's Common Stock issuable upon conversion of the Registrant's Series D Convertible Preferred Stock and 500,000 shares of Registrant's Common Stock issuable upon exercise of warrants issued to the holders of the Series D Convertible Preferred Stock. Of those 14,500,000 shares of Common Stock, 3,300,330 shares of Common Stock may be issued upon conversion of the Series D Convertible Preferred Stock based upon the initial conversion price of $6.06 per share set forth in the Series D Certificate of Designations, Preferences and Rights. In addition, the 14,500,000 shares of Common Stock include a maximum of 2,400,000 shares of Common Stock that may be issued by the Registrant in payment of the 6% per annum premium payable upon conversion of the Series D Convertible Preferred Stock, assuming that the Series D Convertible Preferred Stock is not converted until its four-year maturity date. Both the 3,300,330 base conversion shares and the 2,400,000 base premium shares are subject to adjustment by reason of the floating rate conversion price mechanism set forth in the Series D Certificate of Designations, Preferences and Rights. Therefore, in addition to the 5,700,330 in aggregate base shares of Common Stock, the 14,500,000 shares of Common Stock also include an additional 154%, or 8,799,670 shares of Common Stock, which represent the Registrant's good faith estimate of the additional number of shares that may be issued upon conversion of the Series D Convertible Preferred Stock if the base conversion shares and base premium shares are adjusted upward pursuant to the floating rate conversion price mechanism as a result of a decline in the market price of the Common Stock. (2) Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the "Securities Act"), the number of shares of Common Stock set forth in the Calculation of Registration Fee Table issuable in respect of (i) the Series D Convertible Preferred Stock and the Series D Warrants are subject to adjustment by reason of stock splits, stock dividends, and other similar transactions in the Common Stock and (ii) the Series D Convertible Preferred Stock is subject also to adjustment by reason of the floating rate conversion price mechanism included in the Series D Certificate of Designations, Preferences and Rights. (3) Based on the average of the high and low sales price of the Registrant's Common Stock as reported by the New York Stock Exchange on March 12, 1998, estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine. "Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state." SUBJECT TO COMPLETION PROSPECTUS NATIONAL MEDIA CORPORATION Eleven Penn Center, Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 (215) 988-4600 --------------------------------- 15,000,000 Shares of Common Stock --------------------------------- This prospectus concerns the offer and sale by the selling stockholders named herein (the "Selling Stockholders"), from time to time, of up to 15,000,000 common shares (the "Offered Shares"), par value $.01 per share (the "Common Stock") of National Media Corporation (together with its subsidiaries, the "Company"). The Offered Shares consist of shares of Common Stock issuable by the Company (i) upon conversion by the Selling Stockholders (as defined herein, the "Series D Investors") of the Series D Convertible Preferred Stock, par value $.01 per share, of the Company (the "Series D Preferred Stock") held by such Selling Stockholders (the "Conversion Shares") and (ii) upon the exercise of warrants (the "Series D Warrants") issued by the Company to the Series D Investors (the "Series D Warrant Shares"). The Series D Preferred Stock was issued by the Company to the Series D Investors in exchange for all shares of the Company's Series C Convertible Preferred Stock, $.01 par value per share (the "Series C Preferred Stock"), issued by the Company to such investors in September 1997. The Offered Shares include a good faith estimate of the number of shares of Common Stock (including shares of Common Stock payable on account of the premium payable) underlying the Series D Preferred Stock that may be issued in connection with the conversion of the Series D Preferred Stock by reason of the floating rate conversion mechanism included in the Series D Certificate of Designations, Preferences and Rights. Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the "Securities Act"), the number of Offered Shares issuable in respect of (i) the Series D Preferred Stock and the Series D Warrants are subject to adjustment by reason of stock splits, stock dividends and other similar transactions in the Common Stock and (ii) the Series D Preferred Stock is also subject to adjustment by reason of the floating rate conversion mechanism included in the Series D Certificate of Designations, Preferences and Rights. None of the proceeds from the sale of the Offered Shares by the Selling Stockholders will be received by the Company. However, the Company will receive proceeds from the exercise of the Series D Warrants if the Series D Warrants are exercised. The Company will pay substantially all of the expenses with respect to the offering and sale of the Offered Shares to the public, including the costs associated with registering the Offered Shares under the Securities Act and preparing and printing this Prospectus. Any underwriting commission and broker fees, however, as well as any applicable transfer taxes, are payable individually by the Selling Stockholders. The Company's Common Stock is listed on the New York Stock Exchange ("NYSE") and the Philadelphia Stock Exchange ("PHLX") under the symbol "NM." On March 12, 1998, the closing sale price for the Common Stock, as quoted on the NYSE, was $2.1875 per share. SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. --------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY OTHER AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is March __, 1998. 1 Pursuant to this Prospectus, the Offered Shares may be sold by the Selling Stockholders, from time to time while the Registration Statement to which this Prospectus relates is effective, on the NYSE, the PHLX or otherwise at prices and terms prevailing at the time of sale, at prices and terms related to such prevailing prices and terms, in negotiated transactions or at fixed prices. The Selling Stockholders have advised the Company that they currently intend to sell all or a portion of the Offered Shares pursuant to this Registration Statement from time to time in any manner described under "Plan of Distribution." See "Plan of Distribution." Notwithstanding the registration of the offer and sale of Offered Shares hereunder to subsequent purchasers, Selling Stockholders to whom the Offered Shares were initially issued by the Company, whether or not affiliates of the Company, that acquire the Conversion Shares or the Series D Warrant Shares will be required to deliver this Prospectus in accordance with the Securities Act in connection with any transaction involving the resale of such securities. --------------------- 2 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO BUY THE SECURITIES TO WHICH THIS PROSPECTUS RELATES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATE AS OF WHICH INFORMATION IS SET FORTH HEREIN. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Commission. Such reports, proxy and information statements and other information can be inspected and copied at prescribed rates at the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional offices located at 7 World Trade Center, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Such reports and other information filed with the Commission can be reviewed through the Commission's Electronic Data Gathering Analysis and Retrieval System, which is publicly available through the Commission's website (http:www.sec.gov). The Common Stock of the Company is listed on the NYSE and the PHLX and reports, proxy and information material and other information concerning the Company may be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005 and the PHLX, 1900 Market Street, Philadelphia, Pennsylvania 19103. This Prospectus constitutes a part of a registration statement on Form S-3 (the "Registration Statement") filed by the Company with the Commission under the Securities Act with respect to the securities offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Reference is hereby made to the Registration Statement and to the exhibits thereto for further information with respect to the Company and the securities offered hereby. Copies of the Registration Statement and the exhibits thereto are on file at the offices of the Commission and may be obtained upon payment of the prescribed fee or may be examined without charge at the Public Reference Section of the Commission described above. Statements contained herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the applicable document filed with the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: (a) The Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997 (the "Form 10-K"); (b) Amendments to the Form 10-K filed on Form 10-K/A, dated, respectively, July 28, 1997 and January 9, 1998 (together with the Form 10-K, the "1997 Annual Reports"); (c) The Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997, September 30, 1997 and December 31, 1997 and amendments to the Company's Quarterly Report on Form 10-Q/A for the quarter ended September 30, 1997, dated, respectively, January 9, 1998 and January 23, 1998; (d) The Company's Current Reports on Form 8-K, dated April 28, 1997, June 30, 1997 and September 18, 1997 and January 5, 1998 and the Company's Current Report on Form 8-K/A, dated January 5, 1998 and filed January 16, 1998; and (e) The Company's Joint Proxy Statement/Prospectus dated March 16, 1998 related to the proposed merger of the Company with Value Vision International, Inc.; and (f) The description of the Company's Common Stock contained in the Company's Registration Statement on Form 8-A, dated August 28, 1990, including all amendments and reports filed for the purpose of updating such description. 3 All documents filed pursuant to Section 13(a), 13(c), 14 or 15 (d) of the Exchange Act subsequent to the date of this Prospectus and prior to the completion or termination of this offering shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing of such documents. Any statement contained in a document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document, which also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request, a copy of any or all of such documents which are incorporated herein by reference (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into the documents that this Prospectus incorporates). Written or oral requests for copies should be directed to National Media Corporation, Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, Pennsylvania 19103; Attention: Director of Investor Relations, phone number 215-988-4600. 4 FORWARD-LOOKING STATEMENTS This Prospectus contains "forward-looking" statements regarding potential future events and developments affecting the business of the Company. Such statements relate to, among other things, (i) the Merger; (as defined below); (ii) competition for customers for its products and services; (iii) the uncertainty of developing or obtaining rights to new products that will be accepted by the market and the timing of the introduction of new products into the market; (iv) the limited market life of the Company's products; and (v) other statements about the Company or the direct response consumer marketing industry. Such forward-looking statements include those preceded by, followed by or that include the words "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. The Company's ability to predict the results or the effect of any pending events (including the Merger) on the Company's operating results is inherently subject to various risks and uncertainties, including competition for products, customers and media access; the risks of doing business abroad; the uncertainty of developing or obtaining rights to new products that will be accepted by the market; the limited market life of the Company's products; and the effects of government regulations. Reference is made in particular to the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1997 Annual Report incorporated in this Prospectus by reference. THE COMPANY The Company is principally engaged in the use of direct response transactional television programming, known as infomercials, to sell consumer products. The Company manages all phases of direct marketing for the majority of its products in both the United States and international markets, including product selection and development, manufacturing by third parties, production and broadcast of infomercials, order processing and fulfillment and customer service. The Company is engaged in direct marketing of consumer products in the United States and Canada through its wholly-owned subsidiary, Quantum North America, Inc. (formerly Media Arts International, Ltd.), which the Company acquired in 1986, and internationally through its wholly-owned subsidiaries: Quantum International Limited, which the Company acquired in 1991; Quantum Far East Ltd., through which the Company operates in all Asian countries other than Japan; Quantum International Japan Company Limited, which the Company formed in June 1995; and Prestige Marketing Limited and Prestige Marketing International Limited (collectively, "Prestige") and Suzanne Paul Holdings Pty Limited and its operating subsidiaries (collectively, "Suzanne Paul"), which the Company acquired in July 1996. The Company produces infomercials through DirectAmerica Corporation ("DirectAmerica"), d/b/a Quantum Television, which the Company acquired in October 1995 and Positive Response Television, Inc. ("Positive Response"), which the Company acquired in May 1996. The Company is a Delaware corporation, with its principal executive offices located at Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, Pennsylvania 19103 and its telephone number is 215-988-4600. RECENT DEVELOPMENTS General On January 5, 1998, the Company announced that it had entered into an Agreement and Plan of Reorganization and Merger (the "Merger Agreement"), dated as of January 5, 1998, by and among the Company, ValueVision International, Inc. ("ValueVision") and V-L Holdings Corp. (subsequently renamed Quantum Direct Corporation) ("Quantum Direct"), a newly-formed Delaware corporation. ValueVision is a Minneapolis, Minnesota-based integrated electronic and print media direct marketing company which operates the third largest home shopping network in the United States. Following consummation of the transactions contemplated by the Merger Agreement, the Company and ValueVision will be wholly-owned subsidiaries of Quantum Direct (the "Merger"). Subject to the satisfaction of certain conditions set forth below, the Merger is expected to be consummated in the second calendar quarter of 1998. On March 16, 1998, each of the Company and ValueVision mailed a joint proxy statement to its stockholders soliciting approval of the Merger. Meetings of the Company's and ValueVision's stockholders are presently scheduled for April 14, 1998. The Merger will be accounted for as a purchase for accounting and financial reporting purposes with ValueVision as the acquiror. As a result, approximately $87 million in goodwill will have to be recognized by Quantum Direct and amortized over a 25-year period. Quantum Direct is making application to have its Common Stock listed on the New York Stock Exchange. 5 As of October 31, 1997, ValueVision had approximately $45.7 million in cash and cash equivalents and no outstanding indebtedness. The Company believes that ValueVision's strong balance sheet will, upon consummation of the Merger, improve the Company's liquidity. Such enhanced liquidity, management believes, when combined with ValueVision's excess telemarketing, customer service and order fulfillment capacity, will improve the Company's financial condition and results of operations; provided, however, that until such time as the Merger is completed and the businesses of the Company and ValueVision are integrated, there can be no assurance as to the realization or magnitude of such operational efficiencies. The Company's relationship with ValueVision dates back to January 1994, at which time ValueVision made an unsolicited tender offer to acquire the Company. Although initially rejected by the Company, the companies eventually entered into a merger agreement in March 1994, pursuant to which ValueVision amended its tender offer. In April 1994, ValueVision terminated such merger agreement. Such termination resulted in a year-long litigation between the companies. Pursuant to a settlement of such litigation, ValueVision and the Company entered into a Telemarketing, Production and Post-Production Agreement in April 1995 (the "Telemarketing Agreement") and the Company issued to ValueVision a warrant to purchase 500,000 shares of Common Stock at an exercise price of $8.865 per share. Since entering into the Telemarketing Agreement, ValueVision and National Media have had an ongoing business relationship. The Telemarketing Agreement and such warrant will be terminated as part of the Merger. Transaction Terms Pursuant to the terms of the Merger Agreement, each outstanding share of Common Stock will be converted into the right to receive one share of common stock in Quantum Direct and each outstanding share of common stock, $.01 par value per share ("ValueVision Common Stock") of ValueVision, will be converted into the right to receive 1.19 shares of common stock in Quantum Direct. Cash will be paid in lieu of fractional shares of Quantum Direct common stock. Following consummation of the Merger, Quantum Direct will have an aggregate of approximately 57 million shares of common stock issued and outstanding (based upon 25,325,487 shares of Common Stock and 26,755,778 shares of ValueVision Common Stock issued and outstanding as of January 19, 1998). The Company's stockholders will own approximately 45% of the common stock of Quantum Direct after the Merger. ValueVision's shareholders will own approximately 55% of the common stock of Quantum Direct after the Merger. Concurrently with the execution of the Merger Agreement, the Company entered into an agreement with the holders of the Series C Preferred Stock (the "Redemption and Consent Agreement") in which the Company agreed to exchange the Series C Preferred Stock for the Series D Preferred Stock and to redeem all of the Series D Preferred Stock for approximately $23.5 million upon consummation of the Merger. Pursuant to the terms of the Redemption and Consent Agreement, the Series D Investors agreed, among other things, not to request the Company to convert the Series C Preferred Stock or Series D Preferred Stock into Common Stock at a per share price below $6.06 prior to the earliest of (i) June 1, 1998 (which date may be extended until August 31, 1998 in certain circumstances set forth in the Redemption and Consent Agreement), (ii) the date upon which it is publicly announced that ValueVision is unwilling to proceed with the Merger on the terms set forth in the Merger Agreement, or (iii) the date upon which demand is made to the Company to repay the Loan (as defined below) described below. In order to make the required amendments to the terms of the Series C Preferred Stock, the Company agreed to exchange the Series C Preferred Stock for a class of newly designated preferred stock, Series D Preferred Stock, which contains terms substantially similar to those set forth in the Series C Certificate of Designations, Preferences and Rights. As further consideration for executing the Redemption and Consent Agreement, the Company issued to the Series D Investors the Series D Warrants which are exercisable at any time prior to January 5, 2003. Until a permanent Quantum Direct chief executive officer is appointed, Robert Johander, current chief executive officer of ValueVision, will serve as interim chief executive officer of Quantum Direct. The Company and ValueVision have commenced a search for a permanent chief executive officer. Robert Verratti, current chief executive officer of the Company, will reduce his operational responsibilities upon completion of the Merger but will remain a member of the Board of Directors and Executive Committee of Quantum Direct. Frederick Hammer, Chairman of the Board of Directors of the Company, and Mr. Johander will serve as co-chairmen of the Board of Directors of Quantum Direct. Nicholas M. Jaksich, the current chief operating officer of ValueVision, will serve as president and chief operating officer of Quantum Direct. Stuart R. Romenesko, the current chief financial officer ValueVision, will serve as chief financial officer of Quantum Direct. The Board of Directors of Quantum Direct initially will consist of ten members, half chosen by the Company and half chosen by ValueVision. Pursuant to the terms of the Merger Agreement, ValueVision agreed to extend to the Company a working capital loan (the "Loan") of up to $10 million, $7 million of which was advanced upon execution of Merger Agreement. The Loan proceeds will be used by the Company for various purposes, including funding of inventory and media purchases. The Loan bears interest at prime rate plus one and one-half percent per annum and is due on the earlier of January 1, 1999 or upon termination of the Merger Agreement in certain circumstances. In the event the Company is 6 unable to repay the Loan when due, ValueVision may elect to receive payment in shares of Common Stock at the then present market value. In consideration for providing the Loan, the Company issued to ValueVision a warrant to acquire 250,000 shares of Common Stock. Such warrant has an exercise price per share equal to $2.73 per share. The warrant is exercisable until the earlier of (i) January 5, 2003 and (ii) the occurrence of one of the following termination events: (x) the consummation of the Merger or (y) the termination by the Company of the Merger Agreement, if such termination results from a breach of a covenant by ValueVision or in the event ValueVision's shareholders do not approve the Merger Agreement; provided, however, that if, within 75 days after such termination event, the Company has not repaid the Loan in full or if during such 75 days, the Company defaults under its obligations pursuant to the Loan, no termination event will be deemed to have occurred and the warrant shall remain exercisable. The Company also granted registration rights in connection with the shares of Common Stock issuable in connection with the Loan and the warrants issued to ValueVision. Consummation of the Merger is subject to the satisfaction (or waiver) of a number of conditions, including, but not limited to: (i) the approval and adoption of the Merger Agreement and approval of the Merger by holders of a majority of the issued and outstanding shares of Common Stock and ValueVision Common Stock; (ii) redemption of the Company's Series D Stock for approximately $23.5 million (which funds are to be advanced by ValueVision to the Company immediately prior to the closing of the Merger); (iii) the effectiveness of a Registration Statement in connection with the issuance of Quantum Direct common stock in the Merger; (iv) the continuing accuracy in all material respects of the representations and warranties made by each of the Company and ValueVision in the Merger Agreement on and as of the Effective Time; (v) the compliance by the parties with certain covenants contained in the Merger Agreement; (vi) the receipt by each of the Company and ValueVision, as applicable, of certain opinions regarding tax and certain other matters; and (vii) the receipt of certain regulatory approvals. In the event of the termination of the Merger Agreement under certain circumstances, such as the proposal of an Alternative Transaction (as defined in the Merger Agreement), the Company is obligated to pay to ValueVision, or ValueVision is obligated to pay to the Company, a termination fee equal to $5.0 million. In addition, the Company has granted to ValueVision an option to purchase up to 19.9% (5,075,979 shares of Common Stock based upon the number of shares of Common Stock issued and outstanding on the date of execution of the Merger Agreement) of the Company's Common Stock at a per share cash purchase price of $3.4375. Similarly, ValueVision has granted to the Company an option to purchase up to 19.9% (5,579,119 shares of ValueVision Common Stock based upon the number of shares of ValueVision Common Stock issued and outstanding as of the date of execution of the Merger Agreement) of ValueVision's Common Stock at a per share cash purchase price of $3.875. Such options (each, a "Termination Option") are exercisable by the respective party, in whole or in part, at any time after the occurrence of an event which would entitle such party to the termination fee described above; provided, however, that neither party may exercise the Termination Option if such party is in material breach of any of its material representations, warranties, covenants or agreements contained in the Merger Agreement or in the Termination Option. Neither party may receive in excess of $7.5 million in connection with the receipt of the termination fee and the exercise of such party's Termination Option. The Termination Option could have the effect of making a third party acquisition of the Company more costly because of the need to acquire in any such transaction the shares of Common Stock subject to such Termination Option, and could also jeopardize the ability of a third party to acquire the Company in a transaction accounted for as a pooling of interests. Possible Transaction Value If one were to use the closing sales price for ValueVision Common Stock of $3.875 per share on January 2, 1998 (the last trading date immediately prior to the date the Merger was publicly announced) in determining the aggregate value of the shares of Quantum Direct common stock expected to be issued upon consummation of the Merger, the value of the shares of Quantum Direct common stock would be approximately $189 million. Based upon the average closing sales price for ValueVision Common Stock of $3.5625 per share on March 12, 1998, the aggregate value of the shares of Quantum Direct common stock expected to be issued upon consummation of the Merger would be approximately $173 million. There can be no assurance as to the price at which Quantum Direct's common stock will trade following consummation of the Merger. Comparative Per Share Data The following table summarizes certain unaudited historical and pro forma per share data, giving effect to the Merger as a purchase with ValueVision deemed the acquiror for accounting and financial reporting purposes. The unaudited selected pro forma per share data for the year ended January 31, 1997 (ValueVision's fiscal year ends on January 31) gives effect to the Merger as if it had occurred on February 1, 1996 and has been prepared on the basis of the results of operations for the year ended January 31, 1997 for ValueVision and for the year ended March 31, 1997 for the Company. The unaudited selected per share data for the 7 nine months ended October 31, 1997 gives effect to the Merger as if it had occurred on February 1, 1996 and has been prepared on the basis of the results of operation for the nine months ended October 31, 1997 for ValueVision and for the nine months ended December 31, 1997 for the Company. The unaudited selected pro forma condensed consolidated per share data set forth in the following table is derived from, and should be read in conjunction with, the publicly-filed historical consolidated financial statements of ValueVision and the Company, including the respective notes thereto. The following unaudited per share data is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the Merger been consummated on the dates or prior to the periods presented.
Pro Forma(1) -------------------------------- Year Ended Nine Months Ended January 31, October 31, 1997 1997 ----------- ----------------- Per share data: ValueVision Common Stock Net income (loss): Historical.............. $0.57 $0.58 Pro forma consolidated.. (0.30) (0.11) Book value(2): Historical.............. 4.41 4.73 Pro forma consolidated.. 3.62
Pro Forma(1) -------------------------------- Year Ended Nine Months Ended March 31, December 31, 1997 1997 ------------ ----------------- National Media Common Stock Net loss: Historical.............. ($2.09) ($1.45) Pro forma equivalent.... (0.30) (0.11) Book value(2): Historical.............. 3.68 2.95 Pro forma equivalent.... 3.62
(1) Pro Forma adjustments reflect $86.7 million of excess cost over net tangible assets acquired (i.e., goodwill) arising from the Merger in accordance with the purchase method of accounting. This adjustment reflects the replacement of the Company's historical recurring amortization of goodwill with the amortization of Parent goodwill recorded through purchase accounting. Goodwill is assumed to be amortized on a straight-line basis over a period of 25 years. For accounting and financial reporting purposes, ValueVision will be deemed the acquiror. Also included in the purchase price is the estimated fair value of stock options "in-the-money" as of the assumed closing date of the Merger. This adjustment reflects the effect of the redemption of the Series D Preferred Stock on December 31, 1997 for approximately $21.4 million. The final allocation of the purchase price will be determined upon the consummation of the Merger or shortly thereafter. (2) In making such calculations, historical book value per share is calculated by dividing total common shareholders' equity by total common shares outstanding. Pro forma consolidated book value per share is calculated by dividing total pro forma common shareholders' equity by the sum of total outstanding shares of National Media's Common Stock (assuming the conversion of 5.0 shares of the Series B Stock) adjusted for the 1.0 to 1.0 exchange ratio plus the total outstanding shares of ValueVision Common Stock adjusted for the 1.19 to 1.0 exchange ratio. Pro forma equivalent book value per share represents the pro forma consolidated book value per share multiplied by the 1.0 to 1.0 National Media exchange ratio. 8 RISK FACTORS The purchase of the shares of Common Stock offered hereby involve certain risks. In addition to the other information set forth and incorporated by reference in this Prospectus, the following factors should be considered carefully by prospective investors in evaluating an investment in the shares of Common Stock offered hereby. The Company's fiscal year ends on March 31. References to fiscal 1997, fiscal 1996 etc. refer to the fiscal period ending in the indicated calendar year. The following does not discuss matters which relate specifically to ValueVision or its business, financial condition or results of operations. There can be no assurance that the Merger will be consummated or that, if consummated, the Merger will result in any of the synergies or other benefits expected to result from the Merger. Recent Losses; Cash Flow The Company has suffered net losses in three of its last four fiscal years, including net losses of approximately $45.7 million in fiscal 1997, approximately $670,000 in fiscal 1995 and approximately $8.7 million in fiscal 1994. The Company also reported a net loss of approximately $35.5 million for the first nine months of fiscal 1998. Based upon the deterioration which occurred in the Company's financial condition during fiscal 1997 and the presence of certain other conditions, as of July 14, 1997, the Company's independent auditors opined that substantial doubt existed as to the Company's ability to continue as a going concern. During calendar year 1997, the Company also experienced, as a result of such losses and other circumstances, significant cash flow difficulties. While the Company has developed a business plan and implemented a number of programs designed to reduce costs and return the Company to profitability, there can be no assurance that such business plan adequately addresses the circumstances and situations which resulted in the Company's performance in the periods referred to above. Unless the Company adequately addresses the reasons for its recent results of operations, there can be no assurance as to the Company's future results of operations. Nature of the Infomercial Industry The worldwide infomercial industry is now characterized by extreme competition for products, customers and media access. The Company's future in this industry will depend in part on its access to, and efficient management of, media time; the introduction of successful products and the full exploitation of such products through not only direct marketing but also traditional retail marketing and other channels of distribution; its ability to enhance its product lines and support product marketing and sales with efficient order fulfillment and customer services; and its ability to successfully integrate the entities or businesses the Company has or may acquire into an efficient global company. The future revenues of the business will depend substantially on the Company's ability to create and maintain an effective, integrated organization to develop, introduce and market products that (i) address changing consumer needs on a timely basis; (ii) establish and maintain effective distribution channels (infomercial and non-infomercial) for its products; and (iii) develop new geographic markets while expanding established geographic markets. There can be no assurance that the Company will be able to achieve these goals. While the Company maintains an internal product development group responsible for seeking out new products from third parties, there can be no assurance that present and potential third party product providers will choose to market products through the Company in the future. Delays in product introductions and short falls in successful product introductions played a significant part in the Company's fiscal 1997 and subsequent results of operations. Any significant delays or reductions in product introductions in the future periods could have a material adverse effect on the Company's future results of operations. Dependence on Foreign Sales The Company had no sales outside the United States and Canada prior to June 1991. The Company now markets products to consumers in over 70 countries. In fiscal 1997, 1996 and 1995, approximately 47.4%, 51.6% and 45.7%, respectively, of the Company's net revenues were derived from sales to customers outside the United States and Canada. Such sales represented a 12.4% increase in fiscal 1997 from fiscal 1996, a 87.6% increase in fiscal 1996 from fiscal 1995 and a 74.8% increase in fiscal 1995 from fiscal 1994. In fiscal 1997, 1996 and 1995, sales in Germany accounted for approximately 5.7%, 7.0% and 13.0%, respectively, of the Company's net revenues. In early 1994, the Company began airing its infomercials in Asia. Sales of the Company's products in Asia accounted for approximately 19.8% of' the Company's net revenues for fiscal 1997. Sales of the Company's products in Japan, which represented a significant portion of Asian revenues, accounted for approximately 17.7% of the Company's net revenues for fiscal 1997. The Company experienced a decline of approximately 30.3% in its Japanese net revenues in fiscal 1997 compared to fiscal 1996. During fiscal 1998 this trend has continued. In the first nine months of fiscal 1998, as compared to the first nine months of fiscal 1997, the Company's revenues in its Asian marketplace had declined by 49.4%, approximately 10% of which is attributable to currency devaluation. The Company expects such revenues to continue to decline in light of the economic downtown, including a significant devaluation in currencies, and increased competition experienced in certain Asian countries in the fourth calendar quarter of 1997 and in the beginning of the 9 first calendar quarter of 1998. Geographical expansion of sales activity results in increased working capital requirements as a result of additional lead time for delivery of and payment for product prior to receipt of sale proceeds. While the Company's foreign operations have the advantage of airing infomercials that have already proven successful in the United States market, as well as successful infomercials produced by other international companies with limited media access and distribution capabilities, there can be no assurance that the Company's foreign operations will continue to generate increases in net revenues. Competition in the Company's international marketplace is increasing rapidly. In addition, the Company is subject to many risks associated with doing business abroad, including: adverse fluctuations in currency exchange rates; transportation delays and interruptions; political and economic disruptions; the imposition of tariffs and import and export controls; and increased customs or local regulations. The occurrence of any one or more of the foregoing could have a material adverse effect on the Company's results of operations. Entering into New Markets As the Company enters into new markets, including countries in Asia and South America, it is faced with the uncertainty of never having done business in those commercial, political and social settings. Accordingly, despite the Company's best efforts, its likelihood of success in each new market which it enters is unpredictable for reasons particular to each such market. It is also possible that, despite the Company's apparently successful entrance into a new market, some unforeseen circumstance could arise which would limit the Company's ability to continue to do business or to expand in that new market. Dependence on New Products; Unpredictable Market Life; Inventory Management and Product Returns The Company is dependent on its continuing ability to develop or obtain rights to new products to supplement or replace existing products as they mature through their product life cycles. The Company's future results of operations will also be dependent upon its ability to proactively manage its products through their life cycles. The Company's five most successful products in each of fiscal 1997, 1996 and 1995 accounted for approximately 41.2%, 46.0% and 54.0%, respectively, of the Company's net revenues for such periods. For the most part, the Company's five most successful products change from year to year. Revenues are dependent from year to year on the introduction of new products. Even if the Company is able to introduce new products, there can be no assurance that such new products will be successful. The Company's future results of operations depend on its ability to spread its revenue (sales) stream over a larger number of products in a given period and to more effectively exploit the full revenue potential of each product it introduces through all levels of consumer marketing, whether directly or through third parties. Product sales and results of operations for a given period will depend upon, among other things, a positive customer response to the Company's infomercials, the Company's effective management of product inventory and the stage in their life cycles of products sold during such period. Customer response to infomercials depends on many variables, including, the appeal of the products being marketed, the effectiveness of the infomercials, the availability of competing products and the timing and frequency of air-time. There can be no assurance that the Company's new products will receive market acceptance. In the event the Company does not have an adequate supply of inventory, as a result of production delays or shortages or inadequate inventory management or cash flow difficulties, it may lose potential product sales. The ability of the Company to maintain systems and procedures to more effectively manage its inventory (and its infomercial airings), in the domestic as well as international markets, is of critical importance to the Company's continuing cash flow and results of operations. It is possible that, during a product's life, unanticipated obsolescence of such product may occur or problems may arise regarding regulatory, intellectual property, product liability or other issues which may affect the continued viability of the product for sale despite the fact that the Company may still hold a sizable inventory position in such product. Most of the Company's products have a limited market life. It is therefore, extremely important that the Company fully realize the potential of each successful product. Historically, the majority of products generate their most significant domestic revenue in their introductory year. Foreign revenues have tended to have been generated more evenly over a somewhat longer period. In the event the number of times an infomercial is broadcast within a market is increased, the market life of such product in such market may decrease. There can be no assurance that a product which has produced significant sales will continue to produce significant, or any, sales in the future. As a result, the Company is dependent on its ability to adapt to market conditions and competition as well as other factors which affect the life cycles of its products and its ability to continue to identify and successfully market new products. The failure of newly introduced products or significant delays in the introduction of, or failure to introduce, new products would adversely impact the Company's results of operations in terms of both lost opportunity cost and actual loss of dollars invested. Even when market acceptance for the Company's new products occurs, the Company's results of operations may be adversely impacted by returns of such products, either pursuant to the Company's warranties or otherwise. 10 While the Company establishes reserves against such returns which it believes are adequate based upon historic levels and product mix, there can be no assurance that the Company will not experience unexpectedly high levels of returns (in excess of its reserves) for certain products. In the event that returns exceed reserves, the Company's results of operations would be adversely affected. Dependence on Third Party Manufacturers and Service Providers The Company has historically been dependent on third party sources, both foreign and domestic, to manufacture all of its products. From time to time, the Company has also been dependent to an extent upon a number of companies which serve to fulfill orders placed for the Company's products and/or provide telemarketing services. The inability of the Company, either temporarily or permanently, to obtain a timely supply of product to fulfill sales orders for a specific product or to satisfy orders for such product could have a material adverse effect on the Company's results of operations. Moreover, because the time from this initial approval of a product by the Company's product development personnel to the first sale of such product is relatively short, the Company's ability to cause its manufacturing sources to meet its production and order fulfillment deadlines at reasonable costs and produce a high-quality product or render quality service is important to its business. There can be no assurance that the Company will successfully manage this process in such a way to maximize its sales of its products. Since the Company often relies on foreign manufacturers, it must allow longer lead times for products to fulfill customer orders. Utilizing such foreign manufacturers exposes the Company to the general risks of doing business abroad. Dependence on Media Access; Effective Management of Media Time The Company has historically been dependent on having access to media time to televise its infomercials on cable networks, network affiliates and local stations. The Company's future results of operations will also depend upon the Company's ability to manage its media time, taking advantage of long-term purchases where prudent and spot purchases where necessary. This media management function must also include a meaningful coordination between available infomercials and available media time. In the normal course of business, the Company's media contracts expire pursuant to their terms from time to time. There can be no assurance that, as existing contracts expire, the Company will be able to purchase or renew media time on a long-term basis or at favorable price levels. The Company purchases a significant amount of its media time from cable television and satellite networks. These cable television and satellite networks assemble programming for transmission to multiple and local cable system operators. These cable system operators may not be required to carry all of the network's programming. The Company currently does not pay and is not paid for the "privilege" of being broadcast by these operators. It is possible that, if demand for air time grows, these operators will begin to charge the Company to continue broadcasting the Company's infomercials or limit the amount of time available for broadcast. Recently, larger multiple system operators have elected to change their operations by selling "dark" time (i.e., the hours during which a station does not broadcast its own programming). Significant increases in the cost of media time or significant decreases in the Company's access to media time, domestically or internationally, including, but not limited to, any failure to renew or extend existing agreements, could have a material adverse effect on its results of operations. There can also be no assurances that, even if the Company secures media access, its programming will attract viewers or that its products will enjoy consumer acceptance. In addition, periodically, due to world events, media access and the number of persons viewing the Company's infomercials in one or more markets may be substantially diminished. In such circumstances, the Company's results of operations for such periods may be adversely affected. In recent periods the Company has experienced an increase in the demand by international media suppliers for fixed rates and/or for minimum revenue guarantees, both of which increase the Company's risk. A significant portion of the Company's media time has historically been purchased under contracts which are one year or greater in length. Whenever the Company makes advance purchases and commitments to purchase media time, if the Company does not manage such media time effectively, such failure could have a material adverse effect on the Company's results of operations. In the event the Company is unable to utilize all of the media time it has acquired, it attempts to arrange to sell a portion of its media time to others. There can be no assurance, however, that the Company will be able to use all of its media time or sell it to others or that, upon expiration of such long-term contracts, the Company will be able to successfully negotiate extensions of such contracts on terms favorable to the Company. The inability of the Company to extend one or more of such contracts on reasonable terms as they expire could have a material adverse effect on the Company's results of operations. Litigation Involving the Company The infomercial industry has historically been very litigious and the Company in recent years has been involved in significant legal proceedings and has incurred significant charges in prior periods related to such litigation. Abbreviated information regarding the status of current material pending litigation involving the Company is set forth below. However, as it pertains to previously reported matters, such information does not purport to be complete and 11 is qualified in its entirety by the detailed description of the legal and regulatory proceedings set forth in the reports filed by the Company pursuant to the Exchange Act and incorporated by reference herein. Such descriptions variously include information relating to the status of the proceedings and the Company's evaluation of the claims made against it. Certain of such previously reported matters have been resolved substantially in accordance with the terms set forth in such prior disclosure. In addition, as set forth above, the Company consummated the acquisition of DirectAmerica in October 1995 and the acquisition of Positive Response in May 1996. As a result of these acquisitions, all liabilities of DirectAmerica and Positive Response became liabilities of the respective wholly-owned subsidiary of the Company into which each of DirectAmerica and Positive Response was merged. The Company also acquired Prestige and Suzanne Paul in July 1996, including all of their respective liabilities. NATIONAL MEDIA LITIGATION WWOR Litigation In March 1997, WWOR-TV filed a breach of contract action in the United States District Court for New Jersey against one of the Company's operating subsidiaries alleging that the subsidiary wrongfully terminated a contract for the purchase of media time, seeking in excess of $1,000,000 in compensatory damages. The Company is contesting the action and believes it has meritorious defenses to the plaintiff's claims for damages. At this stage, the Company cannot predict the outcome of this matter; however, even if plaintiffs were to prevail on all of their claims, the Company does not believe that such result would have a material adverse impact on the Company's financial condition or results of operations. Parkin In early October 1997, John Parkin, an on air personality appearing in certain of the Company's infomercials, brought an action for injunctive relief and unspecified damages in the United States District Court for the Eastern District of Pennsylvania, alleging principally breach of contract and intellectual property based claims. Following court hearings, plaintiff's claims for injunctive relief were dismissed. While at this stage it is not possible to predict the outcome of this matter, the Company believes that any resolution of this matter will not have a material adverse effect on the Company's results of operations. PRTV LITIGATION PRTV Shareholders' California Class Action On May 1, 1995, prior to the acquisition of PRTV by the Company, a purported class action suit was filed in the United States District Court for the Central District of California against PRTV and its principal executive officers alleging that PRTV made false and misleading statements in its public filings, press releases and other public statements with respect to its business and financial prospects. The suit was filed on behalf of all persons who purchased PRTV common stock during the period from January 4, 1995 to April 28, 1995. The suit sought unspecified compensatory damages and other equitable relief. On or about September 25, 1995, the plaintiffs filed a second amended complaint which added additional officers as defendants and attempted to set forth new facts to support plaintiff's entitlement to legal relief. The Company reached an agreement in principle to settle this action in fiscal year 1997 which provides for the payment of $550,000 to the class, 66% of which is to be paid by PRTV's insurance carrier. The Company recorded a charge of $187,000 during fiscal 1997 in connection with this matter, reflecting its portion of such settlement. Such settlement is contingent upon final court approval. Suntiger In late March 1997, Suntiger, Inc., a distributor of sunglasses, filed suit against PRTV and certain other parties alleging patent infringement. The Company has reached a settlement with the plaintiffs involving a going forward business relationship which will not have a material adverse effect on the Company's financial condition or results of operations. REGULATORY MATTERS The infomercial industry is regulated by the Federal Trade Commission (the "FTC"), the United States Post Office, the Consumer Product Safety Commission, the Federal Communications Commission, the Food and Drug Administration, various States' Attorneys General and other state and local consumer protection and health agencies. The FTC directly regulates marketers of products, such as the Company, credit card companies which process customer orders and others involved in the infomercial and direct marketing industries. 12 The Company's marketing activities and/or products have been and will continue to be subject to the scrutiny of each of the aforementioned regulatory agencies. An adverse determination or extended investigation by any of these agencies could have a material adverse effect on the Company. Moreover, the domestic and international regulatory environments in which the Company operates are subject to change from time to time. It is possible that changes in the regulations to which the Company is subject might have a material adverse effect on the Company's business or results of operations. As a result of prior settlements with the FTC, the Company has agreed to two consent orders. Prior to the Company's acquisition of Positive Response, Positive Response and its Chief Executive Officer, Michael S. Levey, also agreed to a consent order with the FTC. Among other things, such consent orders require the Company, Positive Response and Mr. Levey to submit compliance reports to the FTC staff. The Company, Positive Response and Mr. Levey submitted compliance reports as well as additional information requested by the FTC staff. In June 1996, the Company received a request from the FTC for additional information regarding certain of the Company's infomercials in order to determine whether the Company was operating in compliance with the consent orders referred to above. The Company responded to such request. The FTC later advised the Company that it believed the Company had violated one of the consent orders by allegedly failing to substantiate certain claims made in one of its infomercials which it no longer airs in the United States. The Company, which is now indemnified against damages sustained as a result of any action taken by the FTC in connection with such infomercial, has provided information to the FTC to demonstrate substantiation. If the Company's substantiation is deemed to be insufficient by the FTC, the FTC has a variety of enforcement mechanisms available to it, including, but not limited to, monetary penalties. While no assurances can be given, especially given the indemnification protection available to it, the Company does not believe that any remedies to which it may become subject will have a material adverse effect on the Company's results of operations or financial condition. In addition, in Spring 1997, in accordance with applicable regulations, the Company notified the CPSC of breakages which were occurring in its Fitness Strider product. The Company also notified the CPSC of its replacement of certain parts of the product with upgraded components. The CPSC reviewed the Company's testing results in order to assess the adequacy of the Company's upgraded components. The CPSC also undertook its own testing of the product and, in November 1997, the CPSC informed the Company that the CPSC compliance staff had made a preliminary determination that the Fitness Strider product and the upgraded component present a substantial product hazard, as defined under applicable law. The Company and the CPSC staff are discussing voluntary action to address the CPSC's concerns, including replacement of the affected components. At present, management of the Company does not anticipate that any action agreed upon, or action required by the CPSC, will have any material adverse impact on the Company's financial condition or results of operations. The Company has also been contacted by Australian consumer protection regulatory authorities regarding the safety and fitness of the Fitness Strider product and an exercise rider product marketed only in Australia and New Zealand. At this point, the Company cannot predict whether the outcome of these matters regarding the Fitness Strider will have a material adverse impact upon the Company's financial condition or results of operations. The Company's international business is subject to the laws and regulations of England, the European Union, Japan and other countries in which the Company sells its products, including, but not limited to, the various consumer and health protection laws and regulations in the territories in which the programming is broadcast, where applicable. If any significant actions were brought against the Company or any of its subsidiaries in connection with a breach of such laws or regulations, including the imposition of fines or other penalties, or against one of the entities through which the Company obtains a significant portion of its media access, the Company could be materially adversely affected. There can be no assurance that changes in the laws and regulations of any territory which forms a significant portion of the Company's market will not adversely affect the Company's financial condition or results of operations. Product Liability Claims Products sold by the Company may expose it to potential liability from claims by users of such products, subject to the Company's rights, in certain instances, to indemnification against such liability from the manufacturers of such products. The Company generally requires the manufacturers of its products to carry product liability insurance, although in certain instances where a limited quantity of products are purchased from non-U.S. vendors, the vendor may not be formally required to carry product liability insurance. Certain of such vendors, however, may in fact maintain such insurance. There can be no assurance that such parties will maintain this insurance or that this coverage will be adequate to cover all potential claims, including coverage in amounts which it believes to be adequate. There can be no assurance that the Company will be able to maintain such coverage or obtain additional coverage on acceptable terms, or that such insurance will provide adequate coverage against all potential claims. Competition The Company competes directly with many companies which generate sales from infomercials. The Company also competes with a large number of consumer product companies and retailers which have substantially greater 13 financial, marketing and other resources than the Company, some of which have recently commenced, or indicated their intent to conduct, direct response marketing. The Company also competes with companies that make imitations of the Company's products at substantially lower prices. Products similar to the Company's products may be sold in department stores, pharmacies, general merchandise stores and through magazines, newspapers, direct mail advertising and catalogs. Dependence on Key Personnel The Company's executive officers have substantial experience and expertise and make significant contributions to the Company's growth and success. In particular, the Company is highly dependent on certain of its employees responsible for product development and production of infomercials. The unexpected loss of the services of one or more of such individuals could have a material adverse effect on the Company. Year 2000 Issues The efficient operation of the Company's business is dependent in part on its computer hardware, software programs and operating systems (collectively, "Programs and Systems"). These Programs and Systems are used in several key areas of the Company's business, including merchandise purchasing, inventory management, pricing, sales, shopping and financial reporting, as well as in various administrative functions. The Company has been evaluating its Programs and Systems to identify potential Year 2000 compliance issues. These actions are necessary to ensure that the Programs and Systems will recognize and process the Year 2000 and beyond. It is anticipated that modification or replacement of some of the Company's Programs and Systems will be necessary to make such Programs and Systems Year 2000 compliant. The Company is also communicating with suppliers, financial institutions and others to coordinate Year 2000 conversion. Based on present information, the Company believes that it will be able to achieve such Year 2000 compliance through a combination of modification of some existing Programs and Systems, and the replacement of other Programs and Systems with new Programs and Systems that are already Year 2000 compliant. However, no assurance can be given that these efforts will be successful. The Company does not expect that the expenses and capital expenditures associated with achieving Year 2000 compliance will have a material effect on its financial condition or results of operations. Convertible Securities; Shares Eligible for Future Sale Sales of substantial amounts of the shares of Common Stock currently issued, issuable upon conversion or exercise of securities convertible into or exercisable for Common Stock or of the shares of Common Stock offered hereby could adversely affect the market value of the Common Stock, depending upon the timing of such sales, and, in the case of convertible and exercisable securities, may effect a dilution of the book value per share of Common Stock. Immediately prior to the effectiveness of the Registration Statement to which this Prospectus relates, the Series D Investors exchanged all of the issued and outstanding shares of Series C Preferred Stock for 20,000 shares of the Company's Series D Preferred Stock. Each share of the Series D Preferred stock is convertible into such number of shares of Common Stock as is determined by dividing the stated value ($1,000) of the shares of Series D Preferred Stock (as such value is increased by a premium of six percent (6%) per annum based on the number of days the Series D Preferred Stock is held) by the then current conversion price (which is determined by reference to the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock and the then current market price). The terms of the Series D Preferred Stock did not provide for a beneficial conversion price upon issuance. If converted on March 12, 1998, the Series D Preferred Stock would have been convertible into approximately 3,300,330 plus shares of Common Stock, excluding the premium payable thereon. Depending on market conditions at the time of conversion, the number of shares issuable could prove to be significantly greater based upon the prevailing trading price of the Common Stock. For example, in the event that the volume weighted average sale of the Common Stock was equal to $2.50 per share on the date of conversion, the Series D Preferred Stock would be convertible into 8,000,000 shares of Common Stock, excluding any premium accrued on account of the Series D Preferred Stock. Purchasers of Common Stock could therefore experience substantial dilution upon conversion of the Series D Preferred Stock. The shares of Series D Preferred Stock are not registered and may be sold only if registered under the Securities Act or sold in accordance with an applicable exemption from registration, such as Rule 144. The shares of Common Stock into which the Series D Preferred Stock may be converted are being registered pursuant to this Registration Statement. As of March 12, 1998, approximately 12,100,000 shares of Common Stock were reserved for issuance upon exercise of outstanding warrants (including the Warrants), options and the Company's Series B Convertible Preferred Stock. At March 12, 1998, there were 25,375,487 shares of Common Stock outstanding, nearly all of which were freely tradeable without restriction under the Securities Act unless held by affiliates. 14 USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Offered Shares of Common Stock offered hereby. The Selling Stockholders will receive all of the net proceeds from the sale of the Offered Shares of Common Stock offered hereby. Upon the exercise of the Series D Warrants by the holders thereof, the Company will receive the exercise price of the Series D Warrants. To the extent the Series D Warrants are exercised, the Company will apply the proceeds thereof to its general corporate purposes and working capital. 15 SELLING STOCKHOLDERS The following table sets forth the names of the Selling Stockholders, the number of Common Shares beneficially owned by such Selling Stockholders as of March 12, 1998 and the number of Offered Shares which may be offered for sale pursuant to this Prospectus by each such Selling Stockholder. Neither of the Selling Stockholders has held any position, office or other material relationship with the Company or any of its affiliates within the past three years other than as a result of its ownership of the Company's Securities. The Offered Shares may be offered from time to time by the Selling Stockholders named below. See "Plan of Distribution." However, such Selling Stockholders are under no obligation to sell all or any portion of such Offered Shares, nor are the Selling Stockholders obligated to sell any such Offered Shares immediately under this Prospectus. Because the Selling Stockholders may sell all or part of their Offered Shares, no estimate can be given as to the number of Common Shares that will be held by any Selling Stockholder upon termination of any offering made hereby. Pursuant to Rule 416(a) under the Securities Act, the shares of Common Stock issuable in respect of (i) the Series D Preferred Stock and Series D Warrants are subject to adjustment by reason of stock splits, stock dividends, and other similar transactions in the Common Stock and (ii) the Series D Preferred Stock is also subject to adjustment by reason of the floating rate conversion price mechanism included in the Series D Certificate of Designations, Preferences and Rights.
Common Shares Beneficially Owned After Offering (1) -------------------------- Number of Common Shares Beneficially Common Shares Percent of Name of Selling Stockholder Owned Prior to Offering Offered Hereby Number Outstanding - --------------------------- ----------------------- -------------- -------- ----------- Capital Ventures International(2) 11,992,060(3) 11,250,000 742,060 2.8% RGC International Investors, 3,997,353(3) 3,750,000 247,353 * LDC(2) ______________________________ * Less than one percent.
(1) Assumes the sale of all Offered Shares. (2) Pursuant to a Redemption and Consent Agreement, dated as of January 5, 1998, among the Company, Capital Ventures International and RGC International Investors, LDC (collectively, the "Series D Investors"), the Series D Investors agreed to exchange an aggregate of 20,000 shares of Series C Preferred Stock purchased by the Series D Investors pursuant to that certain Securities Purchase Agreement, dated September 4, 1997, among the Series D Investors and the Company for an aggregate of 20,000 shares of Series D Preferred Stock and warrants to purchase 500,000 Common Shares. (3) Represents the pro rata allocation among the Series D Investors of 14,500,000 shares of Common Stock which may be issued upon conversion of the Series D Preferred Stock, on account of conversion defaults, if any, and payment of the premium payable thereon in shares of Common Stock and 500,000 Common Shares issuable upon exercise of the Series D Warrants which the Company is registering hereunder pursuant to the registration rights agreement between the Company and the Series D Investors. As of the date of this Prospectus, the actual number of shares of Common Stock issuable upon conversion of Series D Preferred Stock and exercise of the Series D Warrants is indeterminate, is subject to adjustment and could be materially less or more than such estimated number depending on factors which cannot be predicted by the Company at this time, including, among other factors, the future market price of the Common Stock. These 14,500,000 shares of Common Stock represents a good faith estimate of the number of shares underlying the Series D Preferred Stock and the premium payable thereon. Pursuant to the terms of the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock, the actual number of Common Shares issuable upon conversion of the Series D Preferred Stock will equal (in addition to the Common Shares issuable upon exercise of the Series D Warrants) (i) the aggregate stated value of the shares of Series D Preferred Stock then being converted (i.e., $1,000 per share), plus a premium in the amount of 6% per annum accruing from the date of issuance, through the date of conversion (unless the Company chooses to pay such premium in cash) plus any conversion default amount (as defined in the Certificate of Designations, Preferences and Rights of the Series D Preferred Stock), divided by (ii) (x) if the conversion occurs on or before the Adjustment Date (as defined herein), a conversion price equal to $6.06 per share, or (y) in the case of conversions after the Adjustment Date, a conversion price per share equal to the lower of 101% of the closing bid price of the Common Stock on June 1, 1998, 101% of the 16 closing bid price of the Common Stock on the first trading day after the Merger Termination Date (as defined in the Merger Agreement) or $6.06. For purposes of conversions of the Series D Preferred Stock, the Adjustment Date means the earlier to occur of (i) June 1, 1998 (which date may be extended until August 31, 1998 by the Company and ValueVision in certain circumstances set forth in the Redemption and Consent Agreement), (ii) the date upon which it is publicly announced that ValueVision is unwilling to proceed with the Merger on the terms set forth in the Merger Agreement, or (iii) the date upon which demand is made to the Company to repay the Loan described under "Recent Developments." Except under certain limited circumstances, no holder of the Series D Preferred Stock and Series D Warrants is entitled to convert or exercise such securities to the extent that the shares to be received by such holder upon such conversion or exercise would cause such holder to beneficially own more than 4.9% of the Common Shares. Therefore, the number of shares set forth herein and which a Series D Investor may sell pursuant to this Prospectus may exceed the number of Common Shares such Series D Investor would otherwise beneficially own as determined pursuant to Section 13(d) of the Exchange Act. PLAN OF DISTRIBUTION The Offered Shares are being offered on behalf of the Selling Stockholders, and, except for the exercise price of the Warrants, the Company will not receive any proceeds from the Offering. The Offered Shares may be sold or distributed from time to time by the Selling Stockholders, or by pledgees, donees or transferees of, or other successors in interest to, the Selling Stockholders, directly to one or more purchasers (including pledgees) or through brokers, dealers or underwriters who may act solely as agent or may acquire Offered Shares as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the Offered Shares may be effected in one or more of the following methods: (i) ordinary brokers' transactions, which may include long or short sales; (ii) transactions involving cross or block trades or otherwise on the NYSE and PHLX; (iii) purchases by brokers, dealers or underwriters as principal and resale by such purchasers for their own accounts pursuant to this Prospectus; (iv) "at the market" to or through market makers or into established trading markets, including direct sales to purchasers or sales effected through agents; (vi) any combination of the foregoing, or by any other legally available means. In addition, the Selling Stockholders or their successors in interest may enter into hedging transactions with broker-dealers who may engage in short sales of Offered Shares in the course of hedging the position they assume with the Selling Stockholders. The Selling Stockholders or their successors in interest may also enter into option or other transactions with broker-dealers that require the delivery by such broker-dealers of the Offered Shares, which Offered Shares may be resold thereafter pursuant to this Prospectus. There can be no assurance that all or any of the Offered Shares will be issued to, or sold by, the Selling Stockholders. Brokers, dealers, underwriters or agents participating in the sale of the Offered Shares as agents may receive compensation in the form of commissions, discounts or concessions from the Selling Stockholders and/or purchasers of the Offered Shares for whom such broker-dealers may act as agent, or to whom they may sell as principal, or both (which compensation to a particular broker-dealer may be less than or in excess of customary commissions). The Selling Stockholders and any broker-dealers or other persons who act in connection with the sale of Offered Shares hereunder may be deemed to be "Underwriters" within the meaning of the Securities Act, and any commission they receive and proceeds of any sale of Offered Shares may be deemed to be underwriting discounts and commission under the Securities Act. Neither the Company nor any Selling Stockholder can presently estimate the amount of such compensation. The Company knows of no existing arrangements between any Selling Stockholder any other shareholders, broker, dealer, underwriter or agent relating to the sale or distribution of the Offered Shares. The Selling Stockholders and any other persons participating in the sale or distribution of the Shares will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of any of the Offered Shares by the Selling Stockholders or any other such persons. The foregoing may affect the marketability of the Offered Shares. The Company will pay substantially all of the expenses incident to the registration, offering and sale of the Offered Shares to the public other than commission or discounts of underwriter, broker-dealers or agents. The Company has also agreed to indemnify certain of the Selling Stockholders and certain related persons against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the Offered Shares has been passed upon for the Company by Brian J. Sisko, Esq., Senior Vice President and General Counsel of the Company. 17 EXPERTS The consolidated financial statements and schedule of National Media Corporation appearing in National Media Corporation's Annual Report (Form 10-K) for the year ended March 31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon (which contains an explanatory paragraph indicating that matters exist that raise substantial doubt as to the Company's ability to continue as a going concern as described in Note 1 to the consolidated financial statements) included therein and incorporated herein by reference. Such consolidated financial statements and schedule are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 18 No dealer, salesman or any other person has been authorized to give any information or to make any representations not contained in this Prospectus in connection with the offering described herein and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or the Selling Stockholders. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy a security other than the shares of Common Stock offered hereby, nor does it constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any date subsequent to the date hereof. ---------- TABLE OF CONTENTS ---------- Page Available Information...................... 3 Incorporation of Certain Documents by Reference..................... 3 Forward-Looking Statements................. 5 The Company................................ 5 Recent Developments........................ 5 Risk Factors............................... 9 Use of Proceeds............................ 15 Selling Stockholders....................... 16 Plan of Distribution....................... 17 Legal Matters.............................. 17 Experts.................................... 18 15,000,000 Shares of Common Stock NATIONAL MEDIA CORPORATION -------- PROSPECTUS -------- March __, 1998 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 14. Other Expenses of Issuance and Distribution. The following is an itemized statement of the estimated amounts of all expenses payable by the registrant in connection with the registration of the Offered Shares, other than underwriting discounts and commissions: Registration Fee--Securities and Exchange Commission....... $ 9,957.00 *Blue Sky fees and expenses................................ $ 1,000.00 *Accountants' fees and expenses............................ $ 5,000.00 *Legal fees and expenses................................... $ 10,000.00 *Printing and EDGAR expenses............................... $ 5,000.00 *Miscellaneous............................................. $ 2,500.00 ----------- Total................................................. $ 33,457.00 ----------- -----------
- ---------------------- * Estimate Item 15. Indemnification of Directors and Officers. A. The Delaware General Corporation Law provides that, to the extent that any director, officer, employee or agent of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Company) to which such person was a party by reason of the fact that such person is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, the Company shall indemnify any such person against expenses (including attorneys' fees) actually and reasonably incurred in connection therewith. B. In addition, the Company has the power to indemnify any of the persons referred to above against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Notwithstanding the foregoing, in connection with any action or suit by or in the right of the Company to procure a judgment in its favor, the Company shall not make any indemnification as described above in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless, and only to the extent that, the Court of Chancery (in the State of Delaware) or the court in which such action or suit was brought shall determine, upon application, that despite adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. C. The Company also has the power, under the Delaware General Corporation Law, to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any other liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Company would have the power to indemnify such person against such liability under the foregoing provisions. D. The indemnification provided by or allowable pursuant to the Delaware General Corporation Law shall or may, as applicable, continue as to a person who has ceased to be a director, officer, employee or agent of the Company and shall inure to the benefit of the heirs, executors and administrators of such person. Item 16. Exhibits and Financial Statement Schedules. (a) Schedule of Exhibits. II-1 Exhibit Number Exhibit 2.1(1) Agreement and Plan of Merger and Reorganization, dated as of October 24, 1995, by and among the Registrant, DA Acquisition Corp., DirectAmerica Corporation, California Production Group, Inc. and other parties thereto. 2.2(2) Agreement and Plan of Merger and Reorganization, dated as of January 17, 1996 and amended as of April 4, 1996, by and among the Registrant, PRT Acquisition Corp. and Positive Response Television, Inc. 2.3(3) Acquisition Agreement, dated as of May 30, 1996, by and among Registrant, Paul Meier, Susan Barnes, Alan Meier and Tancot Pty Limited. 2.4(3) Acquisition Agreement, dated as of May 29, 1996, by and among Registrant, Paul Meier, Susan Barnes and Prestige Marketing Holdings Limited. 2.5(4) Agreement and Plan of Merger and Reorganization, dated as of August 7, 1996, by and among Registrant, NLA Acquisition Corp., Nancy Langston & Associates, Inc. and Nancy Langston. 2.6(5) Agreement and Plan of Reorganization and Merger, dated as of January 5, 1998, by and among Registrant, ValueVision International, Inc. and V-L Holdings Corp. 4.1(6) Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock. 4.2(6) Form of Warrant issued in connection with Series D Convertible Preferred Stock. 4.3(7) Rights Agreement dated as of January 3, 1994. 4.4(7) Amendment No. 1 to Rights Agreement, dated as of March 6, 1994. 4.5(8) Amendment No. 2 to Rights Agreement, dated as of September 26, 1994. 4.6(8) Amendment No. 3 to Rights Agreement, dated as of September 30, 1994. 4.7(8) Amendment No. 4 to Rights Agreement, dated as of November 30, 1994. 4.8(9) Amendment No. 5 to Rights Agreement, dated as of August 14, 1997. 4.9(8) Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock. 4.10(10) Director's Stock Grant Plan. 4.11(11) Form of Warrant to Purchase Common Stock of the Registrant, dated November 24, 1995, issued to Value Vision International, Inc. concerning an aggregate of 500,000 shares at an exercise price of $8.865 per share. 4.12(11) Form of Warrant to Purchase Common Stock of the Registrant, dated November 24, 1995, issued to various persons concerning an aggregate of 500,000 shares at an exercise price of $10.00 per share. 4.13(12) Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock. 4.14(12) Form of Warrant issued in connection with the Series C Convertible Preferred Stock. 4.14(a)(6) Amendment to Form of Warrant issued in connection with the Series C Convertible Preferred Stock. 4.15(5) Warrant Agreement by and between the Registrant and ValueVision International, Inc., dated as of January 5, 1998. 4.16(5) Warrant Certificate No. 1, dated January 5, 1998, issued by the Registrant to ValueVision International, Inc. to purchase 250,000 shares of the Registrant's common stock. II-2 10.1(6) Amendment No. 1 to Registration Rights Agreement by and among the Company and the Series D Investors. 10.2(5) Redemption and Consent Agreement, dated as of January 5, 1998, among the Company and the Series D Holders. 5(6) Opinion and Consent of Brian J. Sisko, Esquire. 23.1(6) Consent of Ernst & Young LLP, independent auditors, with respect to the consolidated financial statements of National Media Corporation for the year ended March 31, 1997. - ------------------ (1) Incorporated by reference to Registrant's Current Report on Form 8-K dated October 19, 1995. (2) Incorporated by reference to Registrant's Current Report on Form 8-K dated May 17, 1996. (3) Incorporated by reference to Registrant's Current Report on Form 8-K dated July 1, 1996. (4) Incorporated by reference to Registrant's Current Report on Form 8-K dated August 7, 1996. (5) Incorporated by reference to Registrant's Current Report on Form 8-K/A dated January 5, 1998. (6) Filed herewith. (7) Incorporated by reference to Registrant's Annual Report on Form 10-K for fiscal year ended March 31, 1994. (8) Incorporated by reference to Registrant's Annual Report on Form 10-K for fiscal year ended March 31, 1995. (9) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1997. (10) Incorporated by reference to Registrant's Registration Statement on Form S-8 filed October 19, 1995. (11) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 1995. (12) Incorporated by reference to Registrant's Report on Form 8-K dated September 18, 1997. Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act; (ii) To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement. II-3 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. For purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on this 17th day of March, 1998. NATIONAL MEDIA CORPORATION BY: /s/ Robert N. Verratti -------------------------------------------- Robert N. Verratti, Chief Executive Officer POWER OF ATTORNEY Each of the undersigned officers and directors of National Media Corporation whose signature appears below hereby appoints Brian J. Sisko, Esquire and John J. Sullivan and each of them individually as true and lawful attorney-in-fact for the undersigned with full power of substitution, to execute in his name and on his behalf in each capacity stated below, any and all amendments (including post-effective amendments) to this Registration Statement as the attorney-in-fact shall deem appropriate, and to cause to be filed any such amendment (including exhibits thereto and other documents in connection therewith) to this Registration Statement with the Securities and Exchange Commission, as fully and to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, or any of them, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on this 17th day of March, 1998. /s/ Robert N. Verratti Chief Executive Officer and Director - ------------------------------- Robert N. Verratti /s/ John J. Sullivan Senior Vice President and Chief Financial - ------------------------------- Officer John J. Sullivan /s/ Constantinos I. Costalas Vice Chairman of the Board, Director - ------------------------------- Constantinos I. Costalas /s/ Albert R. Dowden Director - ------------------------------- Albert R. Dowden /s/ Michael J. Emmi Director - ------------------------------- Michael J. Emmi /s/ William M. Goldstein Director - ------------------------------- William M. Goldstein /s/ Frederick S. Hammer Chairman of the Board, Director - ------------------------------- Frederick S. Hammer /s/ Robert E. Keith, Jr. Director - ------------------------------- Robert E. Keith, Jr. /s/ Ira M. Lubert Director - ------------------------------- Ira M. Lubert /s/ Brian McAdams Director - ------------------------------- Brian McAdams /s/ Warren V. Musser Director - ------------------------------- Warren V. Musser /s/ Jon W. Yoskin II Director - ------------------------------- Jon W. Yoskin II EXHIBIT INDEX Exhibit Number Description 4.1 Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock. 4.2 Form of Warrant issued in connection with Series D Convertible Preferred Stock. 4.14(a) Amendment to Form of Warrant issued in connection with Series C Convertible Preferred Stock. 5 Opinion and Consent of Brian J. Sisko, Esquire 10.1 Amendment No. 1 to Registration Rights Agreement by and among the Company and the Series D Investors. 23.1 Consent of Ernst & Young, LLP, independent auditors, with respect to the consolidated financial statements of National Media Corporation for the year ended March 31, 1997. EX-4.1 2 EX-4.1 EXHIBIT 4.1 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS of SERIES D CONVERTIBLE PREFERRED STOCK of NATIONAL MEDIA CORPORATION (Pursuant to Section 151 of the Delaware General Corporation Law) National Media Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Corporation pursuant to authority of the Board of Directors as required by Section 151 of the Delaware General Corporation Law. RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the "Board of Directors" or the "Board") in accordance with the provisions of its Certificate of Incorporation and Bylaws, each as amended and restated through the date hereof, the Board of Directors hereby authorizes a series of the Corporation's previously authorized Preferred Stock, par value $.01 per share (the "Preferred Stock"), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges, powers and restrictions thereof as follows: I. DESIGNATION AND AMOUNT The designation of this series, which consists of 20,000 shares of Preferred Stock, is the Series D Convertible Preferred Stock (the "Series D Preferred Stock") and the face amount shall be One Thousand U.S. Dollars ($1000.00) per share (the "Face Amount"). II. NO DIVIDENDS The Series D Preferred Stock will bear no dividends, and the holders of the Series D Preferred Stock shall not be entitled to receive dividends on the Series D Preferred Stock. III. CERTAIN DEFINITIONS For purposes of this Certificate of Designation, the following terms shall have the following meanings: A. "Adjustment Date" means the earliest to occur of (w) June 1, 1998, (x) the date it is publicly announced that ValueVision International, Inc. ("VVI") is unwilling to proceed with the transactions contemplated by the Agreement and Plan of Reorganization and Merger (the "Merger Agreement") dated as of January 5, 1998 between V-L Holdings Corp., the Corporation and VVI on the terms set forth therein; (y) the Merger Termination Date as defined in the Merger Agreement, or (z) the date on which demand is made upon the Corporation for payment of principal pursuant to the Demand Note (as defined in the Merger Agreement) issued by the Corporation to VVI pursuant to the Merger Agreement; provided, however, that the date set forth in subparagraph (w) above shall be extended to August 31, 1998 if on or before the close of business on June 1, 1998 the Corporation and VVI shall deliver to each of the holders of the Series D Preferred Stock a certification executed by the chief executive officer of each of the Corporation and VVI to the effect that all conditions precedent to completion of the transactions contemplated by the Merger Agreement have been satisfied or waived excepting only the consent required pursuant to Section 6.1(c) of the Merger Agreement. B. "Conversion Date" means, for any Optional Conversion, the date specified in the notice of conversion in the form attached hereto (the "Notice of Conversion"), so long as the copy of the Notice of Conversion is faxed (or delivered by other means resulting in notice) to the Corporation before 11:59 p.m., New York City time, on the Conversion Date indicated in the Notice of Conversion. If the Notice of Conversion is not so faxed or otherwise delivered before such time, then the Conversion Date shall be the date the holder faxes or otherwise delivers the Notice of Conversion to the Corporation. The Conversion Date for the Required Conversion at Maturity shall be the Maturity Date (as such terms are defined in Paragraph D of Article IV). C. "Conversion Percentage" shall mean one hundred percent (100%), subject to adjustment as provided herein. D. "Conversion Price" means (i) with respect to any Conversion Date occurring prior to the earliest of (a) the 180th day after the date of execution of the Securities Purchase Agreement (as defined herein), (b) the first Announcement Date (as defined in Article XI.C hereof) after the date of execution of the Securities Purchase Agreement or (c) the delivery by the Corporation of the notice specified in Section 4(j)(A) of the Securities Purchase Agreement (such earliest date referred to herein as the "First Variable Conversion Date"), the Fixed Conversion Price and (ii) with respect to any Conversion Date on or after the First Variable Conversion Date, the lower of the Fixed Conversion Price and the Variable Conversion Price, each in effect as of such date and subject to adjustment as provided herein. E. "Fixed Conversion Price" means (i) until the Adjustment date, $6.06, subject to adjustment as provided herein, and (ii) effective on the Adjustment Date the lower of (x) 101% of the closing bid price of the Common Stock on June 1, 1998, (y) 101% of the Closing bid price of the Common Stock 1 on the first trading day after the Merger Termination Date (as defined in the Merger Agreement) or (z) the price determined under clause (i) above. F. "Issuance Date" means the date of the exchange of shares of Series C Preferred Stock for newly issued shares of Series D Preferred Stock as contemplated by that certain Redemption and Consent Agreement dated as of January 5, 1998 among the Corporation, VVI and the holders of Series C Preferred Stock, et al. (the "Redemption and Consent Agreement") G. "N" means the number of days from, but excluding, the Issuance Date. H. "Premium" means an amount equal to (.06)x(N/365)x(1,000). I. "Variable Conversion Price" means, as of any date of determination, the amount obtained by multiplying the Conversion Percentage then in effect by the lowest Volume Weighted Average Sale Price for the Corporation's common stock, par value $.01 per share ("Common Stock"), on any single trading day during the five (5) consecutive trading days ending on the trading day immediately preceding such date of determination (subject to equitable adjustment for any stock splits, stock dividends, reclassifications or similar events during such five (5) trading day period), and shall be subject to adjustment as provided herein. J. "Volume Weighted Average Sale Price" means, for any security as of any date, the volume weighted average sale price of such security on such date on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg Financial Markets utilizing its "volume at price" function or a comparable reporting service of national reputation selected by the Corporation and reasonably acceptable to holders of a majority-in-interest of the then outstanding shares of Series D Preferred Stock if Bloomberg Financial Markets is not then reporting volume weighted average sale prices of such security (collectively, "Bloomberg"), or if no volume weighted average sale price is reported for such security by Bloomberg, the average of the bid prices of any market maker for such security that is listed in the "pink sheets" published by the National Quotation Bureau, Inc. If the Volume Weighted Average Sale Price cannot be calculated for such security on such date on any of the foregoing bases, the Volume Weighted Average Sale Price of such security on such date shall be the fair market value as reasonably determined by an investment banking firm selected by the Corporation and reasonably acceptable to holders of a majority-in-interest of the then outstanding shares of Series D Preferred Stock, with the costs of such appraisal to be borne by the Corporation. IV. CONVERSION A. Conversion at the Option of the Holder. (i) Subject to the limitations on conversions contained in Paragraph C and E of this Article IV, each holder of shares of Series D Preferred Stock may, at any time and from time to time, convert (an "Optional Conversion") each of its shares of Series D Preferred Stock into a number of fully paid and nonassessable shares of Common Stock determined in accordance with the following formula if the Corporation timely redeems the Premium thereon in cash in accordance with subparagraph (ii) below: 1,000 ---------------- Conversion Price or in accordance with the following formula if the Corporation does not timely redeem the Premium thereon in accordance with subparagraph (ii) below: 1,000 + the Premium ------------------- Conversion Price (ii) (a) The Corporation shall have the right, in its sole discretion, upon receipt of a Notice of Conversion or in the event of a Required Conversion at Maturity, to redeem any 2 portion of the Premium subject to such conversion for a sum of cash equal to the amount of the Premium being so redeemed. All cash redemption payments hereunder shall be paid in lawful money of the United States of America at such address for the holder as appears on the record books of the Corporation (or at such other address as such holder shall hereafter give to the Corporation by written notice). In the event the Corporation so elects to redeem all or any portion of the Premium in cash and fails to pay such holder the applicable redemption amount to which such holder is entitled by depositing a check in the U.S. Mail to such holder within three (3) business days of receipt by the Corporation of a Notice of Conversion (in the case of a redemption in connection with an Optional Conversion) or the Maturity Date (in the case of a redemption in connection with a Required Conversion at Maturity), the Corporation shall thereafter forfeit its right to redeem such Premium in cash and such Premium shall thereafter be converted into shares of Common Stock in accordance with Article IV.A(i). (b) Each holder of Series D Preferred Stock shall have the right to require the Corporation to provide advance notice to such holder stating whether the Corporation will elect to redeem all or any portion of the Premium in cash pursuant to the Corporation's redemption rights discussed in subparagraph (a) of this Article IV.A(ii). A holder may exercise such right from time to time by sending notice (an "Election Notice") to the Corporation, by facsimile, requesting that the Corporation disclose to such holder whether the Corporation would elect to redeem any portion of the Premium for cash in lieu of issuing shares of Common Stock therefor if such holder were to exercise its right of conversion pursuant to this Article IV.A. The Corporation shall, no later than the close of business on the next business day following receipt of an Election Notice, disclose to such holder whether the Corporation would elect to redeem any portion of a Premium in connection with a conversion pursuant to a Notice of Conversion delivered over the subsequent five (5) business day period. If the Corporation does not respond to such holder within such one (1) business day period via facsimile, the Corporation shall, with respect to any conversion pursuant to a Conversion Notice delivered within the subsequent five (5) business day period, forfeit its right to redeem such Premium in accordance with subparagraph (a) of this Article IV.A(ii) and shall be required to convert such Premium into shares of Common Stock. B. Mechanics of Conversion. In order to effect an Optional Conversion, a holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to the Corporation or the transfer agent for the Common Stock and (y) surrender or cause to be surrendered the original certificates representing the Series D Preferred Stock being converted (the "Preferred Stock Certificates"), duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Corporation or the transfer agent. Upon receipt by the Corporation of a facsimile copy of a Notice of Conversion from a holder, the Corporation shall immediately send, via facsimile, a confirmation to such holder stating that the Notice of Conversion has been received, the date upon which the Corporation expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation regarding the conversion. The Corporation shall not be obligated to issue shares of Common Stock upon a conversion unless either the Preferred Stock Certificates are delivered to the Corporation or the transfer agent as provided above, or the holder notifies the Corporation or the transfer agent that such certificates have been lost, stolen or destroyed and delivers the documentation to the Company required by Article XIV.B hereof. (i) Delivery of Common Stock Upon Conversion. Upon the surrender of Preferred Stock Certificates from a holder of Series D Preferred Stock accompanied by a Notice of Conversion, the Corporation shall, no later than the later of (a) the second business day following the Conversion Date and (b) the business day following the date of such surrender (or, in the case of lost, stolen or destroyed certificates, after provision of indemnity pursuant to Article XIV.B) (the "Delivery Period"), issue and deliver to the holder or its nominee (x) that number of shares of Common Stock issuable upon conversion of such shares of Series D Preferred Stock being converted and (y) a certificate representing the number of shares of Series D Preferred Stock not being converted, if any. If the Corporation's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend and the holder thereof is not obligated to return such certificate for the placement of a legend thereon, the Corporation shall cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the holder by crediting the account of the holder or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC 3 Transfer"). If the aforementioned conditions to a DTC Transfer are not satisfied, the Corporation shall deliver to the holder physical certificates representing the Common Stock issuable upon conversion. Further, a holder may instruct the Corporation to deliver to the holder physical certificates representing the Common Stock issuable upon conversion in lieu of delivering such shares by way of DTC Transfer. (ii) Taxes. The Corporation shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of the shares of Common Stock upon the conversion of the Series D Preferred Stock. (iii) No Fractional Shares. If any conversion of Series D Preferred Stock would result in the issuance of a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon conversion of the Series D Preferred Stock shall be the next higher whole number of shares. (iv) Conversion Disputes. In the case of any dispute with respect to a conversion, the Corporation shall promptly issue such number of shares of Common Stock as are not disputed in accordance with subparagraph (i) above. If such dispute involves the calculation of the Conversion Price, the Corporation shall submit the disputed calculations to an independent outside accountant via facsimile within two (2) business days of receipt of the Notice of Conversion. The accountant, at the Corporation's sole expense, shall audit the calculations and notify the Corporation and the holder of the results no later than two (2) business days from the date it receives the disputed calculations. The accountant's calculation shall be deemed conclusive, absent manifest error. The Corporation shall then issue the appropriate number of shares of Common Stock in accordance with subparagraph (i) above. C. Limitation on Conversions. Unless a holder of shares of Series D Preferred Stock delivers a waiver in accordance with the last sentence of this Paragraph C, except in a Required Conversion at Maturity, in no event shall a holder of shares of Series D Preferred Stock be entitled to receive shares of Common Stock upon a conversion to the extent that the sum of (x) the number of shares of Common Stock beneficially owned by the holder and its affiliates (exclusive of shares issuable upon conversion of the unconverted portion of the shares of Series D Preferred Stock or the unexercised or unconverted portion of any other securities of the Corporation (including, without limitation, the warrants (the "Warrants") issued pursuant to the Securities Purchase Agreement) subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (y) the number of shares of Common Stock issuable upon the conversion of the shares of Series D Preferred Stock with respect to which the determination of this subparagraph is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of this subparagraph, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided in clause (x) above. Except as provided in the immediately succeeding sentence, the restriction contained in this Paragraph C shall not be altered, amended, deleted or changed in any manner whatsoever unless the holders of a majority of the outstanding shares of Common Stock of the Corporation and each holder of outstanding shares of Series D Preferred Stock shall approve such alteration, amendment, deletion or change. A holder of shares of Series D Preferred Stock may waive the restriction set forth in this Paragraph C by written notice to the Corporation upon not less than sixty one (61) days prior notice (with such waiver taking effect only upon the expiration of such sixty one (61) day notice period). D. Required Conversion at Maturity. Provided all shares of Common Stock issuable upon conversion of all outstanding shares of Series D Preferred Stock are then (i) authorized and reserved for issuance, (ii) registered under the Securities Act of 1933, as amended (the "Securities Act") for resale by the holders of such shares of Series D Preferred Stock or such shares may be immediately sold to the public without registration under Rule 144(k) under the Securities Act and (iii) eligible to be traded on either the NYSE, the American Stock Exchange or the NASDAQ National Market, each share of Series D Preferred Stock issued and outstanding on the fourth (4th) anniversary of the Issuance Date (the "Maturity Date"), automatically shall be converted into shares of Common Stock on such date in accordance with the conversion formulas set forth in Paragraph A of this Article IV (the "Required Conversion at Maturity"). If the Required Conversion at Maturity occurs, the Corporation and the holders of Series D Preferred Stock 4 shall follow the applicable conversion procedures set forth in Paragraph B of this Article IV; provided, however, that the holders of Series D Preferred Stock are not required to deliver a Notice of Conversion to the Corporation or its transfer agent. If the Required Conversion at Maturity does not occur, each holder of Series D Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of a Redemption Notice to the Corporation, to require the Corporation to purchase for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B), the holder's Series D Preferred Stock. If the Corporation fails to redeem any of such shares within five (5) business days after the day on which the Corporation receives such Redemption Notice (the "Redemption Date"), then such holder shall be entitled to the remedies provided in Article VIII.C. V. RESERVATION OF SHARES OF COMMON STOCK A. Reserved Amount. Upon the initial issuance of the shares of Series D Preferred Stock, the Corporation shall reserve 10,000,000 shares of the authorized but unissued shares of Common Stock for issuance upon conversion of the Series D Preferred Stock and thereafter the number of authorized but unissued shares of Common Stock so reserved (the "Reserved Amount") shall not be decreased and shall at all times be sufficient to provide for the conversion of the Series D Preferred Stock outstanding at the then current Conversion Price thereof. The Reserved Amount shall be allocated to the holders of Series D Preferred Stock as provided in Article XIV.C. B. Increases to Reserved Amount. If the Reserved Amount for any three (3) consecutive trading days (the last of such three (3) trading days being the "Authorization Trigger Date") shall be less than 135% of the number of shares of Common Stock issuable upon conversion of the Series D Preferred Stock, the Corporation shall immediately notify the holders of Series D Preferred Stock of such occurrence and shall take immediate action (including, if necessary, seeking shareholder approval to authorize the issuance of additional shares of Common Stock) to increase the Reserved Amount to 200% of the number of shares of Common Stock then issuable upon conversion of the outstanding Series D Preferred Stock. In the event the Corporation fails to so increase the Reserved Amount within ninety (90) days after an Authorization Trigger Date, each holder of Series D Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of a Redemption Notice to the Corporation, to require the Corporation to purchase for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B), a portion of the holder's Series D Preferred Stock such that, after giving effect to such purchase, the holder's allocated portion of the Reserved Amount exceeds 135% of the total number of shares of Common Stock issuable to such holder upon conversion of its Series D Preferred Stock. If the Corporation fails to redeem any of such shares within five (5) business days after such Redemption Date, then such holder shall be entitled to the remedies provided in Article VIII.C. VI. FAILURE TO SATISFY CONVERSIONS A. Conversion Default Payments. If, at any time, (x) a holder of shares of Series D Preferred Stock submits a Notice of Conversion and the Corporation fails for any reason (other than because such issuance would exceed such holder's allocated portion of the Reserved Amount, for which failure the holders shall have the remedies set forth in Article V) to deliver, on or prior to the fourth (4th) business day following the expiration of the Delivery Period for such conversion, such number of freely tradeable shares of Common Stock to which such holder is entitled upon such conversion, or (y) the Corporation provides notice to any holder of Series D Preferred Stock at any time of its intention not to issue freely tradeable shares of Common Stock upon exercise by any holder of its conversion rights in accordance with the terms of this Certificate of Designation (other than because such issuance would exceed such holder's allocated portion of the Reserved Amount) (each of (x) and (y) being a "Conversion Default"), then the Corporation shall pay to the affected holder, in the case of a Conversion Default described in clause (x) above, and to all holders, in the case of a Conversion Default described in clause (y) above, payments for the first ten (10) business days following the expiration of the Delivery Period, in the case of a Conversion Default described in clause (x), and for the first ten (10) business days following a Conversion Default described in clause (y), 5 an amount equal to $500 per day. In the event any Conversion Default continues beyond such ten (10) business day period, the Corporation shall pay to the holder an additional amount equal to: (.24) x (D/365) x (the Default Amount) where: "D" means the number of days after the expiration of the ten (10) business day period described above through and including the Default Cure Date; "Default Amount" means (i) the total Face Amount of all shares of Series D Preferred Stock held by such holder plus (ii) the total accrued Premium as of the first day of the Conversion Default on all shares of Series D Preferred Stock included in clause (i) of this definition; and "Default Cure Date" means (i) with respect to a Conversion Default described in clause (x) of its definition, the date the Corporation effects the conversion of the full number of shares of Series D Preferred Stock and (ii) with respect to a Conversion Default described in clause (y) of its definition, the date the Corporation begins to issue freely tradeable shares of Common Stock in satisfaction of all conversions of Series D Preferred Stock in accordance with Article IV.A, and (iii) with respect to either type of a Conversion Default, the date on which the Corporation redeems shares of Series D Preferred Stock held by such holder pursuant to paragraph D of this Article VI. "Freely tradeable shares of Common Stock" means the shares of Common Stock issuable upon conversion of the outstanding shares of Series D Preferred Stock (a) which can be sold by the holders thereof (i) pursuant to the registration statement filed by the Company under the Securities Act pursuant to the Registration Rights Agreement subject to the prospectus delivery requirements of the Securities Act, or (ii) under Rule 144(k) of the Securities Act and (b) which Shares are listed for trading on the NYSE, the American Stock Exchange or the Nasdaq National Market. The payments to which a holder shall be entitled pursuant to this Paragraph A are referred to herein as "Conversion Default Payments." A holder may elect to receive accrued Conversion Default Payments in cash or to convert all or any portion of such accrued Conversion Default Payments, at any time, into Common Stock at the lowest Conversion Price in effect during the period beginning on the date of the Conversion Default through the Conversion Date with respect to such Conversion Default Payments. In the event a holder elects to receive any Conversion Default Payments in cash, it shall so notify the Corporation in writing. Such payment shall be made in accordance with and be subject to the provisions of Article XIV.E. In the event a holder elects to convert all or any portion of the Conversion Default Payments into Common Stock, the holder shall indicate on a Notice of Conversion such portion of the Conversion Default Payments which such holder elects to so convert and such conversion shall otherwise be effected in accordance with the provisions of Article IV. B. Adjustment to Conversion Price. If a holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series D Preferred Stock for any reason (other than because such issuance would exceed such holder's allocated portion of the Reserved Amount, for which failure the holders shall have the remedies set forth in Article V), then the Fixed Conversion Price in respect of any shares of Series D Preferred Stock held by such holder (including shares of Series D Preferred Stock submitted to the Corporation for conversion, but for which shares of Common Stock have not been issued to such holder) shall thereafter be the lesser of (i) the Fixed Conversion Price on the Conversion Date specified in the Notice of Conversion which resulted in the Conversion Default and (ii) the lowest Conversion Price in effect during the period beginning on, and including, such Conversion Date through and including the earlier of (x) the day such shares of Common Stock are delivered to the holder and (y) the day on which the holder regains its rights as a holder of Series D Preferred Stock with respect to such unconverted shares of Series D Preferred Stock pursuant to the provisions of Article XIV.F hereof. If there shall occur a Conversion Default of the type described in clause (y) of Article VI.A, then the Fixed Conversion Price with respect to any conversion thereafter shall be the lowest Conversion Price in effect at any time during the period beginning 6 on, and including, the date of the occurrence of such Conversion Default through and including the Default Cure Date. The Fixed Conversion Price shall thereafter be subject to further adjustment for any events described in Article XI. C. Buy-In Cure. Unless the Corporation has notified the applicable holder in writing prior to the delivery by such holder of a Notice of Conversion that the Corporation is unable to honor conversions, if (i) (a) the Corporation fails for any reason to deliver during the Delivery Period shares of Common Stock to a holder upon a conversion of shares of Series D Preferred Stock or (b) there shall occur a Legend Removal Failure (as defined in Article VIII.A(iii) below) and (ii) thereafter, such holder purchases (in an open market transaction or otherwise) shares of Common Stock to make delivery in satisfaction of a sale by such holder of the unlegended shares of Common Stock (the "Sold Shares") which such holder anticipated receiving upon such conversion (a "Buy-In"), the Corporation shall pay such holder (in addition to any other remedies available to the holder) the amount by which (x) such holder's total purchase price (including brokerage commissions, if any) for the unlegended shares of Common Stock so purchased exceeds (y) the net proceeds received by such holder from the sale of the Sold Shares. For example, if a holder purchases unlegended shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for $10,000, the Corporation will be required to pay the holder $1,000. A holder shall provide the Corporation written notification and supporting documentation indicating any amounts payable to such holder pursuant to this Paragraph C. The Corporation shall make any payments required pursuant to this Paragraph C in accordance with and subject to the provisions of Article XIV.E. D. Redemption Right. If the Corporation fails, and such failure continues uncured for five (5) business days after the Corporation has been notified thereof in writing by the holder, for any reason (other than because such issuance would exceed such holder's allocated portion of the Reserved Amount, for which failure the holders shall have the remedies set forth in Article V) to issue shares of Common Stock within ten (10) business days after the expiration of the Delivery Period with respect to any conversion of Series D Preferred Stock, then the holder may elect at any time and from time to time prior to the Default Cure Date for such Conversion Default, by delivery of a Redemption Notice to the Corporation, to have all or any portion of such holder's outstanding shares of Series D Preferred Stock purchased by the Corporation for cash, at an amount per share equal to the Redemption Amount (as defined in Article VIII.B). If the Corporation fails to redeem any of such shares within five (5) business days after such Redemption Date, then such holder shall be entitled to the remedies provided in Article VIII.C. VII. [Intentionally Omitted] VIII. REDEMPTION DUE TO CERTAIN EVENTS A. Redemption by Holder. In the event (each of the events described in clauses (i)-(vi) below after expiration of the applicable cure period (if any) being a "Redemption Event"): (i) the Common Stock (including any of the shares of Common Stock issuable upon conversion of the Series D Preferred Stock) is suspended from trading on any of, or is not listed (and authorized) for trading on at least one of, the NYSE, the American Stock Exchange or the Nasdaq National Market for an aggregate of ten (10) trading days in any nine (9) month period; (ii) the Registration Statement required to be filed by the Corporation pursuant to Section 5.2(d) of the Redemption and Consent Agreement, after being declared effective, cannot be utilized by the holders of Series D Preferred Stock for the resale of all of their Registrable Securities (as defined in the Registration Rights Agreement dated as of September 4, 1997 among the Corporation and the named signatories, as amended in connection with the issuance of the Series D Preferred Stock (the "Registration Rights Agreement") for an aggregate of more than thirty (30) days excluding any Disclosure Delay Period permitted under the Registration Rights Agreement; 7 (iii) the Corporation fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the holders of Series D Preferred Stock upon conversion of the Series D Preferred Stock as and when required by this Certificate of Designation, the Securities Purchase Agreement or the Registration Rights Agreement (a "Legend Removal Failure"), and any such failure continues uncured for five (5) business days after the Corporation has been notified thereof in writing by the holder; (iv) the Corporation provides notice to any holder of Series D Preferred Stock, including by way of public announcement, at any time, of its intention not to issue shares of Common Stock to any holder of Series D Preferred Stock upon conversion in accordance with the terms of this Certificate of Designation (other than due to the circumstances contemplated by Article V for which the holders shall have the remedies set forth in such Article); (v) the Corporation shall: (a) sell, convey or dispose of all or substantially all of its assets; (b) merge, consolidate or engage in any other business combination with any other entity (other than pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Corporation and other than pursuant to a merger in which the Corporation is the surviving corporation and in which the Corporation does not issue securities having voting power in the election of the directors greater than 20% of the voting power in the election of directors of all outstanding securities for the Corporation calculated before the issuance of voting securities in the merger); or (c) have fifty percent (50%) or more of the voting power of its capital stock owned beneficially by one person, entity or "group" (as such term is used under Section 13(d) of the Securities Exchange Act of 1934, as amended), other than a person, entity or "group" comprised of one or more of the Purchasers (as defined in the Securities Purchase Agreement); (vi) the Corporation otherwise shall breach any material term hereunder or under the Securities Purchase Agreement or the Registration Rights Agreement (other than a breach of Section 4(j) of the Securities Purchase Agreement constituting a Redemption Event under clause (v) of this Paragraph A); then, upon the occurrence of any such Redemption Event, each holder of shares of Series D Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of a Redemption Notice (as defined in Paragraph C below) to the Corporation while such Redemption Event continues, to require the Corporation to purchase for cash any or all of the then outstanding shares of Series D Preferred Stock held by such holder for an amount per share equal to the Redemption Amount (as defined in Paragraph B below) in effect at the time of the redemption hereunder. For the avoidance of doubt, the occurrence of any event described in clauses (i), (ii), (iv), (v) or (vi) above shall immediately constitute a Redemption Event and there shall be no cure period. Upon the Corporation's receipt of any Redemption Notice hereunder (other than during the three (3) trading day period following the Corporation's delivery of a Redemption Announcement (as defined below) to all of the holders in response to the Corporation's initial receipt of a Redemption Notice from a holder of Series D Preferred Stock), the Corporation shall immediately (and in any event within one (1) business day following such receipt) deliver a written notice (a "Redemption Announcement") to all holders of Series D Preferred Stock stating the date upon which the Corporation received such Redemption Notice and the amount of Series D Preferred Stock covered thereby. The Corporation shall not redeem any shares of Series D Preferred Stock during the three (3) trading day period following the delivery of a required Redemption Announcement hereunder. B. Definition of Redemption Amount. The "Redemption Amount" with respect to a share of Series D Preferred Stock means an amount equal to: V X M ---------- C P 8 where: "V" means the face amount thereof plus the accrued Premium thereon and all unpaid Conversion Default Payments owing (if any) with respect thereto through the date of payment of the Redemption Amount; "CP" means the Conversion Price in effect on the Redemption Date; and "M" means (i) with respect to all redemptions other than redemptions pursuant to Article VIII.A(v) where the conditions of Section 4(j)(i) and/or 4(j)(ii) of the Securities Purchase Agreement are not satisfied, the highest Volume Weighted Average Sale Price of the Corporation's Common Stock during the period beginning on the Redemption Date and ending on the date immediately preceding the date of payment of the Redemption Amount and (ii) with respect to redemptions pursuant to Article VIII.A(v) hereof where the conditions of Section 4(j)(i) and/or 4(j)(ii) of the Securities Purchase Agreement are not satisfied, the greater of (a) the amount determined pursuant to clause (i) of this definition or (b) the fair market value, as of the date immediately preceding the date of redemption, of the consideration payable to the holder of a share of Common Stock pursuant to the transaction which triggers the redemption; provided, however, that if the Minimum Return (as defined below) is greater than the Redemption Amount, as calculated utilizing the greater of (a) and (b), then the Redemption Amount shall equal the Minimum Return. For purposes of this definition, "fair market value" shall be determined by the mutual agreement of the Company and holders of a majority-in-interest of the shares of Series D Preferred Stock then outstanding, or if such agreement cannot be reached within five (5) business days prior to the date of redemption, by an investment banking firm selected by the Corporation and reasonably acceptable to holders of a majority-in-interest of the then outstanding shares of Series D Preferred Stock, with the costs of such appraisal to be borne by the Corporation. For purposes of this definition, "Minimum Return" shall mean the sum of the face amount of one share of Series D Preferred Stock, plus accrued Premium thereon, plus interest at eighteen percent (18%) per annum on such face amount and accrued Premium. C. Redemption Defaults. If the Corporation fails to pay any holder the Redemption Amount with respect to any share of Series D Preferred Stock within five (5) business days after its receipt of a notice requiring such redemption (a "Redemption Notice"), then the holder of Series D Preferred Stock delivering such Redemption Notice (i) shall be entitled to interest on the Redemption Amount at a per annum rate equal to the lower of twenty-four percent (24%) and the highest interest rate permitted by applicable law from the Redemption Date until the date of payment of the Redemption Amount hereunder, and (ii) shall have the right, at any time and from time to time, to require the Corporation, upon written notice, to immediately convert (in accordance with the terms of Paragraph A of Article IV) all or any portion of the Redemption Amount, plus interest as aforesaid, into shares of Common Stock at the lowest Conversion Price in effect during the period beginning on the Redemption Date and ending on the Conversion Date with respect to the conversion of such Redemption Amount. In the event the Corporation is not able to redeem all of the shares of Series D Preferred Stock subject to Redemption Notices delivered after the Corporation's delivery of a Redemption Announcement pursuant to Article VIII.B hereof prior to the date upon which such redemption is to be effected (as set forth in the Redemption Announcement), the Corporation shall redeem shares of Series D Preferred Stock from each holder pro rata, based on the total number of shares of Series D Preferred Stock outstanding at the time of redemption included by such holder in all Redemption Notices delivered and prior to the date upon which such redemption is to be effected relative to the total number of shares of Series D Preferred Stock outstanding at the time of redemption included in all of the Redemption Notices delivered prior to the date upon which such redemption is to be effected. 9 IX. RANK All shares of the Series D Preferred Stock shall rank (i) prior to the Corporation's Common Stock and Series A Junior Participating Preferred Stock; (ii) prior to any class or series of capital stock of the Corporation hereafter created (unless, with the consent of the holders of Series D Preferred Stock obtained in accordance with Article XIII hereof, such class or series of capital stock specifically, by its terms, ranks senior to or pari passu with the Series D Preferred Stock) (collectively with the Common Stock, "Junior Securities"); (iii) pari passu with any class or series of capital stock of the Corporation hereafter created (with the consent of the holders of Series D Preferred Stock obtained in accordance with Article XIII hereof) specifically ranking, by its terms, on parity with the Series D Preferred Stock (the "Pari Passu Securities"); and (iv) junior to (a) the Series B Convertible Preferred Stock of the Corporation and (b) any class or series of capital stock of the Corporation hereafter created (with the consent of the holders of Series D Preferred Stock obtained in accordance with Article XIII hereof) specifically ranking, by its terms, senior to the Series D Preferred Stock (the "Senior Securities"), in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. X. LIQUIDATION PREFERENCE A. If the Corporation shall commence a voluntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy, insolvency or similar law resulting in the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of sixty (60) consecutive days and, on account of any such event, the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, including, but not limited to, the sale or transfer of all or substantially all of the Corporation's assets in one transaction or in a series of related transactions (a "Liquidation Event"), no distribution shall be made to the holders of any shares of capital stock of the Corporation (other than Senior Securities) upon liquidation, dissolution or winding up unless prior thereto the holders of shares of Series D Preferred Stock shall have received the Liquidation Preference with respect to each share. If, upon the occurrence of a Liquidation Event, the assets and funds available for distribution among the holders of the Series D Preferred Stock and holders of Pari Passu Securities shall be insufficient to permit the payment to such holders of the preferential amounts payable thereon, then the entire assets and funds of the Corporation legally available for distribution to the Series D Preferred Stock and the Pari Passu Securities shall be distributed ratably among such shares in proportion to the ratio that the Liquidation Preference payable on each such share bears to the aggregate Liquidation Preference payable on all such shares. B. The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Corporation. Neither the consolidation or merger of the Corporation with or into any other entity nor the sale or transfer by the Corporation of less than substantially all of its 10 assets shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Corporation. C. The "Liquidation Preference" with respect to a share of Series D Preferred Stock means an amount equal to the Face Amount thereof plus the accrued Premium thereon through the date of final distribution. The Liquidation Preference with respect to any Pari Passu Securities shall be as set forth in the Certificate of Designation filed in respect thereof. XI. ADJUSTMENTS TO THE CONVERSION PRICE The Conversion Price shall be subject to adjustment from time to time as follows: A. Stock Splits, Stock Dividends, Etc. If at any time on or after the Issuance Date, the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, combination, reclassification or other similar event, the Fixed Conversion Price shall be proportionately reduced, or if the number of outstanding shares of Common Stock is decreased by a reverse stock split, combination or reclassification of shares, or other similar event, the Fixed Conversion Price shall be proportionately increased. In such event, the Corporation shall notify the Corporation's transfer agent of such change on or before the effective date thereof. B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after the Issuance Date, there shall be (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation or merger of the Corporation with any other entity (other than a merger in which the Corporation is the surviving or continuing entity and its capital stock is unchanged), (iii) any sale or transfer of all or substantially all of the assets of the Corporation or (iv) any share exchange pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property (each of (i) - (iv) above being a "Corporate Change"), then the holders of Series D Preferred Stock shall thereafter have the right to receive upon conversion, in lieu of the shares of Common Stock otherwise issuable, such shares of stock, securities and/or other property as would have been issued or payable in such Corporate Change with respect to or in exchange for the number of shares of Common Stock which would have been issuable upon conversion (without giving effect to the limitations contained in Article IV.C) had such Corporate Change not taken place, and in any such case, appropriate provisions shall be made with respect to the rights and interests of the holders of the Series D Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares of Common Stock issuable upon conversion of the Series D Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any shares of stock or securities thereafter deliverable upon the conversion thereof. The Corporation shall not effect any Corporate Change unless (i) each holder of Series D Preferred Stock has received written notice of such transaction at least thirty (30) days prior thereto, but in no event later than ten (10) days prior to the record date for the determination of shareholders entitled to vote with respect thereto, and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligations of this Certificate of Designation. The above provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series D Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. 11 C. Adjustment Due to Major Announcement. In the event the Corporation at any time after the Issuance Date (i) makes a public announcement that it intends to consolidate or merge with any other entity (other than a merger in which the Corporation is the surviving or continuing entity and its capital stock is unchanged and in which the Corporation does not issue securities having voting power in the election of the directors greater than 20% of the voting power in the election of directors of all outstanding securities for the Corporation calculated before the issuance of voting securities in the merger) or to sell or transfer all or substantially all of the assets of the Corporation or (ii) any person, group or entity (including the Corporation) publicly announces a tender offer, exchange offer or another transaction to purchase 50% or more of the Corporation's Common Stock (the date of the announcement referred to in clause (i) or (ii) of this Paragraph C is hereinafter referred to as the "Announcement Date"), then the Conversion Price shall, effective upon the Announcement Date and continuing through the sixth (6th) trading day following the earlier of the consummation of the proposed transaction or tender offer, exchange offer or another transaction or the Abandonment Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for an Optional Conversion occurring on the Announcement Date and (y) the Conversion Price determined in accordance with Article III.C on the Conversion Date set forth in the Notice of Conversion for the Optional Conversion. From and after the sixth trading day following the Abandonment Date, the Conversion Price shall be determined as set forth in Article III.C. "Abandonment Date" means with respect to any proposed transaction or tender offer, exchange offer or another transaction for which a public announcement as contemplated by this Paragraph C has been made, the date upon which the Corporation (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) publicly announces the termination or abandonment of the proposed transaction or tender offer, exchange offer or another transaction which caused this Paragraph C to become operative. D. Adjustment Due to Distribution. If at any time after the Issuance Date the Corporation shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, by way of return of capital or otherwise (including any dividend or distribution to the Corporation's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a "Distribution"), then the holders of Series D Preferred Stock shall be entitled, upon any conversion of shares of Series D Preferred Stock after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the holder with respect to the shares of Common Stock issuable upon such conversion (without giving effect to the limitations contained in Article IV.C) had such holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution. E. Issuance of Other Securities With Variable Conversion Price. If the Corporation shall issue any securities which are convertible into or exchangeable for Common Stock ("Convertible Securities") (i) at a conversion or exchange rate based on a discount to the market price of the Common Stock at the time of conversion or exercise, then the Conversion Percentage in respect of any conversion of Series D Preferred Stock after such issuance shall be calculated utilizing the higher of the greatest discount applicable to any such Convertible Securities and the difference between one hundred percent (100%) and the Conversion Percentage then in effect or (ii) at a market price more favorable to the holder thereof than the Volume Weighted Average Sale Price then in effect, then the term Variable Conversion Price in respect of any conversion of Series D Preferred Stock after such issuance shall automatically be amended to mean the definition resulting in such more favorable market price. F. Purchase Rights. If at any time after the Issuance Date, the Corporation issues any Convertible Securities or rights to purchase stock, warrants, securities or other property (the 12 "Purchase Rights") pro rata to the record holders of any class of Common Stock, then the holders of Series D Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the Series D Preferred Stock (without giving effect to the limitations contained in Article IV.C) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. G. Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Article XI, the Corporation, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each holder of Series D Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series D Preferred Stock, furnish to such holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of a share of Series D Preferred Stock. XII. VOTING RIGHTS The holders of the Series D Preferred Stock have no voting power whatsoever, except as otherwise provided by the Delaware General Corporation Law (the "Business Corporation Law"), in this Article XII and in Article XIII below. Notwithstanding the above, the Corporation shall provide each holder of Series D Preferred Stock with prior notification of any meeting of the shareholders (and copies of proxy materials and other information sent to shareholders). If the Corporation takes a record of its shareholders for the purpose of determining shareholders entitled to (a) receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation or recapitalization) any share of any class or any other securities or property, or to receive any other right, or (b) to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Corporation, or any proposed merger, consolidation, liquidation, dissolution or winding up of the Corporation, the Corporation shall mail a notice to each holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier, but in no event earlier than public announcement of such proposed transaction), of the date on which any such record is to be taken for the purpose of such vote, dividend, distribution, right or other event, and a brief statement regarding the amount and character of such vote, dividend, distribution, right or other event to the extent known at such time. To the extent that under the Business Corporation Law the vote of the holders of the Series D Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Corporation, the affirmative vote or consent of the holders of at least a majority-in-interest of the shares of the Series D Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of majority-in-interest of the shares of Series D Preferred Stock (except as otherwise may be required under the Business Corporation Law) shall constitute the approval of such action by the class. To the extent that under the Business Corporation Law holders of the Series D Preferred Stock are entitled to vote on a matter with holders of Common 13 Stock, voting together as one class, each share of Series D Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which it is then convertible (without giving effect to the limitations contained in Article IV.C) using the record date for the taking of such vote of shareholders as the date as of which the Conversion Price is calculated. XIII. PROTECTION PROVISIONS So long as any shares of Series D Preferred Stock are outstanding, the Corporation shall not without first obtaining the approval (by vote or written consent, as provided by the Business Corporation Law) of the holders of (i) all of the then outstanding shares of Series D Preferred Stock with respect to subsection (a) below or (ii) at least 67% of the then outstanding shares of Series D Preferred Stock with respect to subsections (b) through (h) below: (a) alter or change the rights, preferences or privileges of the Series D Preferred Stock; (b) alter or change the rights, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Series D Preferred Stock; (c) create any new class or series of capital stock having a preference over the Series D Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Corporation (as previously defined in Article IX hereof, "Senior Securities"); (d) create any new class or series of capital stock ranking pari passu with the Series D Preferred Stock as to distribution of assets upon liquidation, dissolution or winding up of the Corporation (as previously defined in Article IX hereof, "Pari Passu Securities"); (e) increase the authorized number of shares of Series D Preferred Stock; (f) issue any shares of Senior Securities or Pari Passu Securities; (g) issue any shares of Series D Preferred Stock other than pursuant to the Securities Purchase Agreement; or (h) redeem, or declare or pay any cash dividend or distribution on, any Junior Securities. Notwithstanding the foregoing, no change pursuant to this Article XIII shall be effective to the extent that, by its terms, it applies to less than all of the holders of shares of Series D Preferred Stock then outstanding. XIV. MISCELLANEOUS A. Cancellation of Series D Preferred Stock. If any shares of Series D Preferred Stock are converted pursuant to Article IV, the shares so converted shall be cancelled, shall return to the status of authorized, but unissued preferred stock of no designated series, and shall not be issuable by the Corporation as Series D Preferred Stock. 14 B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Corporation, or (z) in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Corporation shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date. However, the Corporation shall not be obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the holder contemporaneously requests the Corporation to convert such Series D Preferred Stock. C. Allocation of Reserved Amount. The initial Reserved Amount shall be allocated pro rata among the holders of Series D Preferred Stock based on the number of shares of Series D Preferred Stock issued to each holder. Each increase to the Reserved Amount shall be allocated pro rata among the holders of Series D Preferred Stock based on the number of shares of Series D Preferred Stock held by each holder at the time of the increase in the Reserved Amount. In the event a holder shall sell or otherwise transfer any of such holder's shares of Series D Preferred Stock, each transferee shall be allocated a pro rata portion of such transferor's Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any Series D Preferred Stock shall be allocated to the remaining holders of shares of Series D Preferred Stock, pro rata based on the number of shares of Series D Preferred Stock then held by such holders. D. Quarterly Statements of Available Shares. For each calendar quarter beginning in the quarter in which the registration statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement is declared effective and thereafter so long as any shares of Series D Preferred Stock are outstanding, the Corporation shall deliver (or cause its transfer agent to deliver) to each holder a written report notifying the holders of any occurrence which prohibits the Corporation from issuing Common Stock upon any such conversion. The report shall also specify (i) the total number of shares of Series D Preferred Stock and Warrants outstanding as of the end of such quarter, (ii) the total number of shares of Common Stock issued upon all conversions of Series D Preferred Stock and all exercises of Warrants prior to the end of such quarter, and (iii) the total number of shares of Common Stock which are reserved for issuance upon conversion of the Series D Preferred Stock and exercise of Warrants as of the end of such quarter. The Corporation (or its transfer agent) shall deliver the report for each quarter to each holder prior to the tenth (10th) day of the calendar month following the quarter to which such report relates. In addition, the Corporation (or its transfer agent) shall provide, within fifteen (15) days after delivery to the Corporation of a written request by any holder, any of the information enumerated in clauses (i) - (iii) of this Paragraph D as of the date of such request. E. Payment of Cash; Defaults. Whenever the Corporation is required to make any cash payment to a holder under this Certificate of Designation (as a Conversion Default Payment, upon redemption or otherwise), such cash payment shall be made to the holder within five (5) business days after delivery by such holder of a notice specifying that the holder elects to receive such payment in cash and the method (e.g., by check, wire transfer) in which such payment should be made. If such payment is not delivered within such five (5) business day period, such holder shall thereafter be entitled to interest on the unpaid amount at a per annum rate equal to the lower of twenty-four percent (24%) and the highest interest rate permitted by applicable law until such amount is paid in full to the holder. F. Status as Stockholder. Upon submission of a Notice of Conversion by a holder of Series D Preferred Stock, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such holder's allocated portion of the 15 Reserved Amount) shall be deemed converted into shares of Common Stock and (ii) the holder's rights as a holder of such converted shares of Series D Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. In situations where Article VI.B is applicable, the number of shares of Common Stock referred to in clauses (i) and (ii) of the immediately preceding sentence shall be determined on the date on which such shares of Common Stock are delivered to the holder. Notwithstanding the foregoing, if a holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Delivery Period with respect to a conversion of Series D Preferred Stock for any reason, then (unless the holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Corporation within five (5) business days after the expiration of such ten (10) business day period after expiration of the Delivery Period) the holder shall regain the rights of a holder of Series D Preferred Stock with respect to such unconverted shares of Series D Preferred Stock and the Corporation shall, as soon as practicable, return such unconverted shares to the holder. In all cases, the holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Article VI.A to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Article VI.B) for the Corporation's failure to convert Series D Preferred Stock. G. Remedies Cumulative. The remedies provided in this Certificate of Designation shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit a holder's right to pursue actual damages for any failure by the Corporation to comply with the terms of this Certificate of Designation. The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of Series D Preferred Stock and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees, in the event of any such breach or threatened breach, that the holders of Series D Preferred Stock shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. H. Applicability of the Redemption and Consent Agreement. Certain of the rights and obligations of the Corporation and the holders of the Series D Preferred Stock are subject to the terms of the Redemption and Consent Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 16 IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation this __ day of January, 1998. NATIONAL MEDIA CORPORATION By: ------------------------------------ Name: Title: 17 NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert the Series D Preferred Stock) The undersigned hereby irrevocably elects to convert ____________ shares of Series D Preferred Stock (the "Conversion"), represented by stock certificate Nos(s). ___________ (the "Preferred Stock Certificates") into shares of common stock ("Common Stock") of National Media Corporation (the "Corporation") according to the conditions of the Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock (the "Certificate of Designation"), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the holder for any conversion, except for transfer taxes, if any. A copy of each Preferred Stock Certificate is attached hereto (or evidence of loss, theft or destruction thereof). The Corporation shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee (which is _________________) with DTC through its Deposit Withdrawal Agent Commission System ("DTC Transfer"). The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Series D Preferred Stock shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from registration under the Act. / / In lieu of receiving the shares of Common Stock issuable pursuant to this Notice of Conversion by way of DTC Transfer, the undersigned hereby requests that the Corporation issue and deliver to the undersigned physical certificates representing such shares of Common Stock. Date of Conversion: ________________________________ Applicable Conversion Price: _______________________ Amount of Conversion Default Payments to be Converted, if any: ___________________________ Number of Shares of Common Stock to be Issued: _________________________ Signature: _________________________________________ Name: ______________________________________________ 18 Address: ___________________________________________ ____________________________________________________ ____________________________________________________ 19 EX-4.2 3 EX-4.2 EXHIBIT 4.2 No. ________ VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON JANUARY 4, 2003 THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase ______ Shares of Common Stock, par value $.01 per share Date: January 5, 1998 NATIONAL MEDIA CORPORATION STOCK PURCHASE WARRANT-D THIS CERTIFIES THAT, for value received, ___________________________ or its registered assigns, is entitled to purchase from NATIONAL MEDIA CORPORATION, a corporation organized under the laws of the State of Delaware (the "Company"), at any time or from time to time during the period specified in Section 2 hereof, ________________________________________________________ ( ) fully paid and nonassessable shares of the Company's common stock, par value $.01 per share (the "Common Stock"), at an initial exercise price per share (the "Exercise Price") equal to $6.82. The Exercise Price shall be adjustable as provided in paragraph 4, and shall be further adjustable as follows: the Exercise Price otherwise applicable shall remain in effect until the Adjustment Date, on and after which date the Exercise Price shall be lowest of (x) 101% of the closing bid price of the Common Stock on June 1, 1998, (y) 101% of the closing bid price of the Common Stock on the first trading day after the Merger Termination Date provided for in the Merger Agreement, or (z) the Exercise Price of the close of business on the trading date immediately preceding the Adjustment Date, and further provided that upon the consummation of the transactions contemplated by the Merger Agreement, the adjustment to the Exercise Price provided for in the foregoing clauses (x), (y) and (z) shall be nullified and voided, and the Exercise Price shall be readjusted to $6.82 per share, (or to such other price as would have been in effect had the price adjustment referred to in subparagraphs (x) through (z) above not taken place as long as such other price was not adjusted as a result of the execution and delivery of the Merger Agreement and the other Transaction Documents (as defined in the Merger Agreement) and the consummation of the transactions contemplated thereby or the public announcement of any of the foregoing). The number of shares of Common Stock purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject to adjustment as provided in Section 4 hereof. The term "Warrants" means this Warrant and the other warrants of the Company issued pursuant to that certain Redemption and Consent Agreement, dated as of the date hereof, by and among the Company and the other signatories thereto (the "Redemption and Consent Agreement"). This Warrant is subject to the following terms, provisions, and conditions: 1 1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 7 hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the "Exercise Agreement"), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon (i) payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the holder is permitted to effect a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof, delivery to the Company of a written notice of an election to effect a Cashless Exercise for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above or, if such date is not a business date, on the next succeeding business date. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding two (2) business days, after this Warrant shall have been so exercised (the "Delivery Period"). The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. If, at any time, a holder of this Warrant submits this Warrant, an Exercise Agreement and payment to the Company of the Exercise Price for each of the Warrant Shares specified in the Exercise Agreement, and the Company fails for any reason to deliver, on or prior to the fourth business day following the expiration of the Delivery Period for such exercise, the number of shares of Common Stock to which the holder is entitled upon such exercise (an "Exercise Default"), then the Company shall pay to the holder payments ("Exercise Default Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by (b) the amount by which the Market Price (as defined in Section 4(l) below) on the date the Exercise Agreement giving rise to the Exercise Default is transmitted in accordance with Section 1 (the "Exercise Default Date") exceeds the Exercise Price, multiplied by (c) the number of shares of Common Stock the Company failed to so deliver in such Exercise Default, multiplied by (d) .24, where N = the number of days from the Exercise Default Date to the date that the Company effects the full exercise of this Warrant which gave rise to the Exercise Default. The accrued Exercise Default Payment for each calendar month shall be paid in cash or shall be convertible into Common Stock at the Exercise Price, at the holder's option, as follows: a. In the event holder elects to take such payment in cash, cash payment shall be made to holder by the fifth (5th) day of the month following the month in which it has accrued; and b. In the event holder elects to take such payment in Common Stock, the holder may convert such payment amount into Common Stock (in accordance with the terms contained in Article IV of the Certificate of Designations, Preferences and Rights (the "C Certificate of Designation") governing the Company's Series C Convertible Preferred Stock (the "Series C Preferred Stock") or, if no Series C Preferred Stock is outstanding, in accordance with Article IV of the Certificate of Designations, Preferences and Rights (the "D Certificate of Designation" governing the Company's Series D Convertible Preferred Stock, (the "Series D Preferred Stock"), at the lower of the Exercise Price or the Market Price (as defined in Section 4(l)) (as in effect at the time of conversion) at any time after the fifth (5th) day of the month following the month in which it has accrued. 2 Nothing herein shall limit the holder's right to pursue actual damages for the Company's failure to maintain a sufficient number of authorized shares of Common Stock as required pursuant to the terms of Section 3(b) or to otherwise issue shares of Common Stock upon exercise of this Warrant in accordance with the terms hereof, and each holder shall have the right to pursue all remedies available at law or in equity (including a decree of specific performance and/or injunctive relief). 2. Period of Exercise. a. This Warrant is immediately exercisable, at any time or from time to time on or after January 5, 1998, the date of initial issuance of this Warrant (the "Issue Date"), and before 5:00 p.m., New York City time on January 4, 2003 (the "Exercise Period"). 3. Certain Agreements of the Company. The Company hereby covenants and agrees as follows: a. Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, claims and encumbrances. b. Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise in full of this Warrant (without giving effect to the limitations on exercise set forth in Section 7(g) hereof). c. Listing. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of this Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed or become listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. d. Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. e. Successors and Assigns. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all of the Company's assets. 3 4. Antidilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares issuable hereunder and for which this Warrant is then exercisable pursuant to Section 2 hereof shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. a. Adjustment of Exercise Price. Except as otherwise provided in Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the Company issues or sells, or in accordance with Section 4(b) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Dilutive Market Price (as hereinafter defined) on the date of issuance (a "Dilutive Issuance"), then effective immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in accordance with the following formula: E' = E x O + P/M ------------------ CSDO where: E' = the adjusted Exercise Price; E = the then current Exercise Price; M = the then current Dilutive Market Price (as defined in Section 4(1)); O = the number of shares of Common Stock outstanding immediately prior to the Dilutive Issuance; P = the aggregate consideration, calculated as set forth in Section 4(b) hereof, received by the Company upon such Dilutive Issuance; and CSDO = the total number of shares of Common Stock Deemed Outstanding (as defined in Section 4(l)) immediately after the Dilutive Issuance. b. Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following will be applicable: i. Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities exercisable, convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options") and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Market Price on the date of issuance ("Below Market Options"), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will, as of the date of the issuance or grant of such Below Market Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon the exercise of such Below Market Options" is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Below Market Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such 4 Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. ii. Issuance of Convertible Securities. (A) If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the Market Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon such exercise, conversion or exchange" is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon exercise, conversion or exchange of such Convertible Securities. (B) If the Company in any manner issues or sells any Convertible Securities with a fluctuating conversion or exercise price or exchange ratio to any person or entity other than the holder hereof (a "Variable Rate Convertible Security"), then the price per share for which Common Stock is issuable upon such exercise, conversion or exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest price per share which would be applicable (assuming all holding period and other conditions to any discounts contained in such Convertible Security have been satisfied) if the Market Price on the date of issuance of such Convertible Security was 75% of the Market Price on such date (the "Assumed Variable Market Price"). Further, if the Market Price at any time or times thereafter is less than or equal to the Assumed Variable Market Price last used for making any adjustment under this Section 4 with respect to any Variable Rate Convertible Security, the Exercise Price in effect at such time shall be readjusted to equal the Exercise Price which would have resulted if the Assumed Variable Market Price at the time of issuance of the Variable Rate Convertible Security had been 75% of the Market Price existing at the time of the adjustment required by this sentence. iii. Change in Option Price or Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange of any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. iv. Treatment of Expired Options and Unexercised Convertible Securities. If, in any case, the total number of shares of Common Stock issuable upon exercise of any Option or upon exercise, conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to exercise, convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such Option or Convertible 5 Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued. v. Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair market value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or securities will be determined in good faith by an investment banker or other appropriate expert of national reputation selected by the Company and reasonably acceptable to the holder hereof, with the costs of such appraisal to be borne by the Company. vi. Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities issued and outstanding on September 18, 1997, and set forth in Schedule 3(c) of that certain Securities Purchase Agreement dated as of September 4, 1997 among the Company and the other signatories thereto (the "Securities Purchase Agreement"), in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon the issuance of any shares of Series D Preferred Stock or Warrants issued or issuable pursuant to the terms of the Redemption and Consent Agreement; (iv) upon the issuance of Common Stock upon conversion of the Series C Preferred Stock or the Series D Preferred Stock or exercise of the Warrants and the warrants issued pursuant to the Securities Purchase Agreement; and (v) as a result of the execution and delivery of the Merger Agreement and the other Transaction Documents (as defined in the Merger Agreement) and the consummation of the transactions contemplated thereby. c. Subdivision or Combination of Common Stock. If the Company, at any time during the Exercise Period, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time during the Exercise Period, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. d. Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon exercise of this Warrant and for which this Warrant is or may become exercisable shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable or for which this Warrant is or may become exercisable (as 6 applicable) upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. e. Consolidation, Merger or Sale. In case of any consolidation of the Company with, or merger of the Company into any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company at any time during the Exercise Period, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities, cash or assets as were issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Warrant and the obligations to deliver to the holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire. f. Distribution of Assets. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, stock repurchase by way of return of capital or otherwise (including any dividend or distribution to the Company's shareholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "Distribution"), at any time during the Exercise Period, then the holder of this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets (or rights) which would have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution. g. Notice of Adjustment. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the holder of this Warrant, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. h. Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. i. No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise. j. Other Notices. In case at any time: i. the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (other than dividends or distributions payable in cash out of retained earnings consistent with the Company's past practices with 7 respect to declaring dividends and making distributions) to the holders of the Common Stock; ii. the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights; iii. there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or iv. there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable estimate thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least 30 days prior to the record date or the date on which the Company's books are closed in respect thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. k. Certain Events. If, at any time during the Exercise Period, any event occurs of the type contemplated by the adjustment provisions of this Section 4 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Section 4(g) hereof, and the Company's Board of Directors will make an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant so that the rights of the holder shall be neither enhanced nor diminished by such event. l. Certain Definitions. i. "Common Stock Deemed Outstanding" shall mean the number of shares of Common Stock actually outstanding (not including shares of Common Stock held in the treasury of the Company), plus (x) in the case of any adjustment required by Section 4(a) resulting from the issuance of any Options, the maximum total number of shares of Common Stock issuable upon the exercise of the Options for which the adjustment is required (including any Common Stock issuable upon the conversion of Convertible Securities issuable upon the exercise of such Options), and (y) in the case of any adjustment required by Section 4(a) resulting from the issuance of any Convertible Securities, the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of the Convertible Securities for which the adjustment is required, as of the date of issuance of such Convertible Securities, if any. ii. "Dilutive Market Price," as of any date, (i) means the closing sale price for the shares of Common Stock as reported on the New York Stock Exchange for the trading day immediately preceding such date, or (ii) if the New York Stock Exchange is not the principal trading market for the shares of Common Stock, the closing sale prices on the principal trading market for the Common Stock for the trading day immediately preceding such date, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Dilutive Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and 8 reasonably acceptable to the holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Dilutive Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. iii. "Market Price," as of any date, (i) means the volume weighted average sale price for the shares of Common Stock as reported on the New York Stock Exchange for the trading day immediately preceding such date, or (ii) if the New York Stock Exchange is not the principal trading market for the shares of Common Stock, the volume weighted average sale prices on the principal trading market for the Common Stock for the trading day immediately preceding such date, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. iv. "Common Stock," for purposes of this Section 4, includes the Common Stock and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only Common Stock in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. v. "Adjustment Date" means the earliest to occur of (w) June 1, 1998, (x) the date it is publicly announced that ValueVision International, Inc. ("VVI") is unwilling to proceed with the transactions contemplated by the "Merger Agreement" on the terms set forth therein; (y) the Merger Termination Date as defined in the Merger Agreement, or (z) the date on which demand is made upon the Corporation for payment of principal pursuant to the Demand Note issued by the Corporation to VVI pursuant to the Merger Agreement; provided, however, that the date set forth in subparagraph (w) above shall be extended to August 31, 1998 if on or before the close of business on June 1, 1998 the Corporation and VVI shall deliver to each of the holders of the Warrants who are parties to the Redemption and Consent Agreement, and their permitted transferees, a certification executed by the chief executive officer of each of the Corporation and VVI to the effect that all conditions precedent to completion of the transactions contemplated by the Merger Agreement have been satisfied or waived except only the consent required pursuant to Section 6.1(c) of the Merger Agreement. vi. "Merger Agreement" means that certain Agreement and Plan of Reorganization and Merger dated as of January 5, 1998 among the Corporation, ValueVision International, Inc., and V-L Holdings Corp. 5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant. 6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 9 7. Transfer, Exchange, Redemption and Replacement of Warrant. a. Restriction on Transfer. This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Section 7(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Section 7(f) and (g) hereof and to the provisions of Sections 2(f) and 2(g) of the Redemption and Consent Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 8 hereof are assignable only in accordance with the provisions of that certain Registration Rights Agreement dated as of September 4, 1997, as amended by Amendment No. 1 to the Registration Rights Agreement dated as of the date hereof, by and among the Company and the other signatories thereto (the "Registration Rights Agreement"). b. Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Section 7(e) below, for new Warrants of like tenor of different denominations representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the holder hereof at the time of such surrender. c. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor. d. Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 7, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder or transferees) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 7. The Company shall indemnify and reimburse the holder of this Warrant for all costs and expenses (including legal fees) incurred by such holder in connection with the enforcement of its rights hereunder. e. Warrant Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. f. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such exercise, transfer, or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an 10 investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter, status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. g. Additional Restrictions on Exercise or Transfer. Notwithstanding anything contained herein to the contrary, unless the holder hereof delivers a waiver in accordance with the last sentence of this Section 7(g), in no event shall the holder hereof exercise Warrants to the extent that (a) the number of shares of Common Stock beneficially owned by such holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of the Warrants or the unexercised or unconverted portion of any other securities of the Company (including the Series C Preferred Stock, the Series D Preferred Stock and including the Warrants issued pursuant to that certain Stock Purchase Agreement among the Company and the other signatories thereto dated September 4, 1998) subject to a limitation on conversion or exercise analogous to the limitation contained herein) and (b) the number of shares of Common Stock issuable upon exercise of the Warrants (or portion thereof) with respect to which the determination described herein is being made, would result in beneficial ownership by such holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided in clause (a) hereof. Except as provided in the immediately succeeding sentence, the restrictions contained in this Section 7(g) may not be amended without the consent of the holder of this Warrant and the holders of a majority of the Company's then outstanding Common Stock. The holder hereof may waive the restrictions set forth in this Section 7(g) by written notice to the Company upon not less than sixty one (61) days prior notice (with such waiver taking effect only upon the expiration of such sixty one (61) day notice period). 8. Registration Rights. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement, including the right to assign such rights to certain assignees, as set forth therein. 9. Notices. Any notices required or permitted to be given under the terms of this Warrant shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective five days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier, or by confirmed telecopy, in each case addressed to a party. The addresses for such communications shall be: If to the Company: National Media Corporation Eleven Penn Center 1835 Market Street Suite 1100 Philadelphia, PA 19103 Telecopy: (215) 988-4869 Attn: Robert N. Verratti, Chief Executive Officer, and Attn: Brian J. Sisko, Senior Vice President and General Counsel If to the holder, at such address as such holder shall have provided in writing to the Company, or at such other address as such holder furnishes by notice given in accordance with this Section 9. 10. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware. The Company irrevocably consents to the jurisdiction of the United States federal 11 courts and state courts located in the State of Delaware in any suit or proceeding based on or arising under this Agreement and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives any objection to the laying of venue and the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by certified or registered mail shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the holder's right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 11. Miscellaneous. a. Amendments. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof. b. Descriptive Headings. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. c. Cashless Exercise. Notwithstanding anything to the contrary contained in this Warrant, if the resale of the Warrant Shares by the holder is not then registered pursuant to an effective registration statement under the Securities Act, this Warrant may be exercised at any time after the first anniversary of the Issue Date until the end of the Exercise Period, by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the Market Price of a share of the Common Stock on the date of exercise and the Exercise Price, and the denominator of which shall be such Market Price per share of Common Stock. d. Business Day. For purposes of this Warrant, the term "business day" means any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law, regulation or executive order to close. 12 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. NATIONAL MEDIA CORPORATION By:_________________________________ Name:_____________________________ Title:______________________________ 13 FORM OF EXERCISE AGREEMENT (To be Executed by the Holder in order to Exercise the Warrant) To: National Media Corporation Eleven Penn Center 1835 Market Street Suite 1100 Philadelphia, PA 19103 Telecopy: (215) 988-4869 Attn: Robert N. Verratti, and Attn: Brian J. Sisko The undersigned hereby irrevocably exercises the right to purchase _____________ shares of the Common Stock of National Media Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), evidenced by the attached Warrant, and herewith makes payment of the Exercise Price with respect to such shares in full, all in accordance with the conditions and provisions of said Warrant. i. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws, and agrees that the following legend may be affixed to the stock certificate for the Common Stock hereby subscribed for if resale of such Common Stock is not registered or if Rule 144 is unavailable: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. (a) The undersigned requests that stock certificates for such shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Holder and delivered to the undersigned at the address set forth below: Dated:_________________ _____________________________________ Signature of Holder _____________________________________ Name of Holder (Print) Address: _____________________________________ _____________________________________ _____________________________________ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth hereinbelow, to: Name of Assignee Address No of Shares , and hereby irrevocably constitutes and appoints _____________________________ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Dated: _____________________, ____, In the presence of __________________ Name: ____________________________ Signature: _______________________ Title of Signing Officer or Agent (if any): _________________________ Address: _________________________ _________________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant. EX-4.14(A) 4 EX-4.14(A) EXHIBIT 4.14(a) No. ________ VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON SEPTEMBER 17, 2002 THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. Right to Purchase _______ Shares of Common Stock, par value $.01 per share Date: September 18, 1997 REVISED NATIONAL MEDIA CORPORATION STOCK PURCHASE WARRANT - C THIS CERTIFIES THAT, for value received, _________________________________ or its registered assigns, is entitled to purchase from NATIONAL MEDIA CORPORATION, a corporation organized under the laws of the State of Delaware (the "Company"), at any time or from time to time during the period specified in Section 2 hereof, ________________ (________) fully paid and nonassessable shares of the Company's common stock, par value $.01 per share (the "Common Stock"), at an exercise price per share (the "Exercise Price") equal to $6.82. The Exercise Price shall be adjustable as provided in paragraph 4, and shall be further adjustable as follows: the Exercise Price otherwise applicable shall remain in effect until the Adjustment Date, on and after which date the Exercise Price shall be lowest of (x) 101% of the closing bid price of the Common Stock on June 1, 1998, (y) 101% of the closing bid price of the Common Stock on the first trading day after the Merger Termination Date provided for in the Merger Agreement, or (z) the Exercise Price of the close of business on the trading date immediately preceding the Adjustment Date, and further provided that upon the consummation of the transactions contemplated by the Merger Agreement, the adjustment to the Exercise Price provided for in the foregoing clauses (x), (y) and (z) shall be nullified and voided, and the Exercise Price shall be readjusted to $6.82 per share (or to such other price as would have been in effect had the price adjustment referred to in subparagraphs (x) through (z) above not taken place so long as such other price was not adjusted as a result of the execution and delivery of the Merger Agreement and the other Transaction Documents (as defined in the Merger Agreement) and the consummation of the transactions contemplated thereby or the public announcement of any of the foregoing). The number of shares of Common Stock purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject to adjustment as provided in Section 4 hereof. The term "Warrants" means this Warrant and the other warrants of the Company issued pursuant to that certain Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the other signatories thereto (the "Securities Purchase Agreement"). This Warrant revises the terms of the warrants originally issued pursuant to the Securities Purchase Agreement, and is issued pursuant to the 1 Redemption and Consent Agreement The "Redemption and Consent Agreement") dated January 5, 1998 among the Company and the signatories thereto. This Warrant is subject to the following terms, provisions, and conditions: 1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, including, without limitation, the limitations contained in Section 7 hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the "Exercise Agreement"), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon (i) payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company, of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the holder is permitted to effect a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof, delivery to the Company of a written notice of an election to effect a Cashless Exercise for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above or, if such date is not a business date, on the next succeeding business date. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding two (2) business days, after this Warrant shall have been so exercised (the "Delivery Period"). The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. If, at any time, a holder of this Warrant submits this Warrant, an Exercise Agreement and payment to the Company of the Exercise Price for each of the Warrant Shares specified in the Exercise Agreement, and the Company fails for any reason to deliver, on or prior to the fourth business day following the expiration of the Delivery Period for such exercise, the number of shares of Common Stock to which the holder is entitled upon such exercise (an "Exercise Default"), then the Company shall pay to the holder payments ("Exercise Default Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by (b) the amount by which the Market Price (as defined in Section 4(l) below) on the date the Exercise Agreement giving rise to the Exercise Default is transmitted in accordance with Section 1 (the "Exercise Default Date") exceeds the Exercise Price, multiplied by (c) the number of shares of Common Stock the Company failed to so deliver in such Exercise Default, multiplied by (d) .24, where N = the number of days from the Exercise Default Date to the date that the Company effects the full exercise of this Warrant which gave rise to the Exercise Default. The accrued Exercise Default Payment for each calendar month shall be paid in cash or shall be convertible into Common Stock at the Exercise Price, at the holder's option, as follows: a. In the event holder elects to take such payment in cash, cash payment shall be made to holder by the fifth (5th) day of the month following the month in which it has accrued; and b. In the event holder elects to take such payment in Common Stock, the holder may convert such payment amount into Common Stock (in accordance with the terms contained in Article IV of the Certificate of Designations, Preferences and Rights (the "Certificate of Designation") governing the Company's Series C Convertible Preferred Stock (the "Series C Preferred Stock")) or, if no Series C Preferred Stock is outstanding, in accordance with Article IV of the Certificate of Designations, Preferences and Rights (the "D Certificate of Designation" governing the Company's Series D Convertible Preferred Stock, (the "Series D Preferred Stock"), at the lower of the Exercise 2 Price or the Market Price (as defined in Section 4(l)) (as in effect at the time of conversion) at any time after the fifth (5th) day of the month following the month in which it has accrued. Nothing herein shall limit the holder's right to pursue actual damages for the Company's failure to maintain a sufficient number of authorized shares of Common Stock as required pursuant to the terms of Section 3(b) or to otherwise issue shares of Common Stock upon exercise of this Warrant in accordance with the terms hereof, and each holder shall have the right to pursue all remedies available at law or in equity (including a decree of specific performance and/or injunctive relief). 2. Period of Exercise. a. This Warrant is immediately exercisable, at any time or from time to time on or after September 18, 1997, the date of initial issuance of this Warrant (the "Issue Date"), and before 5:00 p.m., New York City time on, September 17, 2002 (the "Exercise Period"). 3. Certain Agreements of the Company. The Company hereby covenants and agrees as follows: a. Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, claims and encumbrances. b. Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise in full of this Warrant (without giving effect to the limitations on exercise set forth in Section 7(g) hereof). c. Listing. The Company shall promptly secure the listing of the shares of Common Stock issuable upon exercise of this Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed or become listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. d. Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. e. Successors and Assigns. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all of the Company's assets. 3 4. Antidilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares issuable hereunder and for which this Warrant is then exercisable pursuant to Section 2 hereof shall be subject to adjustment from time to time as provided in this Section 4. In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up or down to the nearest cent. a. Adjustment of Exercise Price. Except as otherwise provided in Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the Company issues or sells, or in accordance with Section 4(b) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share less than the Dilutive Market Price (as hereinafter defined) on the date of issuance (a "Dilutive Issuance"), then effective immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in accordance with the following formula: E' = E x O + P/M ------------------ CSDO where: E' = the adjusted Exercise Price; E = the then current Exercise Price; M = the then current Dilutive Market Price (as defined in Section 4(1)); O = the number of shares of Common Stock outstanding immediately prior to the Dilutive Issuance; P = the aggregate consideration, calculated as set forth in Section 4(b) hereof, received by the Company upon such Dilutive Issuance; and CSDO = the total number of shares of Common Stock Deemed Outstanding (as defined in Section 4(l)) immediately after the Dilutive Issuance. b. Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following will be applicable: i. Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities exercisable, convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options") and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Market Price on the date of issuance ("Below Market Options"), then the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full exercise, conversion or exchange of Convertible Securities, if applicable) will, as of the date of the issuance or grant of such Below Market Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon the exercise of such Below Market Options" is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Below Market Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Below Market Options, plus, in the case of Convertible Securities issuable upon the exercise of such Below Market Options, the minimum aggregate amount of additional consideration payable upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Below Market Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such Below Market Options or upon the exercise, conversion or exchange of Convertible Securities issuable upon exercise of such Below Market Options. 4 ii. Issuance of Convertible Securities. (A) If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the Market Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon such exercise, conversion or exchange" is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange thereof at the time such Convertible Securities first become exercisable, convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon exercise, conversion or exchange of such Convertible Securities. (B) If the Company in any manner issues or sells any Convertible Securities with a fluctuating conversion or exercise price or exchange ratio to any person or entity other than the holder hereof (a "Variable Rate Convertible Security"), then the price per share for which Common Stock is issuable upon such exercise, conversion or exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest price per share which would be applicable (assuming all holding period and other conditions to any discounts contained in such Convertible Security have been satisfied) if the Market Price on the date of issuance of such Convertible Security was 75% of the Market Price on such date (the "Assumed Variable Market Price"). Further, if the Market Price at any time or times thereafter is less than or equal to the Assumed Variable Market Price last used for making any adjustment under this Section 4 with respect to any Variable Rate Convertible Security, the Exercise Price in effect at such time shall be readjusted to equal the Exercise Price which would have resulted if the Assumed Variable Market Price at the time of issuance of the Variable Rate Convertible Security had been 75% of the Market Price existing at the time of the adjustment required by this sentence. iii. Change in Option Price or Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the exercise, conversion or exchange of any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. iv. Treatment of Expired Options and Unexercised Convertible Securities. If, in any case, the total number of shares of Common Stock issuable upon exercise of any Option or upon exercise, conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to exercise, convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued. 5 v. Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair market value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or securities will be determined in good faith by an investment banker or other appropriate expert of national reputation selected by the Company and reasonably acceptable to the holder hereof, with the costs of such appraisal to be borne by the Company. vi. Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities issued and outstanding on the Issue Date and set forth on Schedule 3(c) of the Securities Purchase Agreement in accordance with the terms of such securities as of such date; (ii) upon the grant or exercise of any stock or options which may hereafter be granted or exercised under any employee benefit plan of the Company now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose; (iii) upon the issuance of any shares of Series C Preferred Stock or Warrants issued or issuable in accordance with terms of the Securities Purchase Agreement; (iv) upon conversion of the Series C Preferred Stock or exercise of the Warrants issued pursuant to the Stock Purchase Agreement; (v) upon the issuance of any share of Series D Preferred Stock or warrants issued or issuable in accordance with the Redemption and Consent Agreement; (vi) upon the issuance of Common Stock upon conversion of the Series D Preferred Stock or exercise of the warrants issued pursuant to the Redemption and Consent Agreement; or (vii) as a result of the execution and delivery of the Merger Agreement and the other Transaction Documents (as defined therein) and the consummation of the transactions contemplated thereby. c. Subdivision or Combination of Common Stock. If the Company, at any time during the Exercise Period, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company, at any time during the Exercise Period, combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its shares of Common Stock into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased. d. Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 4, the number of shares of Common Stock issuable upon exercise of this Warrant and for which this Warrant is or may become exercisable shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable or for which this Warrant is or may become exercisable (as applicable) upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. e. Consolidation, Merger or Sale. In case of any consolidation of the Company with, or merger of the Company into any other corporation, or in case of any sale or conveyance of all or 6 substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company at any time during the Exercise Period, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities, cash or assets as were issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Warrant and the obligations to deliver to the holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire. f. Distribution of Assets. In case the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a partial liquidating dividend, stock repurchase by way of return of capital or otherwise (including any dividend or distribution to the Company's shareholders of cash or shares (or rights to acquire shares) of capital stock of a subsidiary) (a "Distribution"), at any time during the Exercise Period, then the holder of this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets (or rights) which would have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution. g. Notice of Adjustment. Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the holder of this Warrant, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the chief financial officer of the Company. h. Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price. i. No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise. j. Other Notices. In case at any time: i. the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (other than dividends or distributions payable in cash out of retained earnings consistent with the Company's past practices with respect to declaring dividends and making distributions) to the holders of the Common Stock; ii. the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights; 7 iii. there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all of its assets to, another corporation or entity; or iv. there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable estimate thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least 30 days prior to the record date or the date on which the Company's books are closed in respect thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. k. Certain Events. If, at any time during the Exercise Period, any event occurs of the type contemplated by the adjustment provisions of this Section 4 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Section 4(g) hereof, and the Company's Board of Directors will make an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant so that the rights of the holder shall be neither enhanced nor diminished by such event. l. Certain Definitions. i. "Common Stock Deemed Outstanding" shall mean the number of shares of Common Stock actually outstanding (not including shares of Common Stock held in the treasury of the Company), plus (x) in the case of any adjustment required by Section 4(a) resulting from the issuance of any Options, the maximum total number of shares of Common Stock issuable upon the exercise of the Options for which the adjustment is required (including any Common Stock issuable upon the conversion of Convertible Securities issuable upon the exercise of such Options), and (y) in the case of any adjustment required by Section 4(a) resulting from the issuance of any Convertible Securities, the maximum total number of shares of Common Stock issuable upon the exercise, conversion or exchange of the Convertible Securities for which the adjustment is required, as of the date of issuance of such Convertible Securities, if any. ii. "Dilutive Market Price," as of any date, (i) means the closing sale price for the shares of Common Stock as reported on the New York Stock Exchange for the trading day immediately preceding such date, or (ii) if the New York Stock Exchange is not the principal trading market for the shares of Common Stock, the closing sale prices on the principal trading market for the Common Stock for the trading day immediately preceding such date, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Dilutive Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Dilutive Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. 8 iii. "Market Price," as of any date, (i) means the volume weighted average sale price for the shares of Common Stock as reported on the New York Stock Exchange for the trading day immediately preceding such date, or (ii) if the New York Stock Exchange is not the principal trading market for the shares of Common Stock, the volume weighted average sale prices on the principal trading market for the Common Stock for the trading day immediately preceding such date, or (iii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the average fair market value as reasonably determined by an investment banking firm selected by the Company and reasonably acceptable to the holder, with the costs of the appraisal to be borne by the Company. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value must be made hereunder. iv. "Common Stock," for purposes of this Section 4, includes the Common Stock and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only Common Stock in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4(e) hereof, the stock or other securities or property provided for in such Section. v. "Adjustment Date" means the earliest to occur of (w) June 1, 1998, (x) the date it is publicly announced that ValueVision International, Inc. ("VVI") is unwilling to proceed with the transactions contemplated by the Merger Agreement on the terms set forth therein; (y) the Merger Termination Date as defined in the Merger Agreement, or (z) the date on which demand is made upon the Corporation for payment of principal pursuant to the Demand Note issued by the Corporation to VVI pursuant to the Merger Agreement; provided, however, that the date set forth in subparagraph (w) above shall be extended to August 31, 1998 if on or before the close of business on June 1, 1998 the Corporation and VVI shall deliver to each of the holders of the Warrants who are parties to the Redemption and Consent Agreement, and their permitted transferees, a certification executed by the chief executive officer of each of the Corporation and VVI to the effect that all conditions precedent to completion of the transactions contemplated by the Merger Agreement have been satisfied or waived except only the consent required pursuant to Section 6.1(c) of the Merger Agreement. vi. "Merger Agreement" means that certain Agreement and Plan of Reorganization and Merger dated as of January 5, 1998 among the Corporation, ValueVision International, Inc., and V-L Holdings Corp. 5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant. 6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 7. Transfer, Exchange, Redemption and Replacement of Warrant. a. Restriction on Transfer. This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in 9 Section 7(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Section 7(f) and (g) hereof and to the provisions of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding anything to the contrary contained herein, the registration rights described in Section 8 hereof are assignable only in accordance with the provisions of that certain Registration Rights Agreement, dated as of the date hereof, by and among the Company and the other signatories thereto (the "Registration Rights Agreement"). b. Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Section 7(e) below, for new Warrants of like tenor of different denominations representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the holder hereof at the time of such surrender. c. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor. d. Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 7, this Warrant shall be promptly cancelled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder or transferees) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 7. The Company shall indemnify and reimburse the holder of this Warrant for all costs and expenses (including legal fees) incurred by such holder in connection with the enforcement of its rights hereunder. e. Warrant Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant. f. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such exercise, transfer, or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter, status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. g. Additional Restrictions on Exercise or Transfer. Notwithstanding anything contained herein to the contrary, unless the holder hereof delivers a waiver in accordance with the last sentence of this Section 7(g), in no event shall the holder hereof exercise Warrants to the extent that (a) 10 the number of shares of Common Stock beneficially owned by such holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of the Warrants or the unexercised or unconverted portion of any other securities of the Company (including the Series C Preferred Stock, the Series D Preferred Stock, and the warrants issued pursuant to the Redemption and Consent Agreement) subject to a limitation on conversion or exercise analogous to the limitation contained herein) and (b) the number of shares of Common Stock issuable upon exercise of the Warrants (or portion thereof) with respect to which the determination described herein is being made, would result in beneficial ownership by such holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided in clause (a) hereof. Except as provided in the immediately succeeding sentence, the restrictions contained in this Section 7(g) may not be amended without the consent of the holder of this Warrant and the holders of a majority of the Company's then outstanding Common Stock. The holder hereof may waive the restrictions set forth in this Section 7(g) by written notice to the Company upon not less than sixty one (61) days prior notice (with such waiver taking effect only upon the expiration of such sixty one (61) day notice period). 8. Registration Rights. The initial holder of this Warrant (and certain assignees thereof) is entitled to the benefit of such registration rights in respect of the Warrant Shares as are set forth in the Registration Rights Agreement, including the right to assign such rights to certain assignees, as set forth therein. 9. Notices. Any notices required or permitted to be given under the terms of this Warrant shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective five days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier, or by confirmed telecopy, in each case addressed to a party. The addresses for such communications shall be: If to the Company: National Media Corporation Eleven Penn Center 1835 Market Street Suite 1100 Philadelphia, PA 19103 Telecopy: (215) 988-4869 Attn: Robert N. Verratti, Chief Executive Officer, and Attn: Brian J. Sisko, Senior Vice President and General Counsel If to the holder, at such address as such holder shall have provided in writing to the Company, or at such other address as such holder furnishes by notice given in accordance with this Section 9. 10. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware. The Company irrevocably consents to the jurisdiction of the United States federal courts and state courts located in the State of Delaware in any suit or proceeding based on or arising under this Agreement and irrevocably agrees that all claims in respect of such suit or proceeding may be determined in such courts. The Company irrevocably waives any objection to the laying of venue and the defense of an inconvenient forum to the maintenance of such suit or proceeding. The Company further agrees that service of process upon the Company mailed by certified or registered mail shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. Nothing herein shall affect the holder's right to serve process in any other manner permitted by law. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. 11 11. Miscellaneous. a. Amendments. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof. b. Descriptive Headings. The descriptive headings of the several Sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. c. Cashless Exercise. Notwithstanding anything to the contrary contained in this Warrant, if the resale of the Warrant Shares by the holder is not then registered pursuant to an effective registration statement under the Securities Act, this Warrant may be exercised at any time after the first anniversary of the Issue Date until the end of the Exercise Period, by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the Market Price of a share of the Common Stock on the date of exercise and the Exercise Price, and the denominator of which shall be such Market Price per share of Common Stock. d. Business Day. For purposes of this Warrant, the term "business day" means any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law, regulation or executive order to close. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. NATIONAL MEDIA CORPORATION By:_________________________________ Name:_____________________________ Title:____________________________ 12 FORM OF EXERCISE AGREEMENT (To be Executed by the Holder in order to Exercise the Warrant) To: National Media Corporation Eleven Penn Center 1835 Market Street Suite 1100 Philadelphia, PA 19103 Telecopy: (215) 988-4869 Attn: Robert N. Verratti, and Attn: Brian J. Sisko The undersigned hereby irrevocably exercises the right to purchase _____________ shares of the Common Stock of National Media Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), evidenced by the attached Warrant, and herewith makes payment of the Exercise Price with respect to such shares in full, all in accordance with the conditions and provisions of said Warrant. i. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained on exercise of the Warrant, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws, and agrees that the following legend may be affixed to the stock certificate for the Common Stock hereby subscribed for if resale of such Common Stock is not registered or if Rule 144 is unavailable: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. ii. The undersigned requests that stock certificates for such shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Holder and delivered to the undersigned at the address set forth below: Dated:_________________ _____________________________________ Signature of Holder _____________________________________ Name of Holder (Print) Address: _____________________________________ _____________________________________ _____________________________________ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth hereinbelow, to: Name of Assignee Address No of Shares , and hereby irrevocably constitutes and appoints ______________________________ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises. Dated: _____________________, ____, In the presence of __________________ Name: ____________________________ Signature: _______________________ Title of Signing Officer or Agent (if any): _________________________ Address: _________________________ _________________________ Note: The above signature should correspond exactly with the name on the face of the within Warrant C EX-5 5 EX-5 EXHIBIT 5 NATIONAL MEDIA CORPORATION Eleven Penn Center, Suite 1100 1835 Market Street Philadelphia, PA 19103 March 17, 1998 Board of Directors National Media Corporation Eleven Penn Center, Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 Re: Registration Statement on Form S-3 Gentlemen: I am general counsel to National Media Corporation (the "Company") and have caused to be prepared a registration statement on Form S-3 in connection with the proposed registration of shares of the Company's common stock, par value $.01 per share (the "Common Stock") pursuant to the Securities Act of 1933, as amended (the "Securities Act"). Such registration statement, as it may be amended or supplemented from time to time, including all exhibits thereto, is referred to hereinafter as the "Registration Statement." The shares to be registered (the "Offered Shares") consist of (i) 14,500,000 shares of Common Stock (the "Series D Conversion Shares") issuable pursuant to the terms of the Company's Series D Convertible Preferred Stock, par value $.01 per share (the "Series D Preferred Stock") and (ii) 500,000 shares of Common Stock (the "Series D Warrant Shares") issuable upon exercise of warrants issued in connection with the Series D Preferred Stock. The Offered Shares may be offered and sold from time to time for the account of the persons referred to in the Registration Statement as "Selling Stockholders." In this regard, I have examined: (i) the agreements (the "Agreements") pursuant to which the Selling Stockholders have received or may acquire the Offered Shares from the Company; (ii) the Company's Certificate of Incorporation and Bylaws, each as amended and as presently in effect; (iii) the Registration Statement; and (iv) such officers' certificates, resolutions, minutes, corporate records and other documents as I have deemed necessary or appropriate for purposes of rendering the opinions expressed herein. Board of Directors March 17, 1998 Page 2 In rendering such opinions, I have assumed the authenticity of all documents and records examined, the conformity with the original documents of all documents submitted to me as copies and the genuineness of all signatures. The opinions expressed herein are based solely upon my review of the documents and other materials expressly referred to above. Other than such documents and related materials, I have not reviewed any other documents in rendering such opinions. Such opinions are therefore qualified by the scope of that document examination. Based upon and subject to the foregoing, and on such other examinations of law and fact as I have deemed necessary or appropriate in connection herewith, I am of the opinion that, upon issuance in accordance with the provisions of the appropriate Agreements, the Series D Conversion Shares, the Series D Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock. This opinion is limited to the laws of the Commonwealth of Pennsylvania and the General Corporation Law of the State of Delaware; provided, however, that no opinion is hereby rendered as to the state securities laws of either the Commonwealth of Pennsylvania or the State of Delaware. Except as expressly otherwise noted herein, this opinion is given as of the date hereof. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference made to me under the caption "Legal Matters" in the Prospectus constituting a part of the Registration Statement. By giving such consent, I do not hereby admit that I fall within the category of persons whose consent is required pursuant to Section 7 of the Securities Act. Very truly yours, /s/ Brian J. Sisko, Esq. Brian J. Sisko, Esq. EX-10.1 6 EX-10.1 EXHIBIT 10.1 AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT AMENDMENT NO. 1, dated ____________, 1998, (the "Amended Agreement") to the REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of September 4, 1997, by and among NATIONAL MEDIA CORPORATION, a corporation organized under the laws of the State of Delaware, with headquarters located at Eleven Penn Center, 1835 Market Street, Suite 1100, Philadelphia, Pennsylvania 19103 (the "Company"), V-L HOLDING CORP., a corporation organized under the laws of the State of Delaware, and the undersigned (together with affiliates, the "Initial Investors"). In consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Initial Investors hereby agree that the Agreement be amended as follows: 1. The recitals to the Agreement are amended in their entirety to read as follows: "WHEREAS: "A. In connection with the Securities Purchase Agreement dated September 4, 1997 by and between the Company and the Initial Investors (the "Securities Purchase Agreement"), the Company issued to the Initial Investors (i) shares of its Series C Convertible Preferred Stock (the "C Preferred Stock") that are convertible into shares of the Company's common stock, par value $.01 per share (the "Common Stock"), upon the terms and subject to the limitations and conditions set forth in the Certificate of Designations, Rights and Preferences with respect to such C Preferred Stock (the "C Certificate of Designation") and (ii) warrants (the "Warrants") to acquire shares of Common Stock; "B. In connection with the Redemption and Consent Agreement dated as of January 5, 1998, among the Company, the Initial Investors and ValueVision International, Inc. (the "Redemption and Consent Agreement"), the Company has issued to the Initial Investors, in exchange for the C Preferred Stock, newly issued shares of its Series D Convertible Preferred Stock (the "Preferred Stock") that are also convertible into shares of the Company's Common Stock, upon the terms and subject to the limitations and conditions set forth in the Certificate of Designations, Rights and Preferences with respect to such Preferred Stock (the "Certificate of Designation") and (ii) warrants (the "New Warrants") to acquire shares of Common Stock. The Warrants and the New Warrants are collectively referred to herein as the "Warrants". "C. To induce the Initial Investors to execute and deliver the Redemption and Consent Agreement, the Company has agreed to extend the registration rights provided in the Agreement to the Common Stock issuable upon conversion of the Preferred Stock and upon the exercise of the New Warrants." "D. V-L Holdings Corp. is being made a party hereto for the purpose of assuming the obligations of the Company under the Agreement and this Amended Agreement following the Closing of the Merger (as defined below)." 2. The term "Common Stock" shall have the meaning set forth above in the Recitals, provided that upon the closing of the merger (the "Merger") between the Company and ValueVision International, Inc. pursuant to the Agreement and Plan of Reorganization and Merger dated January 5, 1998, "Common Stock" shall thereafter mean the "common stock, par value $.01 per share of V-L Holdings Corp., a Delaware corporation." 1 The term "Company" shall have the meaning set forth above in the Preamble, provided that upon the closing of the Merger, "Company" shall thereafter mean V-L Holdings Corp. 3. Paragraph 1.a(iii) of the Agreement is hereby amended to read in its entirety as follows: "(iii) "Registrable Securities" means shares of Common Stock issuable upon the conversion of the Preferred Stock (the "Conversion Shares") and the shares of Common Stock issuable upon exercise of the Warrants and the New Warrants (collectively the "Warrant Shares") (including any Conversion Shares issuable with respect to Conversion Default Payments under the Certificate of Designation or in redemption of the Preferred Stock and any Warrant Shares issuable with respect to Exercise Default Payments under the Warrants) and any shares of capital stock issued or issuable, from time to time (with any adjustments), as a distribution on or in exchange for or otherwise with respect to any of the foregoing; provided that upon the redemption of all of the Preferred Stock by the Company at the closing of the Merger, the term "Registrable Securities" shall thereafter not include any Conversion Shares." 4. The first five lines of paragraph 2.(a) of the Agreement are amended in their entirety to read as follows: "(a) Mandatory Registration. The Company has prepared and filed with the SEC on a timely basis Registration Statements on Form S-3, each of which has become effective covering the resale of at least 7,000,000 Registrable. . ." 5. The first six lines of paragraph 2.b are amended in their entirety to read as follows: "(b) Payments by the Company. If, after the Registration Statement has been declared effective by the SEC, sales of all the Registrable. . ." 6. The last sentence of paragraph 3.c is hereby deleted. 7. The first four lines of paragraph 4.a are amended in their entirety to read as follows: "The Company shall keep the Registration Statement referred to in Section 2(a) effective pursuant to Rule 415 at all. . ." 8. Section 12.e of the Agreement is amended in its entirety to read as follows: "This Amended Agreement, the Agreement, the Securities Purchase Agreement, the Redemption and Consent Agreement, the Warrants and the New Warrants (including all schedules and exhibits thereto) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. This Agreement, the Amended Agreement, the Securities Purchase Agreement, the Redemption and Consent Agreement, the Warrants and the New Warrants supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof." 9. The undersigned parties hereby agree that any provisions in the Agreement that relate to any failure or delay by the Company in preparing and filing with the SEC a registration statement covering the Registrable Securities or to have such Registration Statement declared effective (but not the provisions relating to maintaining the effectiveness of the Registration Statement) shall be deemed to be inapplicable as a result of the filing and effectiveness of the Registration Statement described in Section 2(a) of the Agreement, as amended. The undersigned parties hereby further agree that notwithstanding anything to the contrary in the Agreement or in this Amended Agreement, the Initial Investors hereby consent to and waive any claims, benefits or rights with respect to, the failure of the Company to have a Registration Statement covering the Registrable Shares effective during the 120 days following the closing of the Merger; provided, however, that such consent and waiver are contingent upon a Registration Statement being filed by the 2 Company with the SEC within thirty days after the closing of the Merger, and being declared effective by the SEC within one hundred twenty days after the closing of the Merger. 10. To the extent that there are any inconsistent provisions between this Amended Agreement and the Agreement, the terms of the Amended Agreement shall control, and such inconsistent provision in the Agreement is hereby superseded by the Amended Agreement. In all other respects, the Agreement is hereby confirmed and, as amended hereby, remains in full force and effect. 3 IN WITNESS WHEREOF, the parties have caused this Amended Agreement to be duly executed as of the date first above written. NATIONAL MEDIA CORPORATION V-L HOLDINGS CORP. By:_______________________ By:_______________________ Name:_____________________ Name:_____________________ Its:______________________ Its:______________________ INITIAL INVESTORS: CAPITAL VENTURES INTERNATIONAL RGC INTERNATIONAL INVESTORS, LDC By: Heights Capital Management, By: Rose Glen Capital Management, L.P. its authorized agent Investment Manager By:_______________________ By: RGC General Partner Corp., Name:_____________________ General Partner Its:______________________ By:______________________ Name:____________________ Its:_____________________ 4 EX-23.1 7 EX-23.1 EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of National Media Corporation for the registration of 15,000,000 shares of its common stock and to the incorporation by reference therein of our report dated July 14, 1997 with respect to the consolidated financial statements and schedule of National Media Corporation included in its Annual Report (Form 10-K) for the year ended March 31, 1997, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Philadelphia, Pennsylvania March 18, 1998 -----END PRIVACY-ENHANCED MESSAGE-----