-----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, H6xs5VZ/qOIhDqFz5VTvJ1Dv5DoR8p7Cfn3nr82ycitdik9l5EcPgdZiOf0cGjCe NGXTToZFU3TFRSSk8f4XWw== 0001047469-98-035512.txt : 19980928 0001047469-98-035512.hdr.sgml : 19980928 ACCESSION NUMBER: 0001047469-98-035512 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980925 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: 333-64295 FILM NUMBER: 98715018 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 FORM S-3 As filed with the Securities and Exchange Commission on September 25, 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) 15821 Ventura Boulevard Suite 570 Encino, California 91416 (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.|_| Pursuant to Rule 429 under the Securities Act of 1933, as amended, the Form of Prospectus included herein also relates to the securities registered under the Registrant's Registration Statement on Form S-3 (Reg. No. 333-48205) declared effective by the Securities and Exchange Commission (the "Commission") on April 16, 1998, is intended for use therewith, and constitutes a post-effective amendment thereto. CALCULATION OF REGISTRATION FEE
Proposed Proposed Amount of Title of Securities Amount to be Maximum Offering Maximum Aggregate Registration to be Registered Registered Price Per Share Offering Price Fee Common Stock, par value $.01 per share 4,318,579 (1) $3.375/share (2) $14,575,204(2) $4,300.00(2) - -------------------------------------------------------------------------------------------------------------------
(1) 5,750,000 shares of Registrant's Common Stock issuable upon conversion of the ValueVision Note and exercise of the 1995 ValueVision Warrants and 1998 ValueVision Warrants have been previously registered on a Registration Statement on Form S-3 declared effective by the Commission on April 16, 1998 (Reg. No. 333-48205) (the "Prior Registration Statement") and a registration fee of $3,817.00 (based on a market price of $2.25 per share of Common Stock) was paid in connection therewith. 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 the ValueVision Note, the 1995 Warrants and the 1998 Warrants is subject to adjustment by reason of stock splits, stock dividends, and other similar transactions in the Common Stock. (2) 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 September 21, 1998, as estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended. 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 ------------------------------------ 10,068,579 Shares of Common Stock ------------------------------------ This prospectus concerns the offer and sale by the selling stockholder named herein (the "Selling Stockholder"), from time to time, of up to 10,068,579 common shares (the "Offered Shares"), par value $.01 per share (the "Common Stock") of National Media Corporation (together with its subsidiaries, the "Company" or the "Registrant"). The Offered Shares (the "Conversion Shares") consist of the shares of Common Stock issuable by the Company upon conversion by the Selling Stockholder of a promissory note executed by the Company held by the Selling Stockholder, as amended by a letter agreement, dated August 11, 1998, between NM Acquisition Co., LLC, the Selling Stockholder and the Company (the "ValueVision Note") and upon exercise of the 1995 Warrants and 1998 Warrants issued by the Company to the Selling Stockholder. Certain shares of Common Stock issuable by the Company upon conversion by the Selling Stockholder of the ValueVision Note and exercise of the 1995 Warrants and 1998 Warrants were registered for resale pursuant to a Registration Statement on Form S-3 (Reg. No. 333-48205) declared effective by the Securities and Exchange Commission on April 16, 1998. The conversion price of the ValueVision Note is $1.073125 per share of Common Stock. The exercise price of the 1995 Warrants and the 1998 Warrants is $2.74 per share of Common Stock. 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 the ValueVision Note, the 1995 Warrants and the 1998 Warrants is subject to adjustment by reason of stock splits, stock dividends and other similar transactions in the Common Stock. None of the proceeds from the sale of the Offered Shares by ValueVision will be received by the Company. 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 Stockholder. 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 September 21, 1998, the closing sale price for the Common Stock, as quoted on the New York Stock Exchange ("NYSE"), was $3.4375 per share. SEE "RISK FACTORS" BEGINNING ON PAGE 7 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 September __, 1998. 1 Pursuant to this Prospectus, the Offered Shares may be sold by the Selling Stockholder, 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 Stockholder has advised the Company that it currently intends 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, the Selling Stockholder to whom the Offered Shares were initially issued by the Company, whether or not an affiliate of the Company, that acquires the Conversion 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 STOCKHOLDER. 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, 1998 (the "Form 10-K"); (b) Amendment No. 1 on Form 10-K/A; (c) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998; (d) The Company's Current Reports on Form 8-K, dated April 8, 1998, June 1, 1998 , July 15, 1998 and August 13, 1998; (e) The Company's proxy statement on Schedule 14A, dated September 23, 1998; 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. 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 3 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, c/o Quantum Television, 15821 Ventura Boulevard, Suite 570, Encino, California 91416; Attention: Director of Investor Relations, phone number 818-461-6400. 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 transactions described under "Recent Developments" below; (ii) competition for customers for the Company's 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. The Company's ability to predict the results or the effect of any pending events 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 1998 Annual Report and Quarterly Report on Form 10-Q incorporated in this Prospectus by reference. 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 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 ("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 Quantum Television (formerly d/b/a DirectAmerica Corporation), which the Company acquired in October 1995. The Company is a Delaware corporation, with its principal executive offices located at 15821 Ventura Boulevard, Suite 570, Encino, California 91416 and its telephone number is 818-461-6400. RECENT DEVELOPMENTS On August 11, 1998, the Company executed definitive agreements with NM Acquisition Co., LLC ("ACO"), a new Delaware limited liability company formed for the purpose of the Transactions described herein, relating to a transaction pursuant to which an investor group (the "Investor Group") has agreed to acquire a substantial equity interest in and operational control of the Company through the purchase from the holders thereof (the "Series D Holders") of $10,000,000 of the Company's Series D Convertible Preferred Stock, par value of $.01 per share (the "Series D Preferred Stock"), and the purchase from the Company of $20,000,000 to $22,000,000 of the Company's newly-created Series E Convertible Preferred Stock, par value $.01 per share (the "Series E Preferred Stock") (together with the other transactions contemplated thereby, the "Transactions"). At the time of the execution of the definitive agreements regarding the Transactions, the Investor Group consummated the acquisition of 10,000 shares of the Company's outstanding Series D Preferred Stock, along with warrants to purchase 992,942 shares of Common Stock which had previously been issued to the original holders of the Series D Preferred Stock (collectively, the "Series D Securities") from the Series D Holders for an aggregate of $10,000,000. Upon consummation of such acquisition, the Investor Group, the Series D Holders and the Company eliminated the floating conversion price feature of the Series D Preferred Stock, fixing the conversion price at $1.073125 per share of Common Stock and agreed to certain limitations regarding sales of the Series D Securities and the Common Stock issuable upon conversion and/or exercise of the Series D Securities. In the event the Transactions are not consummated, or upon the occurrence of certain events, including a subsequent "change in control" of the Company, the agreements related to the elimination of the floating conversion price feature of the Series D Preferred Stock, the 5 sales limitations with respect to the Series D Securities and the Common Stock issuable upon conversion and/or exercise of the Series D Securities and certain other covenants with respect to sales of the Series D Securities and the Common Stock issuable upon conversion and/or exercise of the Series D Securities will terminate. In addition to the $10,000,000 acquisition of the Series D Securities, ACO entered into a stock purchase agreement with the Company pursuant to which the Investor Group agreed to invest a minimum of $20,000,000 and a maximum of $22,000,000 directly into the Company in exchange for shares of the Company's newly-created Series E Preferred Stock. The Series E Preferred Stock will be convertible into shares of Common Stock at a fixed conversion price of $1.50 per share (subject to adjustment for certain anti-dilution events). Upon execution of the definitive agreements regarding the Transactions, Stephen C. Lehman was named Acting Chief Executive Officer of the Company. Mr. Lehman, Eric R. Weiss and Andrew M. Schuon were also named to the Company's Board of Directors as designees of ACO. The Company also entered into a consulting agreement (the "Consulting Agreement") with Temporary Media Co., LLC, a newly-formed limited liability company controlled by Mr. Lehman, Mr. Weiss and Daniel M. Yukelson ("TMC"), pursuant to which TMC is presently providing executive management consulting services to the Company pending consummation of the Transactions. In connection with the Consulting Agreement, the Company granted to TMC (i) a five-year option (the "TMC Options") to purchase up to 212,500 shares of Common Stock, subject to certain vesting requirements, at an exercise price of $1.32 per share and (ii) contingent warrants (the "TMC Warrants"), which will only become effective following consummation of the Transactions, to purchase up to 3,762,500 shares of Common Stock, at exercise prices ranging from $1.32 per share to $3.00 per share. In the event that the Company's stockholders do not approve the Transactions, all TMC Warrants and all non-vested TMC Options will be cancelled. Additionally, if TMC materially breaches its duties and obligations under the Consulting Agreement and such breach remains uncured for 30 days, all TMC Warrants and all non-vested TMC Options will be cancelled. 1,000,000 of the TMC Warrants shall not be exercised by TMC or any employee of TMC and may only be transferred to any officer, director, employee or consultant of the Company other than Messrs. Lehman, Weiss, Yukelson or any employee of TMC. TMC expects to use the TMC Warrants to retain and attract highly qualified executive personnel and other persons associated with the Company's programming to the Company and that the TMC Warrants will have additional terms which provide for the vesting of the TMC Warrants over a three to five year period. As a result of negotiations initiated by the Company and ACO, the Company also executed agreements with First Union National Bank ("First Union") and ValueVision providing for modifications to the Company's two primary credit facilities. First Union waived all outstanding financial covenant violations and modified certain financial covenants pending consummation of the Transactions upon receipt of a $190,000 fee. First Union also agreed to accept payment of 75% of all outstanding principal obligations in full satisfaction of the Company's indebtedness, provided such payment is made to First Union by November 15, 1998 and all other outstanding fees and accrued interest are paid in full. ValueVision has agreed to waive its right to accelerate repayment of its $10,000,000 demand note (the "ValueVision Note") pending Closing of the Transactions, other than in the event of an acceleration of the First Union facility. ValueVision also agreed to certain standstill provisions and certain limitations regarding the Company's payment of the ValueVision Note prior to January 1, 1999. In consideration thereof, the Company agreed to re-price certain warrants held by ValueVision to $2.74 per share. The Company retained its right to repay the ValueVision Note upon maturity in cash or shares of Common Stock (at $1.073125 per share) at the Company's option. The Company has filed with the Securities and Exchange Commission, the New York Stock Exchange and the Philadelphia Stock Exchange a definitive proxy statement describing the Transactions. 6 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 1998, fiscal 1997 etc. refer to the fiscal period ending in the indicated calendar year. Recent Losses; Cash Flow The Company has suffered net losses in four of its last five fiscal years, including net losses of approximately $56.8 million in fiscal 1998, 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 $3.2 million for the first quarter of fiscal 1999. Based upon the deterioration which occurred in the Company's financial condition during fiscal 1997 and 1998 and the presence of certain other conditions, as of June 29, 1998, 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 1998, the Company has also experienced, as 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 the Company's business plan adequately addresses the circumstances and situations which resulted in the Company's performance in the periods referred to above. Unless the Company has adequately addressed 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, including the Internet; 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 profitable 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, 1998 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 1998, 1997 and 1996, approximately 54.9%, 47.4% and 51.6%, respectively, of the Company's net revenues were derived from sales to customers outside the United States and Canada. In fiscal 1998, 1997 and 1996, sales in Germany accounted for approximately 7.5%, 5.7% and 7.0%, 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 15.2% of' the Company's net revenues for fiscal 1998, down from 19.8% in fiscal 1997. Sales of the Company's products in Japan, which represented a significant portion of Asian revenues, accounted for approximately 11.5% of the Company's net revenues in fiscal 1998, down from 17.7% in fiscal 1997. The economic downturn in these markets has materially adversely affected the Company. A turnaround is not yet expected. Geographical expansion of sales activity has resulted 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 domestic and 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 similar levels of 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 7 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 1998, 1997 and 1996 accounted for approximately 40.3%, 41.2% and 46.0%, 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. Accordingly, it is 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 be 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. 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. 8 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 operation 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. 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 Company's existing agreement with Mitsui & Co., Ltd. ("Mitsui") regarding its operations in Japan will terminate on January 1, 1999. The Company and Mitsui are involved in negotiations to restructure their relationships in Japan and Asia in order to address changes in that market and other circumstances which have arisen. 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. In April 1998 the Company began leasing a twenty-four hour transponder on a newly-launched Eutelstat satellite, the "Hotbird IV," the coverage of which reaches across the European continent. The Company expects to incur significant start up costs in connection with the transponder lease. There can be no assurance that the Company will be able to effectively utilize such media time. Failure to do so could have a material adverse effect on the Company and its 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. 9 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 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, the Company consummated the acquisition of DirectAmerica in October 1995 and the acquisition of Positive Response Television, Inc. ("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. 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. At this stage, the Company cannot predict the outcome of this matter; however, even if plaintiffs were to succeed on all of their claims, the Company does not believe that such result would have a material adverse impact on the Company's results of operations. Regulatory Matters 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 Positive Response and Mr. Levey to submit compliance reports to the FTC staff. The Company 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 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 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, 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. The FTC recently notified the Company that it had concerns about claims being made in one of the Company's current infomercials and also raised questions concerning certain aspects of the Company's pricing practices in certain of its current infomercials. The Company is responding to the FTC's inquiries. 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, informed the Company that the CPSC compliance staff had made a preliminary determination that the Fitness Strider product and 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. In August 1998, the Company received notice from the NYSE that the Company did not meet the NYSE's standards for continued listing. The NYSE also requested that the Company provide information regarding any actions taken or proposed by the Company to restore the Company to compliance with the NYSE standards. The Company is formulating its response to the NYSE notification and request. The delisting of the Company's Common Stock from trading on the NYSE would have a material adverse effect on the Company. 10 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, 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 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. The employment agreement of John W. Kirby, the Company's President, expires in September 1998. There is no assurance that the Company will be able to reach a new agreement with Mr. Kirby. 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. As of September 25, 1998, there were 25,466,937 shares of Common Stock outstanding, nearly all of which were freely tradeable without restriction under the Securities Act unless held by affiliates. In addition, as of September 25, 1998, approximately 44,000,000 shares of Common Stock were reserved for issuance upon exercise of outstanding warrants (including the TMC Warrants), options (including the TMC Options), the Company's Series B 11 Convertible Preferred Stock and the Company's Series D Convertible Preferred Stock. In the event that the Transactions are consummated, the Company will be required to reserve for issuance an additional 13,333,333 shares of Common Stock for issuance upon conversion of the Series E Preferred Stock (assuming the purchase by ACO of $20,000,000 of Series E Preferred Stock) and the Company will be obligated to file and have declared effective a registration statement registering for resale by ACO (or its designee) the shares of Common Stock issuable upon conversion and/or exercise of the Series E Preferred Stock, the TMC Warrants and the TMC Options. USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Conversion Shares offered hereby. The Selling Stockholders will receive all of the net proceeds from the sale of the Conversion Shares offered hereby. 12 SELLING STOCKHOLDER The following table sets forth the name of the Selling Stockholder, the number of shares of Common Stock beneficially owned by the Selling Stockholder as of September 25, 1998 and the number of Offered Shares which may be offered for sale pursuant to this Prospectus by such Selling Stockholder. During the past three years, the Selling Stockholder and the Company have engaged in certain business transactions, including a merger agreement which was terminated prior to consummation in June 1998. See the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998. The Offered Shares may be offered from time to time by the Selling Stockholder named below. See "Plan of Distribution." However, the Selling Stockholder is under no obligation to sell all or any portion of the Offered Shares, nor is the Selling Stockholder obligated to sell any such Offered Shares immediately under this Prospectus. Because the Selling Stockholder may sell all or part of the Offered Shares, no estimate can be given as to the number of shares of Common Stock that will be held by the 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 the ValueVision Note are subject to adjustment by reason of stock splits, stock dividends, and other similar transactions in the Common Stock.
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 - --------------------------------------------------------------------------------------------------------------------- ValueVision International, Inc. 750,000(2) 10,068,579 0(2) -
- ------------------ (1) Assumes the sale of all Offered Shares. (2) In accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the terms of the ValueVision Note, does not include shares of Common Stock which may be issued upon conversion of the ValueVision Note, including 5,000,000 shares of Common Stock that were previously registered for resale on a Registration Statement on Form S-3 (Reg. No. 333-48205) declared effective by the Commission on April 16, 1998, and 4,318,570 shares of Common Stock being registered for resale pursuant hereto. The 9,318,570 shares of Common Stock issuable upon conversion of the ValueVision Note represents the number of shares issuable upon conversion of $10,000,000 in principal due to ValueVision pursuant to the terms of the ValueVision Note at a conversion price of $1.073125 per share of Common Stock. The exercise price of the 1995 Warrants and 1998 Warrants is $2.74 per share of Common Stock. 13 PLAN OF DISTRIBUTION The Offered Shares are being offered on behalf of the Selling Stockholder and 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 Stockholder, or by pledgees, donees or transferees of, or other successors in interest to, the Selling Stockholder, 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 Stockholder or its successor 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 Stockholder. The Selling Stockholder or its successor 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 Stockholder. 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 Stockholder 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 Stockholder 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 commissions under the Securities Act. Neither the Company nor the Selling Stockholder can presently estimate the amount of such compensation. The Company knows of no existing arrangements between the Selling Stockholders any other shareholders, broker, dealer, underwriter or agent relating to the sale or distribution of the Offered Shares. The Selling Stockholder 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 Stockholder 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 commissions or discounts of underwriters, broker-dealers or agents. The Company has also agreed to indemnify the Selling Stockholder 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. EXPERTS The consolidated financial statements and schedule of National Media Corporation appearing in the Company's Annual Report (Form 10-K) for the year ended March 31, 1998 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) included therein and incorporated herein by reference. Such consolidated financial statements and schedule have been incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 14 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 Stockholder. 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..................................................................................................... 7 Use of Proceeds..................................................................................................12 Selling Stockholder..............................................................................................13 Plan of Distribution.............................................................................................14 Legal Matters....................................................................................................14 Experts..........................................................................................................14
10,068,579 Shares of Common Stock NATIONAL MEDIA CORPORATION PROSPECTUS September __, 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................... $ 4,300.00 *Blue Sky fees and expenses............................................. $ 1,000.00 *Accountants' fees and expenses ........................................ $ 3,000.00 *Legal fees and expenses ............................................... $ 5,000.00 *Printing and EDGAR expenses ........................................... $ 2,000.00 *Miscellaneous ......................................................... $ 2,500.00 ------------ Total ......................................................... $ 17,800.00 ------------ ------------
- ------------------ * Estimate Item 15. Indemnification of Directors and Officers. The Company has adopted in its Certificate of Incorporation and Bylaws the provisions of Section 102(b)(7) of the Delaware General Corporation Law which eliminate or limit the personal liability of a director to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except that this provision shall not eliminate or limit the liability of a director for any breach of the director's duty of loyalty to the Company or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, under Section 174 of the Delaware General Corporation Law, or for any transaction from which the director derived an improper personal benefit. Further, the Company's Certificate of Incorporation and Bylaws provide that the Company shall indemnify all persons whom it may indemnify pursuant to Section 145 of the Delaware Corporation Law to the full extent permitted therein. Section 145 provides, subject to various exceptions and limitations, that the Company may indemnify its directors or officers if such director or officer is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he 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 his conduct was unlawful. The determination of whether indemnification is proper under the circumstances, unless made by a court, shall be made by a majority of a quorum of disinterested members of the Board of Directors, independent legal counsel or the stockholders of the Company. In addition, the Company shall indemnify its directors or officers to the extent that they have been successful on the merits or otherwise in defense of any such action, suit or proceeding, or in the defense of any claim, issue or matter therein, against expenses (including attorneys' fees) actually and reasonably incurred by them in connection therewith. 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 to holders of Series C Convertible Preferred Stock. 4.15(13) Warrant Agreement by and between the Registrant and ValueVision International, Inc., dated as of January 5, 1998, as amended.
II-2
4.16(13) 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, as amended. 5(13) Opinion and Consent of Brian J. Sisko, Esquire. 10.1(6) Amendment No. 1 to Registration Rights Agreement by and among the Company and the Series D Investors. 10.2(5) $10,000,000 Demand Promissory Note, dated January 5, 1998, issued by the Company to ValueVision. 10.3(13) Warrant Agreement by and between the Company and ValueVision, dated as of September 1998. 10.4(5) Registration Rights Agreement by and between the Company and ValueVision, dated as of January 5, 1998. 23.1(13) 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) Incorporated by reference to Registrant's Registration Statement on Form S-3 (File No. 333-48205). (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. (13) Filed herewith. Item 17. Undertakings. (a) The undersigned Registrant hereby undertakes: (i) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (A) to include any prospectus required by section 10(a) (3) of the Securities Act; II-3 (B) 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. (C) 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. (ii) 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. (iii) 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. (iv) 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. (b) 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. 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 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on this 25th day of September, 1998. NATIONAL MEDIA CORPORATION BY: /s/ Stephen C. Lehman --------------------------------------------------- Stephen C. Lehman, Acting Chief Executive Officer POWER OF ATTORNEY Each of the undersigned officers and directors of National Media Corporation whose signature appears below hereby appoints Frederick S. Hammer 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 25th day of September, 1998.
Signature Title(s) --------- -------- /s/ Stephen C. Lehman Acting Chief Executive Officer and Director - --------------------------------- Stephen C. Lehman /s/ John J. Sullivan Chief Financial Officer - --------------------------------- John J. Sullivan /s/ Albert R. Dowden Director - --------------------------------- Albert R. Dowden /s/ William M. Goldstein - --------------------------------- William M. Goldstein Director Chairman of the Board and Director - --------------------------------- Frederick S. Hammer /s/ John W. Kirby President and Director - --------------------------------- John W. Kirby /s/ Andrew M. Schuon Director - --------------------------------- Andrew M. Schuon /s/ Robert N. Verratti Director - --------------------------------- Robert N. Verratti /s/ Eric R. Weiss - --------------------------------- Eric R. Weiss Director /s/ Jon W. Yoskin, II - --------------------------------- Jon W. Yoskin, II Director
EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 4.15 Warrant Agreement by and between the Registrant and ValueVision International, Inc., dated as of January 5, 1998, as amended. 4.16 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, as amended. 5 Opinion and Consent of Brian J. Sisko, Esquire. 10.3 Warrant Agreement by and between the Company and ValueVision, dated as of September __, 1998. 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, 1998.
EX-4.15 2 EXH 4.15 EXHIBIT 4.15 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARRANT AGREEMENT BY AND BETWEEN NATIONAL MEDIA CORPORATION AND VALUEVISION INTERNATIONAL, INC. DATED AS OF JANUARY 5, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- SECTION 1. Warrant Certificates........................................................................1 SECTION 2. Execution of Warrant Certificates...........................................................1 SECTION 3. Warrant Register............................................................................1 SECTION 4. Registration of Transfers and Exchanges.....................................................1 SECTION 5. Warrants; Exercise of Warrants..............................................................2 SECTION 6. Payment of Taxes............................................................................3 SECTION 7. Mutilated or Missing Warrant Certificates...................................................3 SECTION 8. Reservation of Warrant Shares; Rights.......................................................3 SECTION 9. Obtaining Stock Exchange Listings...........................................................4 SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable..........................4 SECTION 11. Fractional Interests.......................................................................13 SECTION 12. Notices to Warrant holders.................................................................13 SECTION 13. Notices to Company and ValueVision.........................................................14 SECTION 14. Supplements and Amendments.................................................................15 SECTION 15. Successors.................................................................................15 SECTION 16. Governing Law..............................................................................15 SECTION 17. Benefits of This Agreement.................................................................15 SECTION 18. Counterparts...............................................................................15
i THIS WARRANT AGREEMENT (the "Agreement") is dated as of January 5, 1998 and entered into by and between NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Company"), and ValueVision International, Inc., a Minnesota corporation ("ValueVision"). WHEREAS, the Company proposes to issue to ValueVision, or its designee, Common Stock Warrants, as hereinafter described (the "Warrants"), to purchase up to an aggregate of 250,000 shares of Common Stock, $.01 par value per share, of the Company (the "Common Stock") (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"). NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Warrant Certificates. The certificates evidencing the Warrants (the "Warrant Certificates") to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or a Vice President and by its Secretary or an Assistant Secretary under its corporate seal. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of he shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by the Company, such Warrant Certificates nevertheless may be delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. SECTION 3. Warrant Register. The Company shall number and register the Warrant Certificates in a register as they are issued. SECTION 4. Registration of Transfers and Exchanges. The Company shall from time to time register the transfer of any outstanding Warrant Certificates in a Warrant register to be maintained by the Company upon surrender of such Warrant Certificates accompanied by a written instrument or instruments of transfer in form satisfactory to the Company, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled and disposed of by the Company. 1 The Warrant holders agree that each certificate representing Warrant Shares will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS." Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Company at its office for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants (in denominations representing a multiple of 25,000 shares). Warrant Certificates surrendered for exchange shall be cancelled and disposed of by the Company. If, at the time of the surrender of any of the Warrants in connection with any exercise, transfer, or exchange of any of the Warrants, the Company may require, as a condition of allowing such exercise, transfer or exchange that the holder or transferee of the Warrants, 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 of 1933, as amended (the "Securities Act"). SECTION 5. Warrants; Exercise of Warrants. (a) Subject to the terms of this Agreement, at any time after August 15, 1998, each holder of the Warrants shall have the right, which may be exercised commencing at the opening of business on the foregoing date and until 5:00 p.m., New York City time, on January 5, 2003 (the "Exercise Period"), to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment to the Company of the Exercise Price (as defined below) then in effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 p.m., New York City time, on January 5, 2003 shall become null and void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. (b) A Warrant may be exercised by surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 13 hereof) of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc., and upon payment to the Company of the exercise price (the "Exercise Price") which is set forth in the form of Warrant Certificate attached hereto as Exhibit A, subject to adjustment pursuant to Section 10, for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made (i) in cash or by certified or official bank check payable to the order of the Company or (ii) in the manner provided in Section 5(a). Subject to the provisions of Section 6 hereof, upon such surrender of Warrants and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the 2 exercise of such Warrants together with cash as provided in Section 11; provided, however, that if any capital reorganization or reclassification of capital stock or consolidation, merger or lease or sale of assets is proposed to be effected by the Company as described in subsection (m) of Section 10 hereof, or a tender offer or an exchange offer for shares of Common Stock of the Company shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than two business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence together with cash as provided in Section 11. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section and of Section 2 hereof. All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled and disposed of by the Company. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the Warrant holders during normal business hours at its office. SECTION 6. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involving the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates or certificates for Warrant Shares unless and until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also reasonably satisfactory to it. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 8. Reservation of Warrant Shares; Rights. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. 3 The Company shall issue, together with each Warrant Share issued upon exercise of a Warrant, one Right (as defined in the Merger Agreement) (or other securities in lieu thereof), and any rights issued to holders of Common Stock in addition thereto or in replacement therefor, whether or not such rights shall be exercisable at such time, but only if such rights are issued and outstanding and held by other holders of Common Stock at such time and have not expired. The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 12 hereof. Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 9. Obtaining Stock Exchange Listings. The Company shall from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 10. For purposes of this Section 10, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount. (a) Adjustment for Change in Capital Stock. If the Company: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; or 4 (3) combines its outstanding shares of Common Stock into a smaller number of shares; then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted in accordance with the formula: O E' = E x --- A Where: E'= the adjusted Exercise Price E = the current Exercise Price O = the number of shares of Common Stock outstanding prior to such action A = the number of shares of Common Stock outstanding immediately after such action In the case of a dividend or distribution the adjustment shall become effective immediately after the record date for determination of holders of shares of Common Stock entitled to receive such dividend or distribution, and in the case of a subdivision or combination, the adjustment shall become effective immediately after the effective date of such corporate action. If after an adjustment a holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Company shall determine the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 10. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them at any time after the record date mentioned below to purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 10(f)) per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: N x P O + ----- M E' = E x ------------ O + N 5 where: E'= the adjusted Exercise Price. E= the current Exercise Price. O= the number of shares of Common Stock outstanding on the record date. N= the number of additional shares of Common Stock issuable upon exercise of the rights, options or warrants offered. P= the exercise price per share of the additional shares issuable upon exercise of the rights, options or warrants. M= the Current Market Price per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, (i) not all rights, options or warrants shall have been exercised, or (ii) the exercise price per share for which shares of Common Stock are issuable pursuant to such rights, options or warrants shall be increased or decreased solely by virtue of provisions therein contained for an automatic increase or decrease in such exercise price per share upon the occurrence of a specified date or event, then, the Exercise Price shall be immediately readjusted to what it would have been if, in the case of clause (i) above, "N" in the above formula had been the number of shares actually issued or, in the case of clause (ii) above, "P" in the above formula had been the exercise price per share, as so increased or decreased, as the case may be. (c) Adjustment for Other Distributions. If the Company distributes to all holders of its Common Stock any of its assets (including but not limited to cash), debt securities, preferred stock, or any rights or warrants to purchase debt securities, preferred stock, assets or other securities of the Company, the Exercise Price shall be adjusted in accordance with the formula: M - F E' = E x ----- M where: E'= the adjusted Exercise Price. E= the current Exercise Price. M= the Current Market Price per share of Common Stock on the record date mentioned below. 6 F= the Fair Market Value (as defined in Section 10(f)) on the record date of the assets, securities, rights or warrants applicable to one share of Common Stock. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection does not apply to rights, options or warrants referred to in subsection (b) of this Section 10 or distributions of business units of the Company covered by subsection (n) of this Section 10. (d) Adjustment for Below Market Issuances of Common Stock. If the Company issues shares of Common Stock for a consideration per share less than the Current Market Price per share on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: P O + --- M E' = E x ----------- A where: E'= the adjusted Exercise Price. E= the then current Exercise Price. O= the number of shares outstanding immediately prior to the issuance of such additional shares. P= the aggregate consideration received for the issuance of such additional shares. M= the Current Market Price per share on the date of issuance of such additional shares. A= the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This subsection (d) does not apply to: (1) any of the transactions described in subsections (b) and (c) of this Section 10, (2) the exercise of the Warrants, or 7 (3) Common Stock issued upon the exercise of rights or warrants issued to the holders of Common Stock for which rights or warrants an adjustment has been made pursuant to Section 10(b) or Section 10(e), No duplicative adjustment shall be made in the event of a right, warrant or convertible or exchangeable security requiring an adjustment hereunder and the subsequent exercise or conversion of such right, warrant or convertible or exercisable security. (e) Adjustment for Below Market Issuances of Convertible or Exchangeable Securities. If the Company issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in subsections (b) and (c) of this Section 10) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the Current Market Price per share on the date of issuance of such convertible or exchangeable securities, the Exercise Price shall be adjusted in accordance with this formula: P O + --- M E' = E x -------- O + D where: E'= the adjusted Exercise Price. E= the then current Exercise Price. O= the number of shares outstanding immediately prior to the issuance of such convertible or exchangeable securities. P= the aggregate consideration received for the issuance of such convertible or exchangeable securities. M= the Current Market Price per share on the date of issuance of such convertible or exchangeable securities. D= the maximum number of shares deliverable upon conversion or in exchange for such convertible or exchangeable securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If (i) all of the Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, or (ii) the exercise price per share for which shares of Common Stock are issuable pursuant to such securities shall be increased or decreased solely by virtue of provisions therein contained for an automatic increase or decrease in such exercise price per share upon the occurrence of a specified date or event, then the Exercise Price shall promptly be readjusted in accordance with the formula in this Section 10(e) to 8 the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of, in the case of clause (i) above, the actual number of shares of Common Stock issued upon conversion or exchange of such securities or, in the case of clause (ii) above, the exercise price per share, as so increased or decreased, as the case may be. (f) Certain Definitions. (1) Current Market Price. In subsections (b), (c), (d) and (e) of this Section 10, the current market price per share of Common Stock on any date is: (i) if the Common Stock is not registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), then the Fair Market Value of the Common Stock based upon the Fair Market Value of 100% of Company if sold as a going concern and without regard to any discount for the lack of liquidity or on the basis that the relevant shares of the Common Stock do not constitute a majority or controlling interest in Company and assuming, if applicable, the exercise or conversion of all in-the-money warrants, convertible securities, options or other rights to subscribe for or purchase any additional shares of capital stock of Company or securities convertible or exchangeable into such capital stock; or (ii) if the Common Stock is registered under the Exchange Act, the average of the Quoted Prices of the Common Stock for 20 consecutive trading days immediately preceding the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock on the New York Stock Exchange ("NYSE"), or if the Common Stock is reported by Nasdaq National Market System, as reported by Nasdaq National Market System, or if the Common Stock is listed on a national securities exchange other than the NYSE, the last reported sales price of the Common Stock on such exchange (which shall be for consolidated trading if applicable to such exchange), or if neither so reported or listed, the last reported bid price of the Common Stock. (2) Fair Market Value. Fair Market Value means the value obtainable upon a sale in an arm's length transaction to a third party under usual and normal circumstances, with neither the buyer nor the seller under any compulsion to act, with equity to both, as determined by the Board of Directors of the Company (the "Board") in good faith; provided, however, that if ValueVision shall dispute the Fair Market Value as determined by the Board, ValueVision may undertake to have it and the Company retain an Independent Expert. The determination of Fair Market Value by the Independent Expert shall be final, binding and conclusive on the Company and ValueVision. All costs and expenses of the Independent Expert shall be borne by ValueVision unless the determination of Fair Market Value by the Independent Expert is more than 5% more favorable to Company than the Fair Market Value determined by the Board, in which event the cost of the Independent Expert shall be shared equally by ValueVision and Company, or more than 10% more favorable to Company than the Fair Market Value determined by the Board, in which event the cost of the Independent Expert shall be borne solely by Company. 9 (3) Independent Expert. Independent Expert means an investment banking firm reasonably agreeable to Company and ValueVision who does not (and whose Affiliates do not) have a financial interest in Company or any of its Affiliates. (g) Consideration Received. For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) of this Section 10, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the Fair Market Value thereof; (3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities at the date of such issuance plus the additional consideration as of the date of such issuance, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection). (h) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (i) When No Adjustment Required. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. No adjustment will be made for shares issued upon the exercise of the Warrants, upon the conversion of the Demand Note, upon conversion of the Series C Convertible Preferred Stock outstanding on the date hereof (or the Series D Convertible Preferred Stock issuable in exchange therefore) or upon the exercise of the 750,000 options owned by Robert Verratti as of the date hereof. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. 10 (j) Notice of Adjustment. Whenever the Exercise Price is adjusted, the Company shall provide the notices required by Section 12 hereof. (k) Voluntary Reduction. The Company from time to time may reduce the Exercise Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period; provided, however, that in no event may the Exercise Price be less than the par value of a share of Common Stock. Whenever the Exercise Price is reduced, the Company shall mail to Warrant holders a notice of the reduction. The Company shall mail the notice at least 15 days before the date the reduced Exercise Price takes effect. The notice shall state the reduced Exercise Price and the period it will be in effect. A reduction of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for purposes of subsections (a), (b), (c), (d) and (e) of this Section 10. (l) Notice of Certain Transactions. If: (1) the Company takes any action that would require an adjustment in the Exercise Price pursuant to subsections (a), (b), (c), (d) or (e) of this Section 10 and if the Company does not arrange for Warrant holders to participate pursuant to subsection (i) of this Section 10; (2) the Company takes any action that would require a supplemental Warrant Agreement pursuant to subsection (m) of this Section 10; or (3) there is a liquidation or dissolution of the Company, the Company shall mail to Warrant holders a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of the transaction. (m) Reorganization of Company. If the Company effects a capital reorganization or recapitalization of its capital stock or consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any person, then, as a condition precedent to the consummation of such transaction, lawful and adequate provisions shall be made whereby the Warrant holder shall thereafter have the right to purchase and receive upon the basis and the terms and conditions specified in this Agreement and in lieu of the shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, such shares of stock, securities, cash or other assets which the holder of a Warrant would have received immediately after the reorganization, recapitalization, consolidation, merger, transfer or lease if the holder had exercised such Warrant immediately before 11 the effective date of the transaction, and in any case appropriate provision shall be made with respect to the rights and interests of the holders thereof to the end that the provisions hereof (including without limitation provisions for adjustments of the number of shares of Common Stock purchasable and receivable upon the exercise of the Warrants) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, cash or assets thereafter deliverable upon the exercise thereof. The Company shall not effect any such consolidation, merger, transfer or lease, unless, prior to the consummation thereof, the corporation formed by or surviving any such consolidation or merger if other than the Company, or the person to which such sale or conveyance shall have been made, shall enter into and deliver to the holders of Warrants at the last address thereof appearing on the books of the Company, a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this subsection (m) applies, subsections (a), (b), (c), (d) and (e) of this Section 10 do not apply. (n) [Intentionally Omitted] (o) When Issuance or Payment May Be Deferred. In any case in which this Section 10 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 11; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (p) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 10, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: E N' = N x --- E' where: 12 N'= the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N= the number or Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price immediately prior to adjustment. E'= the adjusted Exercise Price. E= the Exercise Price immediately prior to adjustment. (q) Form of Warrants. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 11. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Current Market Price (as defined in Section 10(f)) on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. SECTION 12. Notices to Warrant holders. Upon any adjustment of the Exercise Price pursuant to Section 10, the Company shall promptly thereafter (i) cause to be filed with the Secretary of the Company a certificate of the Chief Operating Officer and Chief Financial Officer of the Company setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall, absent manifest error, be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register written notice of such adjustments and a copy of such certificate by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 12. In case: (a) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in 13 shares of Common Stock or distributions referred to in subsection (a) of Section 10 hereof); or (c) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (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), or a tender offer or exchange offer for shares of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; (e) the Company proposes to take any action (other than actions of the character described in Section 10(a)) which would require an adjustment of the Exercise Price pursuant to Section 10; or (f) the Company proposes to participate in any transaction described in either Section 10(m) or Section 10(n); then the Company shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 10 business days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 12 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. SECTION 13. Notices to Company and ValueVision. Any notice or demand authorized by this Agreement to be given or made by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed to the office of the Company expressly designated by the Company at its office for purposes of this Agreement (until the Warrant holders are otherwise notified in accordance with this Section by the Company), as follows: 14 if to the Company, initially at Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, Pennsylvania 19103, Attention: General Counsel and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 13, with a copy to Klehr, Harrison, Harvey, Branzburg & Ellers LLP, 1401 Walnut Street, Philadelphia, Pennsylvania 19102, Attention: Stephen T. Burdumy, Esq. Any notice pursuant to this Agreement to be given by the Company to the registered holder(s) of any Warrant Certificate shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until the Company is otherwise notified in accordance with this Section by such holder) to such holder at the following address: if to a registered holder of any Warrant Certificate, at the most current address given by such holder to the Company in accordance with the provisions of this Section 13, which address initially is, with respect to ValueVision, 6740 Shady Oak Road, Eden Praire, Minnesota 55344-3433, Attention: General Counsel, with a copy to Latham & Watkins, 633 West Fifth Street, Los Angeles, California 90071, Attention: Michael Sturrock, Esq. SECTION 14. Supplements and Amendments. This Agreement may be supplemented or amended from time to time subject to approval by the parties hereto. SECTION 15. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company shall bind and inure to the benefit of its respective successors and assigns hereunder. SECTION 16. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the internal laws of said State. SECTION 17. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and the registered holders of the Warrant Certificates. SECTION 18. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] 15 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. NATIONAL MEDIA CORPORATION By: --------------------------------- Title: VALUEVISION INTERNATIONAL, INC. (OR ITS DESIGNEE) By: -------------------------------- Title: S-1 EX-4.16 3 EXH 4.16 EXHIBIT 4.16 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENT OF SUCH ACT OR SUCH LAWS. No. 1 250,000 Shares Warrant Certificate NATIONAL MEDIA CORPORATION This Warrant Certificate certifies that ValueVision International, Inc., ("ValueVision") or registered assigns, is the registered holder of 250,000 Warrants expiring on January 5, 2003 (the "Warrants") to purchase Common Stock, $.01 par value (the "Common Stock"), of NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Company"). Each Warrant entitles the holder upon exercise to receive from the Company on or before 5:00 p.m. New York City Time on January 5, 2003, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") equal to $2.74 per share of Common Stock, payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York Time on January 5, 2003, and to the extent not exercised by such time such Warrants shall become null and void. Reference is hereby made to the further provisions of this Warrant Certificate set forth below and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless signed by officers of the Company as set forth in Section 2 of the Warrant Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: January 5, 1998 NATIONAL MEDIA CORPORATION By: -------------------------------- President By: -------------------------------- Secretary [Continued] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on January 5, 2003. The Warrants (issued in denominations representing a multiple of 25,000 shares) entitle the holder on exercise to receive shares of Common Stock, $0.01 par value, of the Company (the "Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement dated as of January 5, 1998, as amended (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time after August 15, 1998 and before January 5, 2003. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement referred to below. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The holders of the Warrants are entitled to certain registration rights with respect to the Common Stock purchasable upon exercise thereof. Said registration rights are set forth in full in a Registration Rights Agreement dated as of January 5, 1998, between the Company and ValueVision (as amended by that certain letter agreement, dated August 11, 1998, between the Company and ValueVision). A copy of the Registration Rights Agreement (as amended) may be obtained by the holder hereof upon written request to the Company. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive __________ shares of Common Stock and herewith tenders payment for such shares to the order of NATIONAL MEDIA CORPORATION in the amount of $_________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ________________, whose address is _______________________________ and that such shares be delivered to ________________ whose address is ___________ ______________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of ______________, whose address is _________________________, and that such Warrant Certificate be delivered to _________________, whose address is __________________. Signature: ------------------------------ Date: ----------------------------- Signature Guaranteed: -------------------------- EX-5 4 EXH 5 EXHIBIT 5 NATIONAL MEDIA CORPORATION Eleven Penn Center, Suite 1100 1835 Market Street Philadelphia, PA 19103 September 25, 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) 4,318,579 shares of Common Stock (the "ValueVision Conversion Shares") issuable pursuant to the terms of a promissory note executed by the Company in favor of ValueVision International, Inc. ("ValueVision"), as amended by a letter agreement, dated August 11, 1998, between NM Acquisition Co., LLC, the Company and ValueVision. The Offered Shares may be offered and sold from time to time for the account of the entity referred to in the Registration Statement as "Selling Stockholder." Board of Directors September 25, 1998 Page 2 In this regard, I have examined: (i) the agreements (the "Agreements") pursuant to which the Selling Stockholder has 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. 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 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 ValueVision Conversion 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-10.3 5 EXH 10.3 EXHIBIT 10.3 NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND THE TERMS AND CONDITIONS HEREOF. THE HOLDER OF THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE RESTRICTIONS HEREIN SET FORTH. THESE SECURITIES ARE HELD SUBJECT TO THE TERMS, COVENANTS AND CONDITIONS OF TELEMARKETING, PRODUCTION AND POST-PRODUCTION AGREEMENT DATED APRIL 13, 1995 BY AND AMONG NATIONAL MEDIA COMPANY (THE "COMPANY") AND VALUEVISION INTERNATIONAL, INC. ("VVI"), AS AMENDED BY THAT CERTAIN AGREEMENT, DATED AUGUST 11, 1998 BY AND AMONG THE COMPANY, NM ACQUISITION CO., LLC AND VVI, AND MAY NOT BE SOLD IN AN OPEN MARKET TRANSACTION EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF. A COPY OF SAID AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. VOID AFTER 5:00 P.M., PHILADELPHIA, PENNSYLVANIA TIME, NOVEMBER 23, 2005 ************************************** WARRANT to PURCHASE COMMON STOCK of NATIONAL MEDIA CORPORATION ************************************** This certifies that, for good and valuable consideration, National Media Corporation, a Delaware corporation (the "Company"), grants to ValueVision International, Inc. ("VVI") or permitted registered assigns (the "Warrantholder" or "Warrantholders"), the right to subscribe for and purchase from the Company, at $2.74 per share (the "Exercise Price"), from and after 9:00 A.M. Philadelphia, Pennsylvania time on November 23, 1996 (the "Initial Exercise Date"), and to and including 5:00 P.M. New York City time on November 23, 2005 (the "Expiration Date"), 500,000 shares, as such number of shares may be adjusted from time to time (the "Warrant Shares"), of the Company's Common Stock, par value $0.01 per share (the "Common Stock"), subject to the provisions and upon the terms and conditions herein set forth. The Exercise Price and the number of Warrant Shares are subject to adjustment from time to time as provided in Section 6. 1 SECTION 1. Exercise of Warrant; Limitation on Exercise; Payment of Taxes. 1.1 Exercise of Warrant. (a) Subject to Section 1.1(d) hereof, this Warrant shall vest and become exercisable with respect to 166,667 Warrant Shares on December 23, 1996 and on November 23, 1997 and with respect to 166,666 Warrant Shares on November 23, 1998 (each date on which Warrants may vest is referred to herein as a "Vesting Date"). At any time and from time to time after the Initial Exercise Date, the Warrantholder may exercise this Warrant, in whole or in part (subject to the vesting of the Warrant as set forth in the immediately preceding sentence), by presentation and surrender of this Warrant to the Company at its principal executive offices or at the office of its stock transfer agent, if any, with the Subscription Form annexed hereto duly executed and accompanied by cash payment of the full Exercise Price for each Warrant Share to be purchased (subject to VVI's ability to apply certain amounts payable by the Company to VVI under the Telemarketing Agreement (as defined in Section 1.1(d) hereof) against the Exercise Price as set forth in Section 1.3 hereof). (b) Upon receipt of this Warrant, with the Subscription Form duly executed and accompanied by payment of the aggregate Exercise Price for the Warrant Shares for which this Warrant is then being exercised, the Company shall cause to be issued certificates for the total number of whole shares of Common Stock for which this Warrant is being exercised (adjusted to reflect the effect of the antidilution provisions contained in Section 6 hereof, if any, and as provided in Sections 5 and 8.8 hereof) in such denominations as are requested for delivery to the Warrantholder, and the Company shall thereupon deliver such certificates to the Warrantholder. The stock certificates so delivered shall be in such denominations as may be specified by the Warrantholder and shall be issued in the name of the Warrantholder or, if permitted by Section 5 and in accordance with the provisions thereof, such other name as shall be designated in the Subscription Form. The Warrantholder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder. If at the time this Warrant is exercised, a registration statement is not in effect to register under the Securities Act of 1933, the Warrant Shares issuable upon exercise of this Warrant, the Company may require the Warrantholder to make such customary representations, and may place such customary legends on certificates representing the Warrant Shares, as may be reasonably required in the opinion of counsel to the Company to permit the Warrant Shares to be issued without such registration. (c) If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificates for the Warrant Shares, deliver to the Warrantholder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant. No adjustments or payments shall be made on or in respect of Warrant Shares issuable on the exercise of this Warrant for any regular cash dividends paid or payable to holders of record of Common Stock prior to the date as of which the Warrantholder shall be deemed to be the record holder of such Warrant Shares. (d) Notwithstanding anything herein to the contrary, no Warrants shall vest on a Vesting Date in the event (i) VVI shall be in material breach of that certain Telemarketing, Production and Post-Production Agreement dated April 13, 1995 by and between the Company and 2 VVI (the "Telemarketing Agreement") on such Vesting Date unless the Company shall thereafter fail to terminate the Telemarketing Agreement as a result of such breach; (ii) any representation made by VVI in Section 9 of that certain Settlement Agreement dated April 13, 1995 by and between the Company and VVI (the "Settlement Agreement") shall not be true on such Vesting Date or (iii) VVI shall have failed, after receiving written notice of such failure from the Company at least sixty (60) days prior to such Vesting Date, to make available to the Company sufficient capacity to provide to the Company inbound telephone call-taking services for at least one million (1,000,000) inbound telephone calls (at a rate not to exceed 100,000 inbound telephone calls in any month) during the thirteen (13) month period (in the case of the first Vesting Date hereunder) or the twelve (12) month period (in the case of the second and third Vesting Dates hereunder) preceding such Vesting Date in accordance with Section l(a) of the Telemarketing Agreement. 1.2 Limitation on Exercise. If this Warrant is not exercised prior to 5:00 P.M. on the Expiration Date (or the next succeeding Business Day, if the Expiration Date is a Saturday, Sunday or a day on which the New York Stock Exchange is authorized to close or on which the Company is otherwise closed for business (a "Nonbusiness Day"), this Warrant, or any new Warrant issued pursuant to Section 1.1, shall cease to be exercisable and shall become void and all rights of the Warrantholder hereunder shall cease. This Warrant shall not be exercisable and no Warrant Shares shall be issued hereunder, prior to 9:00 A.M. New York City time on the Initial Exercise Date. 1.3 Payment of Exercise Price. Payment of the Exercise Price shall be made to the Company in cash; by certified or official bank check payable in United States dollars to the order of the Company; or by any combination of the foregoing. Notwithstanding the foregoing, VVI may apply all or any part of the aggregate amount of any Telemarketing Differential (as defined in the Telemarketing Agreement) and any Production and Post Production Differential (as defined in the Telemarketing Agreement) against payment of the Exercise Price by providing irrevocable notice of such election to the Company on the Subscription Form. Any election by VVI to apply Telemarketing Differential or Production and Post Production Differential against all or any portion of the Exercise Price due hereunder shall be irrevocable and shall reduce the amount of Telemarketing Differential and Production and Post Production Differential available for application against future exercises of this Warrant. 1.4 Payment of Taxes. The issuance of certificates for Warrant Shares shall be made without charge to the Warrantholder for any stock transfer or other issuance tax in respect thereto; provided, however, that the Warrantholder shall be required to pay any and all taxes which may be payable in respect to any transfer involved in the issuance and delivery of any certificates for Warrant Shares in a name other than that of the then Warrantholder as reflected upon the books of the Company. SECTION 2. Reservation and Listing of Shares, Etc. All Warrant Shares which are issued upon the exercise of the rights represented by this Warrant shall, upon issuance and payment of the Exercise Price, be validly issued, fully paid and nonassessable and free from all taxes, liens, security interests, charges and other encumbrances with respect to the issue thereof other than taxes in respect of any transfer occurring contemporaneously with such issue. During the period within which this Warrant may be exercised, the Company shall at all times have authorized and reserved, and keep available free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant, and if at 3 any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant (and all other Warrants and securities of the Company convertible into or exercisable or exchangeable for Common Stock), in addition to such other remedies as shall be available to a Warrantholder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. In addition, prior to the issuance of any Warrant Shares, the Company shall at its expense procure the listing of the Warrant Shares (or any other issues of capital stock issuable upon the exercise of this Warrant if such other class of capital stock is then so listed) which shall be issued upon exercise of this Warrant (subject to official notice of issuance) as then may be required on all stock exchanges or interdealer quotation systems on which the Common Stock is then listed and shall maintain such listing if and so long as any shares of the same class shall be listed on such stock exchanges or interdealer quotation systems. The Company shall, from time to time, take all such action as may be required to assure that the par value per share of the Warrant Shares is at all times equal to or less than the then effective Exercise Price. SECTION 3. Exchange, Loss or Destruction of Warrants. If permitted by Section 5 and in accordance with the provisions thereof, upon surrender of this Warrant to the Company with a duly executed instrument of assignment and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant of like tenor in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of such bond or indemnification as the Company may reasonably require, and, in the case of such mutilation, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor. The term "Warrant" as used herein includes any Warrants issued in substitution or exchange of this Warrant. SECTION 4. Ownership of Warrant; Certain Rights of Warrantholders. (a) The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in subsection 1.1, Section 3 or Section 5. (b) Nothing contained in this Warrant shall be construed as conferring upon the Warrantholder or its transferees the right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or of any other matter, or any rights whatsoever as stockholders of the Company. The Company shall give notice to the Warrantholder by registered mail if at any time prior to the expiration or exercise in full of the Warrants, any of the following events shall occur: (i) the Company shall authorize the payment of any dividend payable in any securities upon shares of Common Stock or authorize the making of any distribution (other than a regular cash dividend paid out of net profits legally available therefor) to all holders of Common Stock; 4 (ii) the Company shall authorize the issuance to all holders of Common Stock of any additional shares of Common Stock or securities that are convertible into or exercisable for shares of Common Stock ("Common Stock Equivalents") or of rights, options or warrants to subscribe for or purchase Common Stock or Common Stock Equivalents or of any other subscription rights, options or warrants; (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale or conveyance of the property of the Company as an entirety or substantially as an entirety); or (iv) a capital reorganization or reclassification of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or change of Common Stock outstanding) or in the case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety. Such giving of notice shall be initiated at least 20 days prior to the date fixed as a record date or effective date or the date of closing of the Company's stock transfer books for the determination of the stockholders entitled to such dividend, distribution, issuance or subscription rights, or for the determination of the stockholders entitled to vote on such proposed merger, consolidation, sale, conveyance, dissolution, liquidation or winding up. Such notice shall specify such record date or the date of closing the stock transfer books, as the case may be. Failure to provide such notice shall not affect the validity of any action taken in connection with such dividend, distribution, issuance or subscription rights, or proposed merger, consolidation, sale, conveyance, dissolution, liquidation or winding up. SECTION 5. Split-Up, Combination, Exchange and Transfer of Warrant. (a) Subject to the provisions of Section 5(b), this Warrant may be split up, combined or exchanged for another Warrant or Warrants containing the same terms to purchase a like aggregate number of Warrant Shares. If the Warrantholder desires to split up, combine or exchange this Warrant, he, she or it shall make such request in writing delivered to the Company and shall surrender to the Company this Warrant and any other Warrants to be so split up, combined or exchanged. Upon any such surrender for a split up, combination or exchange, the Company shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company shall not be required to effect any split up, combination or exchange which will result in the issuance of a Warrant entitling the Warrantholder to purchase upon exercise a fraction of a share of Common Stock or a fractional Warrant. The Company may require such Warrantholder to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any split up, combination or exchange of Warrants. (b) Prior to the termination of the Telemarketing Agreement, neither this Warrant nor any of Warrantholder's rights hereunder may be disposed of or encumbered (any such action, a "Transfer") without the prior written consent of the Company. Neither this Warrant nor the Warrant Shares may be transferred except in accordance with and subject to the provisions of the Securities Act and the rules and regulations promulgated thereunder. If at the time of a 5 Transfer, a registration statement is not in effect to register this Warrant or the Warrant Shares, the Company may require the Warrantholder to make such customary representations, and may place such customary legends on certificates representing this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit a Transfer without such registration. SECTION 6. Certain Adjustments. (a) If at any time or from time to time the Company shall (i) take a record of the holders of the Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock into a larger number of shares of Common Stock or (iii) combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the number of shares of Common Stock thereafter issuable upon exercise of this Warrant and the Exercise Price then in effect shall be adjusted so that this Warrant shall be exercisable for the same number of shares that a record holder of the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to the happening of such event would own or be entitled to receive after the happening of such event and so that the aggregate Exercise Price payable for the purchase of all Warrant Shares pursuant to this Warrant shall remain unchanged. Any adjustments required by this Section 6(a) shall be made whenever and as often as any specified event requiring an adjustment shall occur. If the Company shall take a record of the holders of the Common Stock for the purpose of effecting such distribution, subdivision or combination and shall, thereafter and before such distribution, subdivision, or combination, legally abandon its plan to pay or deliver such distribution or effect such subdivision or combination, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (b) If at any time prior to the exercise of this Warrant in full, the Company shall (i) issue or sell any Common Stock or Common Stock Equivalents without consideration or for consideration per share (in cash, property or other assets) less than the current market price per share on the date of such issuance or sale as determined pursuant to Section 6(d) or (ii) fix a record date for the issuance of subscription rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase Common Stock (or Common Stock Equivalents (as hereinafter defined)) at a price (or having an exercise or conversion price per share) less than the current market price of the Common Stock (as determined pursuant to Section 6(d)) on the record date described below, the Exercise Price shall be adjusted so that the Exercise Price shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of such sale or issuance (which date in the event of a distribution to stockholders shall be deemed to be the record date set by the Company to determine stockholders entitled to participate in such distribution) by a fraction, the numerator of which shall be (i) the number of shares of Common Stock outstanding on the date of such sale or issuance, plus (ii) the number of additional shares of Common Stock which the aggregate consideration received by the Company upon such issuance or sale (plus the aggregate of any additional amount to be received by the Company upon the exercise of such subscription rights, options or warrants) would purchase at such current market price per share of the Common Stock and the denominator of which shall be (i) the number of shares of Common Stock outstanding on the date of such issuance or sale, plus (ii) the number of additional shares of Common Stock offered for subscription or purchase (or into which the Common Stock Equivalents so offered are exercisable or convertible). Whenever the Exercise Price payable upon exercise of this Warrant is adjusted pursuant to this Section 6(b), the number of Warrant Shares 6 issuable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Warrant Shares issuable upon exercise of this Warrant by the Exercise Price in effect on the date of such adjustment and dividing the product so obtained by the Exercise Price, as adjusted. Any adjustments required by this Section 6(b) shall be made immediately after such issuance or sale or record date, as the case may be. Such adjustments shall be made successively whenever such event shall occur. To the extent that shares of Common Stock (or Common Stock Equivalents) are not delivered in connection with such subscription rights, options or warrants, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or Common Stock Equivalents) actually delivered. In the case of an issue of additional Common Stock or Common Stock Equivalents for cash, the consideration received by the Company therefor, before deducting therefrom any discount or commission or other expenses allowed, paid or incurred by the Company for underwriting of, or otherwise in connection with, the issuance thereof, shall be deemed to be the amount received by the Company therefor. In the case of an issue of additional Common Stock or Common Stock Equivalents for consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Company's Board of Directors, irrespective of any accounting treatment. No adjustments to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant shall be made pursuant to this Section 6(b) for (x) any transaction for which adjustment thereto is required to be made pursuant to Section 6(a) hereof, (y) the exercise of Warrants or (2) the conversion, exchange or exercise of any Common Stock Equivalents. (c) For purposes of this Section 6, "Common Stock Equivalents" shall mean any options, warrants or other securities or rights convertible into, or exercisable or exchangeable for, shares of Common Stock. (d) For the purpose of any computation under this Section 6, the current market price per share of Common Stock at any date shall be deemed to be the average of the daily closing prices for the 20 consecutive trading days immediately preceding such date. The closing price for each day shall be the last sale price of the Common Stock or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices of the Common Stock in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on any such exchange, the representative closing bid price of the Common Stock as reported by NASDAQ, or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price of the Common Stock as determined by the Company's Board of Directors. The term "issue" shall include the sale other disposition of shares held by or on account of the Company or in the treasury of the Company but until so sold or otherwise disposed of such shares shall not be deemed outstanding. (e) In the event that at any time, as a result of any adjustment made pursuant to Section 6, the Warrantholder thereafter shall become entitled to receive any shares of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 6. 7 (f) In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock (other than a dividend, distribution, subdivision or combination of the outstanding Common Stock provided for in Section 6(a) and other than a change in the par value of the Common Stock or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which the Company is the continuing corporation and that does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant)) or in case of any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety, the Company shall, as a condition precedent to such transaction, cause such successor or purchasing corporation, as the case may be, to execute with the Warrantholder an agreement granting the Warrantholder the right thereafter, upon payment of the Exercise Price in effect immediately prior to such action, to receive upon exercise of this Warrant the kind and amount of shares and other securities and property which it, he or she would have owned or have been entitled to receive after the happening of such reclassification, change, consolidation, merger, sale or conveyance had this Warrant been exercised immediately prior to such action. Such agreement shall provide for adjustments in respect of such shares of stock and other securities and property, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. In the event that in connection with any such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for, or of, a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of this Section 6. The provisions of this Section 6 shall similarly apply to successive reclassifications, capital reorganizations, consolidations, mergers, sales or conveyances. (g) Liquidating Dividends, Etc. If the Company at any time while Warrants are outstanding and unexpired makes a distribution of its assets to the holders of its Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company's assets (other than under the circumstances provided for in the foregoing subsections (a) through (f)), the holder of this Warrant shall be entitled to receive upon the exercise hereof, in addition to the shares of Common Stock receivable upon such exercise, and without payment of any consideration other than the Exercise Price, an amount in cash equal to the value of such distribution per share of Common Stock multiplied by the number of shares of Common Stock which, on the record date for such distribution, are issuable upon exercise of this Warrant (with no further adjustment being made following any event which causes a subsequent adjustment in the number of shares of Common Stock issuable upon the exercise hereof), and an appropriate provision therefor should be made as part of any such distribution. The value of a distribution which is paid in other than cash shall be determined in good faith by the Board of Directors. (h) If at any time prior to the date of the original issuance of this Warrant, or at any time thereafter while this Warrant is outstanding, a Distribution Date (as defined in the Company's Rights Agreement as of January 3, 1994 by and between the Company and Mellon Securities Trust Company (the "Rights Plan") shall occur and all of the Rights (as defined in the Rights Plan) then issued and outstanding pursuant to such Rights Plan shall not be redeemed by the Company for nominal consideration of $.001 per Right within the redemption period provided for in Section 23 of the Rights Plan, then in such event there shall be promptly issued to the holder of this 8 Warrant, that number of Rights under the Rights Plan as would have been issued to such holder if immediately prior to the Distribution Date the holder had exercised his right to purchase, and the Company had issued to him, all Warrant Shares issuable to him upon exercise of this Warrant and he was the record owner of such Warrant Shares on the date provided for in the Rights Plan for determining the stockholders of record entitled to receive Rights Certificates (as defined in the Rights Plan). If the Company shall be prohibited from issuing such Rights to the Warrant holder by law or by the terms of the Rights Plan, then the Warrant Holder shall have the right under this paragraph (h) to purchase or acquire (by exchange of securities or otherwise) the same number and class of equity securities of the Company as such holder would have had the right to so purchase or otherwise acquire if the Rights described in the preceding sentence had been issued to him, for the same consideration as the holder would have paid or tendered under such Rights and on the same other terms and conditions as would have been applicable under such Rights if such Rights had been issued to such holder as provided in the preceding sentence. The intent of this paragraph (h) is to protect the holder of the Warrant from the dilution of and diminution in the value of his investment in the Company that would occur if the Rights under the Rights Plan become exercisable or exchangeable for stock of the Company following the occurrence of a Distribution Date and the provisions of this Warrant shall be liberally interpreted in order to give effect to this intention. The Board of Directors of the Company shall also take such other actions as may be necessary to carry out the purpose and intent of this paragraph. (i) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, 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 hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrantholders against impairment. (j) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 6, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each Warrantholder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any Warrantholder, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Exercise Price at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the exercise of this Warrant. SECTION 7. Registration Rights. Each present and future holder of Warrant Shares shall be entitled to the benefits of the registration rights granted pursuant to this Section 7. The Company covenants and agrees as follows: (a) Definitions. For purposes of this Section 7: (i) The term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in 9 compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document; (ii) The term "Registrable Securities" means the Warrant Shares and all shares of Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, any of the Warrant Shares excluding in all cases, however, any Registrable Securities (x) sold by a person in a transaction in which his rights under this Section 7 are not assigned, (y) sold in a public offering registered under the Securities Act or (z) sold pursuant to Rule 144 promulgated under the Securities Act; (iii) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities; (iv) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 5(b) hereof, and (v) The term "Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (b) Request for Registration. (i) If the Company shall receive at any time, on or after the first anniversary hereof, a written request from the Holders of a majority of the Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering the registration of at least sixty percent (60%) of the Registrable Securities then outstanding, then the Company shall, within ten (10) business days of the receipt thereof, give written notice of such request to all Holders, and shall, subject to the limitations of Section 7(b)(ii), effect as soon as practicable, and in any event within 90 days of the receipt of such request, the registration under the Securities Act of the Registrable Securities which the Holders request to be registered within twenty (20) days of the mailing of such notice by the Company. If within fifteen (15) days of the exercise of a demand registration right granted under this Section 7(b), the Company notifies the Holders of the Registrable Securities making such demand that the Company wishes to register securities of the same class for its own account on the registration statement being filed pursuant to the demand for offering to the public via a firm commitment underwriting, then the Company may include securities for its own account in such registration statement; provided, however, that if the managing underwriter determines and advises in writing that the inclusion of any or all such securities for the Company's account in the registration statement covered by the requests for registration made under this Section 7(b)(ii) would be detrimental to the offering of the Registrable Securities being sold in such registration, then the requisite number of securities for the Company's account shall be excluded from registration hereunder and, provided, further, that if the Company includes any securities for its own account on the registration statement filed pursuant to this Section 7(b), such registration shall not be counted as one of Holders' demand registrations pursuant 10 to this Section 7(b) and the Holders shall not be required to reimburse the Company for any expenses incurred by it in connection with such registration. (ii) If the Holders initiating the registration request hereunder (the "Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 7(b) and the Company shall include such information in the written notice referred to in Section 7(b)(i). In such event, the right of any Holder to include its, his or her Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 7(d)(v)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders. VVI acknowledges that the Preference Holders (as hereinafter defined) have the right to include certain securities in any registration under this Section 7(b). Notwithstanding any other provision of this Section 7(b), if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of securities that may be included in the underwriting shall be allocated first among all holders (the "Preference Holders") of Company securities covered by the registration rights ("Other Securities") granted pursuant to either that certain Securities Purchase Agreement dated as of September 30, 1994 (as amended as of December 19, 1994) by and among the Company and the purchasers named therein or that certain Registration Rights Agreement dated as of December 19, 1994 by and among the Company and the other signatories thereto or those certain Warrants to purchase an aggregate of up to 66,264 shares of the Company's Common Stock issued pursuant to that certain Release and Settlement Agreement dated February 10, 1995 by and between the Company and The Wall Street Group, Inc. (the "Preferred Rights"); and next among all Initiating Holders and other Holders who have been provided the notice required by Section 7(b)(i) in proportion (as nearly as practicable) to the number of shares of Registrable Securities requested to be included in such registration by such Holder and which would be eligible for inclusion in the registration but for the application of this sentence. In the event Holders are not permitted to include at least seventy-five (75%) percent of the shares of Registrable Securities that they requested pursuant to Section 7(b)(i) to be included in a demand registration as a result of the application of the immediately preceding sentence, such registration shall not be counted as one of the Holders' demand registrations pursuant to this Section 7(b) and the Holders shall not be required to reimburse the Company for any expenses incurred by it in connection with such registration. In the event, as a result of the second immediately preceding sentence, Holders are permitted to include at least seventy-five (75%) percent but less than one hundred (100%) percent of the shares of Registrable Securities that they requested pursuant to Section 7(b)(i) to be included in any registration which would be the last demand registration to which the Holders would be entitled pursuant to this Section 7(b) but for the application of this sentence, the Holders shall be entitled to effect an additional demand registration in accordance with the provisions set forth in this Section 7(b) and the Holders shall not be required to reimburse the Company for any expenses incurred by it in connection with any such additional registration. 11 (iii) Subject to the last sentences of Sections 7(b)(ii) and (v) hereof, the Company is obligated to effect only two (2) registrations pursuant to this Section 7(b). (iv) Notwithstanding the foregoing, the Company shall not be required to file a registration statement pursuant to a request of the Initiating Holders during either (i) the one hundred twenty (120) day period following the effective date of any registration of Company securities which includes Registrable Securities or Other Securities or (ii) the period of time beginning on the date the Company files a registration statement with the SEC covering Other Securities in a firm commitment underwriting and ending on the earlier to occur of (x) the date which is 120 days after such registration becomes effective, (y) the date on which the Company withdraws such registration with the SEC or (z) the date which is 180 days after the date the Company files such registration statement. In addition, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 7(b) a certificate signed by the President of the Company stating that in the good faith judgment of the board of directors of the Company it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period. (v) VVI acknowledges that the Company has granted the Preferred Holders the right to participate in registrations of the Company's securities required to be undertaken pursuant to this Section 7(b). If within forty-five (45) days of the exercise of a demand registration right granted pursuant to this Section 7(b), the Company notifies the Holders of the Registrable Securities that the Preferred Holders wish to include Other Securities for their account in such registration, then the Company may include Other Securities for the account of such Preferred Holders in such registration and, in the case of an underwritten offering, may reduce the number of shares of Registrable Securities included in such registration in accordance with the provisions set forth in Section 7(b)(ii); provided, however, that if the Holders are not permitted to include at least seventy-five (75%) percent of the shares of Registrable Securities that they requested pursuant to Section 7(b)(i) to be included in a demand registration as a result of the applications of this sentence, such registration shall not be counted as one of Holders' demand registrations pursuant to this Section 7(b) and the Holders shall not be required to reimburse the Company for any expenses incurred by it in connection with such registration. In the event, as a result of the immediately preceding sentence, Holders are permitted to include at least seventy-five (75%) percent but less than one hundred (100%) percent of the shares of Registrable Securities that they requested pursuant to Section 7(b)(i) to be included in any registration which would be the last demand registration to which the Holders would be entitled pursuant to this Section 7(b) but for the application of this sentence, the Holders shall be entitled to effect an additional demand registration in accordance with the provisions set forth in this Section 7(b) and the Holders shall not be required to reimburse the Company for any expenses incurred by it in connection with any such additional registration. (vi) In the event that the Warrant would expire at any time when the Holders have requested registration of Registrable Securities pursuant to Section 7(b)(i) and either (x) the Company is not required to file a registration statement during such time pursuant to Section 7(b)(iv) or (y) the Holders are not permitted to include all of the Registrable Securities that they requested to be included in such demand registration pursuant to Section 7(b)(ii) or (v), then 12 the term of the Warrant (but only with respect to Registrable Securities that were not included in such demand registration by reason of the circumstances described in clause (x) or (y)) shall be extended until a registration statement registering such Registrable Securities is effective. (c) Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any shares of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to employees pursuant to stock option awards and/or to participants in a Company employee benefit or stock plan, or a registration on any form which does not include substantially the same information, other than information related to the selling stockholders or their plan of distribution, as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company, the Company shall, subject to the provisions of the immediately preceding sentence and Section 7(h) hereof, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be so registered. Notwithstanding anything herein to the contrary, in the case of a registration required to be undertaken by the Company pursuant to the Preferred Rights (a "Limited Piggyback Registration"), the Company shall not be required to include any Registrable Securities in such Limited Piggyback Registration if either (i) the Preferred Holders (whose determination shall be made by Preferred Holders holding a majority of the securities covered by such demand registration rights which are to be included in such registration) or the managing underwriter (in the case of an underwritten offering) determine in good faith that the inclusion of any or all of the Registrable Securities would be detrimental to the offering of the Preferred Holders' securities or any securities to be sold in such registration for the Company's account or (ii) the number of Other Securities to be included in such registration would be reduced by the inclusion of the Registrable Securities in such registration. In the event the number of shares of Registrable Securities requested by Holders to be included in a registration is reduced by application of the immediately preceding sentence, the number of Registrable Securities to be included in the registration statement shall be allocated among the Holders who have provided the notice required by this Section 7(c) in proportion (as nearly as practicable) to the number of Registrable Securities requested to be included in such registration by such Holder and which would be eligible for inclusion in such registration but for the application of the immediately preceding sentence. (d) Obligations of the Company. Whenever required under this Section 7 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (i) Prepare and file with the Securities and Exchange Commission (the "SEC") a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days. (ii) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement 13 as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (iii) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (iv) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (v) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (vi) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (vii) In the case of an underwritten public offering, furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 7, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 7, (A) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in such form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters and (B) a letter dated such date, from the independent certified public accountants of the Company, in such form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters. (e) Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 7 with respect to the Registrable Securities of any selling Holder that such Holder shall have furnished to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. (f) Expenses of Demand Registration. Except as set forth in this Section 7(f), the Company shall bear and pay all expenses incurred by it in connection with any registrations, filings or qualifications pursuant to Section 7(b), including without limitation all registration, filing and qualification fees, printers, and accounting fees, and fees and disbursements of counsel for the Company; provided, however, that (subject to Sections 7(b)(ii) and (v) hereof) the Holders participating in any registration pursuant to Section 7(b) shall reimburse the Company for (i) all 14 such expenses (up to a maximum of Twenty Five Thousand ($25,000.00) Dollars per registration) pro rata based upon the number of Registrable Securities included in such registration by all Holders (excluding, however, any expenses attributable to the inclusion of any other securities therein, including, without limitation, any Other Securities) and (ii) for any expenses of any registration proceeding begun pursuant to Section 7(b) if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all Holders participating in such withdrawn registration shall bear such expenses pro rata based upon the number of Registrable Securities to be included in such registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 7(b); provided further, however, that, in the case of clause (ii) hereof, if at the time of such withdrawal the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request, then the Holders shall not be required to reimburse the Company for any of such expenses and shall retain their rights pursuant to Section 7(b). In no event shall the Company be required to pay any expenses incurred by a Holder in connection with any registration, filing or qualification pursuant to Section 7(b). (g) Expenses of Company Registration. The Company shall bear and pay all expenses incurred by it in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 7(c), including without limitation all registration, filing, and qualification fees, printers and accounting fees and all fees and disbursements of counsel for the Company relating or allocable thereto. The Company shall not pay any expenses incurred by a Holder in connection with any such registration, filing or qualification, including, but not limited to underwriting discounts and commissions relating to Registrable Securities and the fees and disbursements of any professional advisors (including attorneys and accountants) utilized by the selling Holders in connection with such registration, filing or qualification. (h) Reduction of Registrable Securities Included in Piggyback Registration Statement. In connection with any offering involving an underwriting of shares being issued by the Company, the Company shall not be required under Section 7(c) hereof to include any of the Holders' securities in such underwriting unless they accept the customary and reasonable terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as will not, in the opinion of the underwriters, jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters reasonably believe compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters believe will not jeopardize the success of the offering (the securities so included to be allocated first among all holders of Other Securities and next apportioned pro rata among the Holders who have provided notice required by Section 7(c) and all other holders (other than holders of Other Securities) of securities subject to registration rights granted by the Company in proportion (as nearly as practicable) to the number of shares of securities requested to be included in such registration by such Holder and such other holders and which would have been eligible for inclusion in such registration but for the application of this sentence, or in such other proportions as shall mutually be agreed to by such selling stockholders). For purposes of the provision of the preceding sentence concerning pro rata apportionment amongst the selling stockholders, for any selling stockholder which is a partnership 15 or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. (i) Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration by the Company as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 7. (j) Indemnification and Contribution. In the event any Registrable Securities are included pursuant to a registration statement under this Section 7: (i) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) and each person if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act") against any losses, claims, damages or liabilities (joint or several) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (A) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus (but only if such is not corrected in the final prospectus) contained therein or any amendments or supplements thereto, (B) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading (but only if such is not corrected in the final prospectus), or (C) any violation or alleged violation by the Company in connection with the registration of Registrable Securities under the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 7(j)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (ii) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any 16 Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in con nection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 7(j)(ii), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 7(j)(ii) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided that in no event shall any indemnity under this Section 7(j)(ii) exceed the net proceeds from the offering received by such Holder. (iii) Promptly after receipt by an indemnified party under this Section 7(j) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7(j), deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7(j), but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 7(j). (iv) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 7(j)(i) and (ii) is applicable but for any reason is held to be unavailable from the Company with respect to all Holders or any Holder, the Company and the Holder or Holders, as the case may be, shall contribute to the aggregate losses, claims, damages and liabilities (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted) to which the Company and one or more of the Holders may be subject in such proportion as is appropriate to reflect the relative fault of the Company on the one hand, and the Holder or Holders on the other, in connection with statements or omissions which resulted in such losses, claims, damages or liabilities. Notwithstanding the foregoing, no Holder shall be required to contribute any amount in excess of the net proceeds received by such Holder from the Registrable Securities as the case may be, sold by such Holder pursuant to the registration statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each person, if any, who controls a Holder within the meaning of the Securities Act shall have the same rights to contribution as such Holder. (v) The obligations of the Company and Holders under this Section 7(j) shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 7 or otherwise. 17 (k) Reports Under the Exchange Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 of the SEC; (ii) at all times take all such action as may be necessary or advisable to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities; (iii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iv) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon its request (i) a written statement by the Company as to its compliance with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act, or as to its qualified status as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. (1) Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (i) to include such securities in any registration filed under Section 7(b) hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of this securities will not reduce the amount of the Registrable Securities of the Holders which is included in such registration; (ii) to make a demand registration which could result in such registration statement being declared effective within one hundred twenty (120) days after the effective date of any registration effected pursuant to Section 7(b) hereof or (iii) to include such securities in any registration in which the Holders may include Registrable Securities pursuant to Section 7(c) hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only on a basis no more favorable than pro rata with all Holders of Registrable Securities in proportion (as nearly as practicable) to the number of shares of securities to be included in such registration by such Holder and such other holders. (m) The provisions of this Section 7 shall survive any expiration of the Warrants evidenced hereby until the earlier to occur of (i) the date that all Warrant Shares held by all Holders may be sold for resale pursuant to Rule 144 under the Exchange Act without reduction as a result of Rule 144(e) thereunder and (ii) the date that no Warrants or Warrant Shares are held by any Holder. SECTION 8. Miscellaneous. 18 8.1 Entire Agreement. This Warrant constitutes the entire agreement between the Company and the Warrantholders with respect to this Warrant and Warrant Shares. 8.2 Binding Effects; Benefits. This Warrant shall inure to the benefit of and shall be binding upon the Company, the Warrantholders and holders of Warrant Shares and their respective heirs, legal representatives, successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person other than the Company, the Warrantholders and holders of Warrant Shares, or their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant or the Warrant Shares. 8.3 Amendments and Waivers. This Warrant may not be modified or amended except by an instrument in writing signed by the Company and Warrantholders that hold Warrants entitling them to purchase at least 50% of the Warrant Shares. The Company, any Warrantholder or holders of Warrant Shares may, by an instrument in writing, waive compliance by the other party with any term or provision of this Warrant on the part of such other party hereto to be performed or complied with. The waiver by any such party of a breach of any term or provision of this Warrant shall not be construed as a waiver of any subsequent breach. 8.4 Section and Other Headings. The section and other headings contained in this Warrant are for reference purposes only and shall not be deemed to be a part of this Warrant or to affect the meaning or interpretation of this Warrant. 8.5 Further Assurances. Each of the Company, the Warrantholders and holders of Warrant Shares shall do and perform all such further acts and things (including, without limitation, any required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and execute and deliver all such other certificates, instruments and/or documents (including without limitation, such proxies and/or powers of attorney as may be necessary or appropriate) as any party hereto may, at any time and from time to time, reasonably request in connection with the performance of any of the provisions of this Warrant. 8.6 Notices. All demands, requests, notices and other communications required or permitted to be given under this Warrant shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States certified or registered first class mail, postage prepaid, to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto: (a) if to the Company, addressed to: National Media Corporation Eleven Penn Center 1835 Market Street, Suite 1100 Philadelphia, Pennsylvania 19103 Attention: General Counsel (b) if to any Warrantholder or holder of Warrant Shares, addressed to the address of such person appearing on the books of the Company. 19 Except as otherwise provided herein, all such demands, requests, notices and other communications shall be deemed to have been received on the date of personal delivery thereof or on the third business day after the mailing thereof. 8.7 Separability. Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable any other term or provision of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction. 8.8 Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Warrantholder an amount in cash equal to such fraction multiplied by the current market price (as determined as of the date of exercise, and with reference to the applicable trading market, in accordance with Section 1.l(a)(ii)) of a share of such stock as of the date of such exercise. 8.9 Rights of the Holder. The Warrantholder shall not, solely by virtue of this Warrant, be entitled to any rights of a stockholder of the Company, either at law or in equity. 8.10 Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and performed in Delaware. 20 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer. NATIONAL MEDIA CORPORATION By: ------------------------------------- Name: Title: Dated September __, 1998 21 ASSIGNMENT (To be executed only upon assignment of Warrant Certificate) For value received, _________________ hereby sells, assigns and transfers unto ___________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ______________________ attorney, to transfer said Warrant Certificate on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises:
Name(s) of Assignee(s) Address No. of Warrant Shares ----------- ------- ---------------------
And if said number of Warrants shall not be all the Warrants represented by the Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the Warrants represented by said Warrant Certificate. Dated: _______________, 19 __ ----------------------------------------------- Note: The above signature should correspond exactly with the name on the face of this Warrant Certificate. 22 SUBSCRIPTION FORM (To be executed upon exercise of Warrant pursuant to Section 1.1(a)) The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, ________ shares of Common Stock, as provided for therein, and delivers payment in full of the Exercise Price in the amount of $________ as follows:
Cash $ ----------- Certified or Official bank check $ ----------- Application of Telemarketing Differential and Production and Post Production Differential $ -----------
Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional share to: Name: ------------------------------------------ Address: ------------------------------------------ ------------------------------------------ ------------------------------------------ Social Security No.: ------------------------------------------ (Please Print Name, Address and Social Security No.) Signature: ------------------------------------------ NOTE: The above signature should correspond exactly with the name on the first page of this Warrant Certificate or with the name of the assignee appearing in the assignment form delivered herewith. And if said number of shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. 23 EX-23.1 6 EXH 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 4,318,579 shares of its common stock and to the incorporation by reference therein of our report dated June 29, 1998 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, 1998, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Philadelphia, Pennsylvania September 24, 1998 -----END PRIVACY-ENHANCED MESSAGE-----