-----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, QDmKMxgCSsxY+SFGvWszwLdEzWQ7Ks6JlCFrLAV6S/2TNds9ZB+Rq7z8Qn+JHF3w Bn+vStrILt4d64kgqCV0Ag== 0000950124-98-000085.txt : 19980109 0000950124-98-000085.hdr.sgml : 19980109 ACCESSION NUMBER: 0000950124-98-000085 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19980105 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALUEVISION INTERNATIONAL INC CENTRAL INDEX KEY: 0000870826 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 411673770 STATE OF INCORPORATION: MN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20243 FILM NUMBER: 98502411 BUSINESS ADDRESS: STREET 1: 6740 SHADY OAK RD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-3433 BUSINESS PHONE: 6129475200 MAIL ADDRESS: STREET 1: 6740 SHADY OAK RAOD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-3433 8-K 1 FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 5, 1998 VALUEVISION INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) MINNESOTA (State or other jurisdiction of incorporation) 0-20243 41-1673770 (Commission File Number) (IRS Employer Identification No.) 6740 SHADY OAK ROAD, EDEN PRAIRIE, NM 55344 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (612) 947-5200 NOT APPLICABLE (Former name or former address, if changed since last report) Page 1 of 2 Exhibit Index Appears on Page 2 ITEM 5. OTHER EVENTS. The Registrant's Press Release dated January 5, 1998, which is filed as Exhibit 99.1 to this Form 8-K, is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits 10.1 Agreement and Plan of Reorganization and Merger dated January 5, 1998 by and among the Registrant, National Media Corporation ("National Media") and V-L Holdings Corp. 10.2 Stock Option Agreement (ValueVision) dated as of January 5, 1998 between the Registrant and National Media. 10.3 Stock Option Agreement (National Media) dated as of January 5, 1998 between National Media and the Registrant. 10.4 Redemption and Consent Agreement dated January 5, 1998 by and between National Media, the Registrant, Capital Ventures International and RGC International Investors, LDC. 10.5 $10,000,000 Demand Promissory Note dated January 5, 1998 issued by National Media to the Registrant. 10.6 Subisidiary Guarantee dated as of January 5, 1998 by Quantum North America, Inc., Quantum International Limited, Quantum Far East Ltd., Quantum Marketing International, Inc., Quantum International Japan Company Ltd., DirectAmerica Corporation, Positive Response Television, Inc., Quantum Productions AG, Suzanne Paul (Australia) Pty Limited, and National Media Holdings, Inc., for the benefit of the Registrant. 10.7 Warrant Agreement by and between National Media and the Registrant dated as of January 5, 1998. 10.8 Warrant Certificate No. 1 dated January 5, 1998, issued by National Media to the Registrant to purchase 250,000 shares of National Media common stock. 10.9 Registration Rights Agreement by and between National Media and the Registrant dated as of January 5, 1998. 99.1 Press Release dated January 5, 1998. 99.2 Consent, Waiver and Amendment dated as of January 5, 1998 by and between CoreStates Bank, N.A., National Media, Quantum North America, Inc., Quantum International Limited, Positive Response Television, Inc. and DirectAmerica Corporation. 2 Page 2 of 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VALUEVISION INTERNATIONAL, INC. (Registrant) Date: January 7, 1998 By: /s/ Stuart R. Romenesko --------------------------------- Name: Stuart R. Romenesko Title: Senior Vice President Finance Chief Financial Officer EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE 10.1 Agreement and Plan of Reorganization and Merger dated January 5, 1998 by and among the Registrant, National Media Corporation ("National Media") and V-L Holdings Corp. 10.2 Stock Option Agreement (ValueVision) dated as of January 5, 1998 between the Registrant and National Media. 10.3 Stock Option Agreement (National Media) dated as of January 5, 1998 between National Media and the Registrant. 10.4 Redemption and Consent Agreement dated January 5, 1998 by and between National Media, the Registrant, Capital Ventures International and RGC International Investors, LDC. 10.5 $10,000,000 Demand Promissory Note dated January 5, 1998 issued by National Media to the Registrant. 10.6 Subisidiary Guarantee dated as of January 5, 1998 by Quantum North America, Inc., Quantum International Limited, Quantum Far East Ltd., Quantum Marketing International, Inc., Quantum International Japan Company Ltd., DirectAmerica Corporation, Positive Response Television, Inc., Quantum Productions AG, Suzanne Paul (Australia) Pty Limited, and National Media Holdings, Inc., for the benefit of the Registrant. 10.7 Warrant Agreement by and between National Media and the Registrant dated as of January 5, 1998. 10.8 Warrant Certificate No. 1 dated January 5, 1998, issued by National Media to the Registrant to purchase 250,000 shares of National Media common stock. 10.9 Registration Rights Agreement by and between National Media and the Registrant dated as of January 5, 1998. 99.1 Press Release dated January 5, 1998. 99.2 Consent, Waiver and Amendment dated as of January 5, 1998 by and between CoreStates Bank, N.A., National Media, Quantum North America, Inc., Quantum International Limited, Positive Response Television, Inc. and DirectAmerica Corporation.
EX-10.1 2 EX-10.1 1 EXHIBIT 10.1 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER BY AND AMONG VALUEVISION INTERNATIONAL, INC., NATIONAL MEDIA CORPORATION, AND V-L HOLDINGS CORP. ___________________________________ DATED AS OF JANUARY 5, 1998 ____________________________________ 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I. THE MERGERS 2 Section 1.1. Certificate of Incorporation and Bylaws of Parent. 2 Section 1.2. The ValueVision Merger. 2 Section 1.3. The National Media Merger. 2 Section 1.4. Effective Time of the Mergers. 2 Section 1.5. Closing. 3 Section 1.6. Effect of the Mergers. 3 Section 1.7. Articles or Certificate of Incorporation and Bylaws of the Surviving Corporations. 4 Section 1.8. Directors and Officers of the Surviving Corporations. 4 ARTICLE II. CONVERSION OF SECURITIES 4 Section 2.1. Conversion of ValueVision Capital Stock. 4 Section 2.2. Conversion of National Media Capital Stock. 5 Section 2.3. Cancellation of Parent Common Stock. 7 Section 2.4. Exchange of Certificates. 7 Section 2.5. Dissenting Shares. 10 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF VALUEVISION 10 Section 3.1. Organization of ValueVision. 11 Section 3.2. ValueVision Capital Structure. 11 Section 3.3. Authority; No Conflict; Required Filings and Consents. 12 Section 3.4. SEC Filings; Financial Statements. 14 Section 3.5. No Undisclosed Liabilities. 15 Section 3.6. Absence of Certain Changes or Events. 15 Section 3.7. Taxes. 15 Section 3.8. Properties. 16 Section 3.9. Intellectual Property. 17 Section 3.10. Agreements, Contracts and Commitments. 17 Section 3.11. Litigation. 17 Section 3.12. Environmental Matters. 18 Section 3.13. Employee Benefit Plans. 18 Section 3.14. Compliance With Laws. 21 Section 3.15. Accounting and Tax Matters. 21 Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus. 21 Section 3.17. Labor Matters. 22 Section 3.18. Insurance. 22 Section 3.19. Opinion of Financial Advisor. 22 Section 3.20. No Existing Discussions. 22 Section 3.21. Sections 302A.671 and 302A.673 of the MBCA Not Applicable. 22 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NATIONAL MEDIA 23 Section 4.1. Organization of National Media. 23
- i - 3 Section 4.2. National Media Capital Structure. 24 Section 4.3. Authority; No Conflict; Required Filings and Consents. 25 Section 4.4. SEC Filings; Financial Statements. 26 Section 4.5. No Undisclosed Liabilities. 27 Section 4.6. Absence of Certain Changes or Events. 27 Section 4.7. Taxes. 28 Section 4.8. Properties. 29 Section 4.9. Intellectual Property. 29 Section 4.10. Agreements, Contracts and Commitments. 29 Section 4.11. Litigation. 29 Section 4.12. Environmental Matters. 29 Section 4.13. Employee Benefit Plans. 30 Section 4.14. Compliance With Laws. 33 Section 4.15. Accounting and Tax Matters. 33 Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus. 34 Section 4.17. Labor Matters. 34 Section 4.18. Insurance. 34 Section 4.19. Opinion of Financial Advisor. 35 Section 4.20. No Existing Discussions. 35 Section 4.21. Section 203 of the DGCL and Sections 2538, 2555, and 2564 of the Pennsylvania Business Corporation Law Not Applicable. 35 Section 4.22. National Media Rights Plan. 35 ARTICLE V. COVENANTS 35 Section 5.1. Conduct of Business. 35 Section 5.2. Cooperation; Notice; Cure. 37 Section 5.3. No Solicitation. 38 Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement. 39 Section 5.5. Nasdaq Quotation and NYSE Listing. 40 Section 5.6. Access to Information. 40 Section 5.7. Stockholders Meetings. 40 Section 5.8. Legal Conditions to Merger. 40 Section 5.9. Public Disclosure. 41 Section 5.10. Tax-Free Reorganization and Transfer. 42 Section 5.11. Affiliate Agreements. 42 Section 5.12. National Listing or Nasdaq Quotation. 42 Section 5.13. Stock Plans. 43 Section 5.14. Brokers or Finders. 44 Section 5.15. Indemnification. 44 Section 5.16. Letter of National Media's Accountants. 45 Section 5.17. Letter of ValueVision's Accountants. 45 Section 5.18. Stock Option Agreements. 45 Section 5.19. Post-Merger Parent Corporate Governance. 45 Section 5.20. Name of Parent. 47 Section 5.21. Parent Stockholder Rights Plan. 47 Section 5.22. The Warrants. 47
- ii - 4 Section 5.23. Conveyance Taxes. 48 Section 5.24. Stockholder Litigation. 48 Section 5.25. Annual Reports for Welfare Benefit Plans. 48 Section 5.26. Employment Agreements. 48 Section 5.27. Funding Advance for Redemption Agreement. 48 ARTICLE VI. CONDITIONS TO MERGER 49 Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers. 49 Section 6.2. Additional Conditions to Obligations of ValueVision. 51 Section 6.3. Additional Conditions to Obligations of National Media. 52 ARTICLE VII. TERMINATION AND AMENDMENT 53 Section 7.1. Termination. 53 Section 7.2. Effect of Termination. 54 Section 7.3. Fees and Expenses. 55 Section 7.4. Amendment. 56 Section 7.5. Extension; Waiver. 57 ARTICLE VIII. MISCELLANEOUS 57 Section 8.1. Nonsurvival of Representations, Warranties and Agreements. 57 Section 8.2. Notices. 57 Section 8.3. Interpretation. 58 Section 8.4. Counterparts. 58 Section 8.5. Entire Agreement; No Third Party Beneficiaries. 59 Section 8.6. Governing Law. 59 Section 8.7. Assignment. 59 Section 8.8. References to "Stockholders". 59
EXHIBITS Exhibit A ValueVision Stock Option Agreement Exhibit B National Media Stock Option Agreement Exhibit C Restated Certificate of Incorporation of Parent Exhibit D Amended and Restated Bylaws of Parent Exhibit E Certificate of Designations of Parent Series B Convertible Preferred Stock Exhibit F Form of Affiliate Agreement Exhibit G Form of Demand Note Exhibit H Form of Warrant Agreement Exhibit I Form of Registration Rights Agreement Exhibit J Form of Amendment to National Media Rights Plan Exhibit K Form of Redemption Agreement Exhibit L Form of Series B Consent Agreement Exhibit M Form of CoreStates Consent Agreement Exhibit N Form of Amendments to Hammer and Costalas Employment Agreements - iii - 5 Exhibit O Form of Parent Stock Plan Exhibit P Form of Parent Rights Plan Exhibit Q Form of Subsidiary Guaranty Exhibit R Form of ValueVision Guaranty TABLE OF DEFINED TERMS
CROSS REFERENCE TERMS IN AGREEMENT - ----- ------------ Acquisition Proposal Section 5.3.(a) Affiliate Section 5.11. Affiliate Agreement Section 5.11. Agreement Preamble Alternative Transaction Section 7.3.(e) Annual Report Section 5.25 Bankruptcy and Equity Exception Section 3.3.(a) Benefit Arrangement Section 3.13.(a) Certificate of Designations Section 4.2(b) Certificates Section 2.4.(b) Closing Section 1.5. Closing Date Section 1.5. Code Preamble Communications Act Section 3.3.(c) Confidentiality Agreement Section 5.3.(a) CoreStates Consent Agreement Section 3.3(a) Costs Section 5.15.(a) Court Section 6.1(m) Current Premium Section 5.15.(b) DGCL Section 1.3. Demand Note Section 3.3(a) Dissenting Shares Section 2.5. Effective Time Section 1.4.(c) Employee Benefit Plan Section 3.13.(a) Environmental Law Section 3.12.(b) ERISA Section 3.13.(a) ERISA Affiliate Section 3.13.(a) Exchange Act Section 3.3.(c) Exchange Agent Section 2.4.(a) Exchange Fund Section 2.4.(a) FCC Section 3.3.(c) FCC Consent Application Section 5.8.(a) Final Order Section 6.1.(c) Governmental Entity Section 3.3.(c) Hazardous Substance Section 3.12.(c) HSR Act Section 3.3.(c) Indemnified Parties Section 5.15.(a)
- iv - 6
CROSS REFERENCE TERMS IN AGREEMENT - ----- ------------ IRS Section 3.7.(b) Joint Proxy Statement/Prospectus Section 3.16. Material Adverse Change Section 3.6. MBCA Section 1.2. Mergers Section 1.3. Merger Sub 1 Section 1.2. Merger Sub 2 Section 1.3. National Media 10-K Section 4.6 National Media Balance Sheet Section 4.4.(b) National Media Certificate of Merger Section 1.4.(b) National Media Common Stock Section 1.3. National Media Convertible Preferred Stock Section 4.2.(a) National Media Director Section 5.19.(a) National Media Disclosure Schedule ARTICLE IV. National Media Employee Plans Section 4.13.(a) National Media ERISA Affiliate Section 4.13.(a) National Media Exchange Ratio Section 2.2.(c) National Media Material Adverse Effect Section 4.1. National Media Material Contracts Section 4.10. National Media Merger Section 1.3. National Media Parachute Agreements Section 4.13(e) National Media Rights Plan Section 4.2.(b) National Media SEC Reports Section 4.4.(a) National Media Stock Option Section 2.2(e) National Media Stock Option Agreement Preamble National Media Stock Plans Section 4.2.(a) National Media Stockholders' Meeting Section 3.16. National Media Surviving Corporation Section 1.6. National Media Warrants Section 4.2.(a) NYSE Section 5.5. Order Section 5.8.(b) Outside Date Section 7.1.(b) Parent Preamble Parent Common Stock Section 1.2. Parent Material Adverse Effect Section 6.1.(h) Parent Series B Convertible Preferred Stock Section 2.2 (d) Parent Stock Plan 5.13(f) PBCL Section 4.21 PBGC Section 4.13.(c) Pension Plan Section 4.13.(c) Redemption Agreement Section 3.3(a) Registration Rights Agreement Section 3.3(a) Registration Statement Section 3.16.
- v - 7
CROSS REFERENCE TERMS IN AGREEMENT - ----- ------------ Rule 145 Section 5.11. SEC Section 3.3.(c) Securities Act Section 3.1(a) Series B Convertible Preferred Stock Section 4.2(a) Series B Consent Agreement Section 3.3(a) Series C Convertible Preferred Stock Section 4.2(a) Series C Note Section 3.3(a) Settlement Agreement Section 6.1(m) Stock Option Agreements Preamble Subsidiary Section 3.1. Surviving Corporations Section 1.6. Tax Section 3.7.(a) Taxes Section 3.7.(a) Third Party Section 7.3.(e) Transaction Documents Section 3.3(a) ValueVision 10-K Section 3.6 ValueVision Articles of Merger Section 1.4.(a) ValueVision Balance Sheet Section 3.4.(b) ValueVision Common Stock Section 1.2. ValueVision Director Section 5.19.(a) ValueVision Disclosure Schedule ARTICLE III. ValueVision Employee Plans Section 3.13.(a) ValueVision ERISA Affiliate Section 3.13.(a) ValueVision Exchange Ratio Section 2.1.(c) ValueVision Guaranty Section 6.3(d) ValueVision Material Adverse Effect Section 3.1. ValueVision Material Contracts Section 3.10. ValueVision Merger Section 1.2. ValueVision Parachute Agreements Section 3.13(e) ValueVision SEC Reports Section 3.4.(a) ValueVision Stock Option Section 2.1(d) ValueVision Stock Option Agreement Preamble ValueVision Stock Plans Section 3.2.(a) ValueVision Stockholders' Meeting Section 3.16. ValueVision Surviving Corporation Section 1.6. ValueVision Warrants Section 3.2.(a) Warrants Section 4.2.(a) Warrant Agreement Section 3.3(a)
- vi - 8 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement"), dated as of January 5, 1998, by and among VALUEVISION INTERNATIONAL, INC. a Minnesota corporation ("ValueVision"), NATIONAL MEDIA CORPORATION, a Delaware corporation ("National Media"), and V-L HOLDINGS CORP., a newly-formed Delaware corporation, one-half of the issued and outstanding capital stock of which is owned by each of ValueVision and National Media ("Parent"). WHEREAS, the Boards of Directors of ValueVision and National Media deem it advisable and in the best interests of each corporation and its respective stockholders that ValueVision and National Media combine in a "merger of equals" in order to advance the long-term business interests of ValueVision and National Media; WHEREAS, the combination of ValueVision and National Media shall be effected by the terms of this Agreement through (i) a merger of a wholly-owned subsidiary of Parent with and into ValueVision and (ii) a merger of another wholly-owned subsidiary of Parent with and into National Media such that ValueVision and National Media become wholly-owned subsidiaries of Parent and the stockholders of ValueVision and National Media become stockholders of Parent; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to each of ValueVision's and National Media's willingness to enter into this Agreement, ValueVision and National Media have entered into (i) a Stock Option Agreement dated as of the date of this Agreement and attached hereto as Exhibit A (the "ValueVision Stock Option Agreement"), pursuant to which National Media granted ValueVision an option to purchase shares of common stock of National Media under certain circumstances, and (ii) a Stock Option Agreement dated as of the date of this Agreement and attached hereto as Exhibit B (the "National Media Stock Option Agreement" and, together with the ValueVision Stock Option Agreement, the "Stock Option Agreements"), pursuant to which ValueVision granted National Media an option to purchase shares of common stock of ValueVision under certain circumstances; WHEREAS, for Federal income tax purposes, it is intended that (i) the ValueVision Merger (as defined in Section 1.2) shall qualify as a reorganization described in Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and, taken together with the National Media Merger (as defined in Section 1.3), as a transfer of property to Parent by holders of ValueVision Common Stock (as defined in Section 1.2) described in Section 351 of the Code, and (ii) the National Media Merger shall, taken together with the ValueVision Merger, qualify as a transfer of property to Parent by holders of National Media Common Stock (as defined in Section 1.3) described in Section 351 of the Code; and WHEREAS, the Boards of Directors of ValueVision and National Media have approved this Agreement and each of the Transaction Documents to which its company is a party (as defined in Section 3.3). 1 9 NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties agree as follows: ARTICLE I. THE MERGERS Section 1.1. Certificate of Incorporation and Bylaws of Parent. The Certificate of Incorporation and Bylaws of Parent shall be amended prior to the Effective Time (as defined in Section 1.4) to be substantially in the form of Exhibit C and Exhibit D attached hereto, respectively. From the date hereof until the Effective Time, ValueVision and National Media shall consult with each other prior to causing or permitting Parent to take any action and neither shall cause or permit Parent to take any action inconsistent with the provisions of this Agreement without the written consent of the other. Section 1.2. The ValueVision Merger. ValueVision and National Media shall cause Parent to form a wholly-owned subsidiary named ValueVision Acquisition Corp. ("Merger Sub 1") under the laws of the State of Minnesota. ValueVision and National Media shall cause Parent to cause Merger Sub 1 to execute and deliver this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the Minnesota Business Corporation Act (the "MBCA"), Merger Sub 1 will merge with and into ValueVision (the "ValueVision Merger") at the Effective Time, and each outstanding share of Common Stock, par value $.01 per share, of ValueVision ("ValueVision Common Stock") shall be converted into 1.19 shares of common stock, par value $.01 per share, of Parent (the "Parent Common Stock") (as described in Section 2.1(c)). Merger Sub 1 will be formed solely to facilitate the ValueVision Merger and will conduct no business or activity other than in connection with the ValueVision Merger. Section 1.3. The National Media Merger. ValueVision and National Media shall cause Parent to form a wholly-owned subsidiary named National Media Acquisition Corp. ("Merger Sub 2") under the laws of the State of Delaware. ValueVision and National Media shall cause Parent to cause Merger Sub 2 to execute and deliver this Agreement. Upon the terms and subject to the provisions of this Agreement, and in accordance with the Delaware General Corporation Code (the "DGCL"), Merger Sub 2 shall merge with and into National Media (the "National Media Merger" and together with the ValueVision Merger, the "Mergers") at the Effective Time, and each outstanding share of Common Stock, par value $.01 per share, of National Media ("National Media Common Stock") shall be converted into 1.00 share of Parent Common Stock (as described in Section 2.2(c)). Merger Sub 2 will be formed solely to facilitate the National Media Merger and will conduct no business or activity other than in connection with the National Media Merger. Section 1.4. Effective Time of the Mergers. (a) The ValueVision Merger. Subject to, and consistent with, the provisions of this Agreement, articles of merger with respect to the ValueVision Merger in such form as is required by the relevant provisions of the MBCA (the "ValueVision Articles of Merger") shall be 2 10 duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Minnesota for filing, as provided in the MBCA as early as practicable on the Closing Date (as defined in Section 1.5). The ValueVision Merger shall become effective upon the filing of the ValueVision Articles of Merger with the Secretary of State of the State of Minnesota (b) The National Media Merger. Subject to, and consistent with, the provisions of this Agreement, a certificate of merger (the "National Media Certificate of Merger") with respect to the National Media Merger in such form as is required by the relevant provisions of the DGCL shall be duly prepared, executed and acknowledged and thereafter delivered to the Secretary of State of the State of Delaware for filing, as provided in the DGCL as early as practicable on the Closing Date. The National Media Merger shall become effective upon the filing of the National Media Certificate of Merger with the Secretary of State of the State of Delaware. (c) The Effective Time. The time at which both Mergers have become fully effective is hereinafter referred to as the "Effective Time." Section 1.5. Closing. The closing of the Mergers (the "Closing") will take place at 11:00 a.m., Eastern Standard Time, on a date to be specified by National Media and ValueVision, which shall be no later than the third business day after satisfaction or, if permissible, waiver of the conditions set forth in Article VI (the "Closing Date"), at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022-4802, unless another date, place or time is agreed to in writing by National Media and ValueVision. Section 1.6. Effect of the Mergers. As a result of the ValueVision Merger, the separate corporate existence of Merger Sub 1 shall cease and ValueVision shall continue as the surviving corporation (the "ValueVision Surviving Corporation"). As a result of the National Media Merger, the separate corporate existence of Merger Sub 2 shall cease and National Media shall continue as the surviving corporation (the "National Media Surviving Corporation" and together with ValueVision Surviving Corporation, the "Surviving Corporations"). Upon becoming effective, the Mergers shall have the effects set forth in the MBCA and the DGCL, as the case may be. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) all properties, rights, privileges, powers and franchises of ValueVision and Merger Sub 1 shall vest in ValueVision Surviving Corporation, and all debts, liabilities and duties of ValueVision and Merger Sub 1 shall become the debts, liabilities and duties of the ValueVision Surviving Corporation and (ii) all properties, rights, privileges, powers and franchises of National Media and Merger Sub 2 shall vest in National Media Surviving Corporation, and all debts, liabilities and duties of National Media and Merger Sub 2 shall become the debts, liabilities and duties of National Media Surviving Corporation. Section 1.7. Articles or Certificate of Incorporation and Bylaws of the Surviving Corporations. At the Effective Time, (i) the Articles of Incorporation and Bylaws of ValueVision Surviving Corporation shall be the Articles of Incorporation and Bylaws, respectively, of ValueVision, as in effect immediately prior to the Effective Time, in each case until duly amended in accordance with applicable law, and (ii) the Certificate of Incorporation and Bylaws of National Media Surviving Corporation shall be the Certificate of Incorporation and Bylaws, respectively, of National Media, as in effect immediately prior to the Effective Time, in each case until duly amended in accordance with applicable law. 3 11 Section 1.8. Directors and Officers of the Surviving Corporations. (a) ValueVision Surviving Corporation. The officers and directors of ValueVision immediately prior to the Effective Time shall be the initial officers and directors of ValueVision Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of ValueVision Surviving Corporation. (b) National Media Surviving Corporation. The officers and directors of National Media immediately prior to the Effective Time shall be the initial officers and directors of National Media Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of National Media Surviving Corporation. ARTICLE II. CONVERSION OF SECURITIES Section 2.1. Conversion of ValueVision Capital Stock. At the Effective Time, by virtue of the ValueVision Merger and without any action on the part of any of the parties hereto or the holders of any shares of ValueVision Common Stock or capital stock of Merger Sub 1: (a) Capital Stock of Merger Sub 1. Each issued and outstanding share of the capital stock of Merger Sub 1 shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of ValueVision Surviving Corporation. (b) Cancellation of Treasury Stock and National Media-Owned Stock. All shares of ValueVision Common Stock that are owned by ValueVision or any Subsidiary (as defined in Section 3.1) of ValueVision and any shares of ValueVision Common Stock (including any options, warrants or other securities convertible into or exchangeable for such shares) owned by National Media, Merger Sub 2 or any other Subsidiary of National Media shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Exchange Ratio for ValueVision Common Stock. Subject to Section 2.4(e), each issued and outstanding share of ValueVision Common Stock (other than shares to be canceled in accordance with Section 2.1(b) and Dissenting Shares (as defined in Section 2.5)) shall be converted into the right to receive 1.19 shares (the "ValueVision Exchange Ratio") of Parent Common Stock. All such shares of ValueVision Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor and an amount equal to certain dividends and distributions described in Section 2.4(c), in each case, upon the surrender of such certificate in accordance with Section 2.4 and without interest. (d) ValueVision Stock Options. At the Effective Time, each outstanding option to purchase shares of ValueVision Common Stock (a "ValueVision Stock Option") under the 4 12 ValueVision Stock Plans (as defined in Section 3.2(a)), whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such ValueVision Stock Option the same number of shares of Parent Common Stock as the holder of such ValueVision Stock Option would have been entitled to receive pursuant to the ValueVision Merger had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of ValueVision Common Stock purchasable pursuant to such ValueVision Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such ValueVision Stock Option in accordance with the foregoing. (e) ValueVision Warrants. At the Effective Time, each ValueVision Warrant (as defined in Section 3.2(a)) shall thereafter solely represent the right to acquire, on the terms and conditions as are currently applicable under the ValueVision Warrants, the same number of shares of Parent Common Stock as a holder of the ValueVision Warrants would have been entitled to receive pursuant to the ValueVision Merger had such holder exercised such ValueVision Warrants in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at the price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of ValueVision Common Stock purchasable pursuant to the ValueVision Warrants immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to the ValueVision Warrants in accordance with the foregoing. Section 2.2. Conversion of National Media Capital Stock. At the Effective Time, by virtue of the National Media Merger and without any action on the part of any of the parties hereto or the holders of any shares of National Media Common Stock or capital stock of Merger Sub 2: (a) Capital Stock of Merger Sub 2. Each issued and outstanding share of the capital stock of Merger Sub 2 shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.01 per share, of National Media Surviving Corporation. (b) Cancellation of Treasury Stock and ValueVision-Owned Stock. All shares of National Media Common Stock that are owned by National Media or any Subsidiary of National Media (including treasury stock) and any shares of National Media Common Stock (including any options, warrants or other securities convertible into or exchangeable for such shares) owned by ValueVision, Merger Sub 1 or any other Subsidiary of ValueVision shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Exchange Ratio for National Media Common Stock. Subject to Section 2.4(e), each issued and outstanding share of National Media Common Stock (including the rights associated with the Series A Junior Participating Preferred Stock issued pursuant to the National Media Rights Plan (as defined in Section 4.2(b)) (other than shares to be canceled in accordance with Section 2.2(b)) shall be converted into the right to receive 1.00 share (the "National Media 5 13 Exchange Ratio") of Parent Common Stock. All such shares of National Media Common Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor and an amount equal to certain dividends and distributions described in Section 2.4(c), in each case, upon the surrender of such certificate in accordance with Section 2.4 and without interest. (d) Exchange Ratio for Series B Convertible Stock. Each issued and outstanding share of Series B Convertible Preferred Stock (as defined in Section 4.2(a)) shall be converted into the right to receive 1.00 share of Parent Series B Convertible Preferred Stock, par value $.01 per share (the "Parent Series B Convertible Preferred Stock"), with the designations, preferences and rights set forth in the Certificate of Designations of the Parent Series B Convertible Preferred Stock in the form attached hereto as Exhibit E. All such shares of Series B Convertible Preferred Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Parent Series B Convertible Preferred Stock upon the surrender of such certificate in accordance with procedures to be established by Parent and without interest. (e) National Media Stock Options. At the Effective Time, each outstanding option to purchase shares of National Media Common Stock (a "National Media Stock Option") under the National Media Stock Plans (as defined in Section 4.2(a)), whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such National Media Stock Option the same number of shares of Parent Common Stock as the holder of such National Media Stock Option would have been entitled to receive pursuant to the National Media Merger had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of National Media Common Stock purchasable pursuant to such National Media Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such National Media Stock Option in accordance with the foregoing. (f) National Media Warrants. At the Effective Time, each National Media Warrant (as defined in Section 4.2(a)) shall thereafter solely represent the right to acquire, on the terms and conditions as are currently applicable under the National Media Warrants, the same number of shares of Parent Common Stock as a holder of the National Media Warrants would have been entitled to receive pursuant to the National Media Merger had such holder exercised such National Media Warrants in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at the price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of National Media Common Stock purchasable pursuant to the National Media Warrants immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to the National Media Warrants in accordance with the foregoing. 6 14 Section 2.3. Cancellation of Parent Common Stock. At the Effective Time, by virtue of the Mergers and without any action on the part of any holder of any capital stock of ValueVision, National Media or Parent, each share of Parent Common Stock issued and outstanding immediately prior to the Effective Time shall be canceled, and no consideration shall be delivered in exchange therefor. Section 2.4. Exchange of Certificates. The procedures for exchanging shares of ValueVision Common Stock and National Media Common Stock for Parent Common Stock outstanding immediately prior to the Effective Time pursuant to the Mergers are as follows: (a) Exchange Agent. As of the Effective Time, Parent shall deposit with a bank or trust company designated by National Media and ValueVision (the "Exchange Agent"), for the benefit of the holders of shares of ValueVision Common Stock outstanding immediately prior to the effective time and the holders of shares of National Media Common Stock outstanding immediately prior to the Effective Time, for exchange in accordance with this Section 2.4, through the Exchange Agent, certificates representing the shares of Parent Common Stock issuable pursuant to Sections 2.1 and 2.2 in exchange for outstanding shares of ValueVision Common Stock and National Media Common Stock, respectively (such shares of Parent Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund"). (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of ValueVision Common Stock or National Media Common Stock (including the Series A Junior Participating Preferred Stock associated with the National Media Common Stock and issued pursuant to the National Media Rights Plan) (the "Certificates") whose shares were converted pursuant to Section 2.1 or Section 2.2 into the right to receive shares of Parent Common Stock (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as ValueVision and National Media may reasonably specify), and (ii) instructions for effecting the surrender of the Certificates in exchange for certificates representing shares of Parent Common Stock (plus cash in lieu of fractional shares, if any, of Parent Common Stock as provided below). Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Parent Common Stock which such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate so surrendered shall immediately be canceled. In the event of a transfer of ownership of ValueVision Common Stock or National Media Common Stock prior to the Effective Time which is not registered in the transfer records of ValueVision or National Media, respectively, a certificate representing the proper number of shares of Parent Common Stock may be issued to a transferee if the Certificate representing such ValueVision Common Stock or National Media Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Immediately after the Effective Time, each outstanding 7 15 Certificate which theretofore represented shares of ValueVision Common Stock or National Media Common Stock shall represent only the right to receive the shares of Parent Common Stock pursuant to the terms hereof and shall not be deemed to evidence ownership of the number of shares of Parent Common Stock into which such shares of ValueVision Common Stock or National Media Common Stock would be or were, as the case may be, converted into the right to receive until the Certificate therefor shall have been surrendered in accordance with this Section 2.4. (c) Distributions With Respect to Unexchanged Shares. No dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock the holder thereof is entitled to receive in respect thereof and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to subsection (e) below until the holder of record of such Certificate shall surrender such Certificate. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of Parent Common Stock to which such holder is entitled pursuant to subsection (e) below and the amount of dividends or other distributions with a record date after the Effective Time previously paid with respect to such whole shares of Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Parent Common Stock. (d) No Further Ownership Rights in ValueVision Common Stock and National Media Common Stock. All shares of Parent Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof (including any cash paid pursuant to subsection (c) or (e) of this Section 2.4) shall be deemed to have been issued in full satisfaction of all rights pertaining to the shares of ValueVision Common Stock or National Media Common Stock theretofore represented by such Certificates, subject, however, to the applicable Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by ValueVision on such shares of ValueVision Common Stock or by National Media on such shares of National Media Common Stock, as the case may be, in accordance with the terms of this Agreement (to the extent permitted under Section 5.1) prior to the date hereof and which remain unpaid at the Effective Time, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the ValueVision Surviving Corporation or the National Media Surviving Corporation, as the case may be, of the shares of ValueVision Common Stock or National Media Common Stock, respectively, which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to one of the Surviving Corporations or Parent for any reason, such Certificates shall be canceled and exchanged as provided in this Section 2.4. (e) No Fractional Shares. No certificate or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such 8 16 fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, each holder of shares of ValueVision Common Stock or shares of National Media Common Stock outstanding immediately prior to the Effective Time exchanged pursuant to the Mergers who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Parent Common Stock multiplied by the per share sales price of Parent Common Stock (as reported by the national securities exchange or market on which such Parent Common Stock is traded or quoted) on the first day of trading of Parent Common Stock on such exchange or market after the Effective Time. (f) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the former stockholders of ValueVision or National Media on the 180th day after the Effective Time shall be delivered to Parent upon demand, and any former stockholder of ValueVision or National Media who has not previously complied with this Section 2.4 shall thereafter look only to Parent for payment of such stockholder's claim for Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock and any dividends or distributions with respect to Parent Common Stock. (g) No Liability. None of ValueVision, National Media or Parent shall be liable to any holder of shares of ValueVision Common Stock or National Media Common Stock, as the case may be, for any shares of Parent Common Stock (or cash in lieu of fractional shares of Parent Common Stock or any dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (h) Withholding Rights. Parent and each of the Surviving Corporations shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of ValueVision Common Stock or National Media Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or one of the Surviving Corporations, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of ValueVision Common Stock or National Media Common Stock, as the case may be, in respect of which such deduction and withholding was made. (i) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or one of the Surviving Corporations, the posting by such person of a bond in such reasonable amount as Parent or such Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the shares of Parent Common Stock, any cash in lieu of fractional shares, and any unpaid dividends and distributions on shares of Parent Common Stock deliverable in respect thereof pursuant to this Agreement. 9 17 (j) Affiliates. Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any Affiliate (as defined in Section 5.11) of ValueVision or National Media shall not be exchanged until Parent has received an Affiliate Agreement (as defined in Section 5.11) substantially in the form of Exhibit F attached hereto from such Affiliate. Section 2.5. Dissenting Shares. Any ValueVision Common Stock held by a holder who dissents from the ValueVision Merger and becomes entitled to obtain payment for the value of such ValueVision Common Stock pursuant to the applicable provisions of Minnesota law shall be herein called "Dissenting Shares." Any Dissenting Share shall not, after the Effective Time, be entitled to vote for any purpose or receive any dividends or other distributions and shall not be converted into Parent Common Stock; provided, however, that ValueVision Common Stock held by a dissenting shareholder who subsequently withdraws a demand for payment, fails to comply fully with the requirements of Minnesota law, or otherwise fails to establish the right of such shareholder to be paid the value of such shareholder's shares under Minnesota law shall be deemed to be have been converted into Parent Common Stock pursuant to the terms and conditions referred to above. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF VALUEVISION ValueVision represents and warrants to National Media that the statements contained in this Article III are true and correct except as set forth herein and in the disclosure schedules delivered by ValueVision to National Media on or before the date of this Agreement (the "ValueVision Disclosure Schedule"). The ValueVision Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III and the disclosure in any paragraph shall qualify other paragraphs in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs. Section 3.1. Organization of ValueVision. Each of ValueVision and ValueVision's Material Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of ValueVision and its Subsidiaries, taken as a whole (a "ValueVision Material Adverse Effect"). Except as set forth in the ValueVision SEC Reports (as defined in Section 3.4) filed prior to the date hereof or on the ValueVision Disclosure Schedule, neither ValueVision nor any of its Subsidiaries directly or indirectly owns (other than ownership interests in ValueVision or in one or more of its Subsidiaries) any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding securities in any publicly traded company held for investment by ValueVision and comprising less than five percent (5%) of the outstanding stock of such 10 18 company. A true, correct and complete copy of the Articles of Incorporation and Bylaws of ValueVision and each of ValueVision's Material Subsidiaries (as defined below) has been delivered to National Media. As used in this Agreement, the word "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. "ValueVision's Material Subsidiaries" shall mean those Subsidiaries of ValueVision set forth on the ValueVision Disclosure Schedule, which Subsidiaries constitute all of ValueVision's "significant subsidiaries" as defined in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as amended (the "Securities Act"). Section 3.2. ValueVision Capital Structure. (a) The authorized capital stock of ValueVision consists of 100,000,000 shares of undesignated capital stock. As of the date hereof, (i) 28,035,778 shares of ValueVision Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable and (ii) no shares of ValueVision Common Stock were held in the treasury of ValueVision or by Subsidiaries of ValueVision. The ValueVision Disclosure Schedule shows the number of shares of ValueVision Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof, the plans under which such options were granted and award agreements pursuant to which "non-plan" options were granted (collectively, the "ValueVision Stock Plans"), and the entities or persons to whom such options were granted. The ValueVision Disclosure Schedule also shows the agreements under which the warrants to purchase an aggregate of 4,242,143 shares of ValueVision Common Stock granted and outstanding as of the date hereof (collectively, the "ValueVision Warrants") were issued and to whom such warrants were issued. As of the date hereof, no other shares of capital stock are issued and outstanding. All shares of ValueVision Common Stock subject to issuance as specified above are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. Except as set forth on the ValueVision Disclosure Schedule, there are no obligations, contingent or otherwise, of ValueVision or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of ValueVision Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations of Subsidiaries entered into in the ordinary course of business. All of the outstanding shares of capital stock of each of ValueVision's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by ValueVision or another Subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations in ValueVision's voting rights, charges or other encumbrances of any nature. 11 19 (b) Except as set forth in this Section 3.2 or as reserved for future grants of options under the ValueVision Stock Plans or the National Media Stock Option Agreement, (i) there are no equity securities of any class of ValueVision or any of its Subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which ValueVision or any of its Subsidiaries is a party or by which it is bound obligating ValueVision or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of ValueVision or any of its Subsidiaries or obligating ValueVision or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of ValueVision, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of ValueVision. Section 3.3. Authority; No Conflict; Required Filings and Consents. (a) ValueVision has all requisite corporate power and authority to enter into this Agreement and each of the Transaction Documents (as defined below) to which it is a party and to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party. The execution and delivery of this Agreement and each of the Transaction Documents to which it is a party and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party by ValueVision have been duly authorized by all necessary corporate action on the part of ValueVision, subject only to the approval and adoption of this Agreement by ValueVision's stockholders under the MBCA. This Agreement and each of the Transaction Documents to which it is a party have been duly executed and delivered by ValueVision and constitute the valid and binding obligations of ValueVision, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equitable principles (the "Bankruptcy and Equity Exception"). "Transaction Documents" means the Stock Option Agreements, the $10 million Promissory Demand Note by National Media for the benefit of ValueVision in the form of Exhibit G attached hereto (the "Demand Note"), the promissory demand note by National Media for the benefit of ValueVision which will be substantially in the form of the Demand Note and which will evidence the loan from ValueVision to National Media to fund the redemption under the Redemption Agreement (as defined below) (the "Series C Note"), the Warrant Agreement between National Media and ValueVision in the form of Exhibit H attached hereto (the "Warrant Agreement"), the Registration Rights Agreement between National Media and ValueVision in the form of Exhibit I attached hereto (the "Registration Rights Agreement"), the Amendment to the National Media Rights Plan (as defined in Section 4.2(b)) in the form of Exhibit J attached hereto, the Redemption and Consent Agreement between National Media and the holders of the Series C Convertible Preferred Stock in the form of Exhibit K attached hereto (the "Redemption Agreement"), the Series B Consent Agreement between National Media and holders of at least 60% of the outstanding shares of the Series B Convertible Preferred Stock in the form of Exhibit L attached hereto (the "Series B Consent Agreement"), the Consent, Waiver and Amendment between CoreStates Bank, N.A. ("CoreStates") and National Media and certain of its Subsidiaries in the form of Exhibit M 12 20 attached hereto (the "Corestates Consent Agreement") and the Amendments to the Hammer and Costalas Employment Agreements in the forms of Exhibit N attached hereto, each dated as of the date hereof. (b) Except as set forth on the ValueVision Disclosure Schedule, the execution and delivery of this Agreement and each of the Transaction Documents to which it is a party by ValueVision does not, and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party will not, (i) conflict with, or result in any violation or breach of, any provision of the Articles of Incorporation or Bylaws of ValueVision or any of its Subsidiaries, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which ValueVision or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to ValueVision or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which are not, individually or in the aggregate, reasonably likely to have a ValueVision Material Adverse Effect. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality ("Governmental Entity") is required by or with respect to ValueVision or any of its Subsidiaries in connection with the execution and delivery of this Agreement and each of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of the pre-merger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of an Articles of Merger with respect to the ValueVision Merger with the Minnesota Secretary of State, (iii) the filing of the Joint Proxy Statement/Prospectus (as defined in Section 3.16 below) with the Securities and Exchange Commission (the "SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv) applicable approvals of the Federal Communications Commission (the "FCC") pursuant to the Communications Act of 1934, as amended, and any regulations promulgated thereunder (the "Communications Act"), (v) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state or foreign securities laws, and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not be reasonably likely to have a ValueVision Material Adverse Effect. Section 3.4. SEC Filings; Financial Statements. (a) ValueVision has filed and made available to National Media all forms, reports and documents filed or required to be filed by ValueVision with the SEC since January 1, 1995 (collectively, the "ValueVision SEC Reports"). Except as set forth on the ValueVision 13 21 Disclosure Schedule, the ValueVision SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such ValueVision SEC Reports or necessary in order to make the statements in such ValueVision SEC Reports, in the light of the circumstances under which they were made, not misleading. None of ValueVision's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) contained in the ValueVision SEC Reports complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, in conformity with the requirements of Form 10-Q under the Exchange Act) and fairly presented in all material respects the consolidated financial position of ValueVision and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. The audited balance sheet of ValueVision as of January 31, 1997 is referred to herein as the "ValueVision Balance Sheet." Section 3.5. No Undisclosed Liabilities. Except as set forth on the ValueVision Disclosure Schedule, and except as disclosed in the ValueVision SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since January 31, 1997 in the ordinary course of business consistent with past practices, ValueVision and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate are reasonably likely to have a ValueVision Material Adverse Effect. Section 3.6. Absence of Certain Changes or Events. Except as disclosed in the ValueVision SEC Reports filed prior to the date hereof or on the ValueVision Disclosure Schedule, since the date of the ValueVision Balance Sheet, ValueVision and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (i) any material adverse change in the financial condition, results of operations, business or properties (a "Material Adverse Change") of ValueVision and its Subsidiaries, taken as a whole (other than changes that are the effect or result of economic factors affecting the economy as a whole or the industry (as described in the ValueVision 10-K for the fiscal year ended January 31, 1997 (the "ValueVision 10-K") in which ValueVision competes), or any development or combination of developments of which the management of ValueVision is aware that, individually or in the aggregate, has had, or is reasonably likely to have, a ValueVision Material Adverse Effect (other than changes that are the effect or result of economic factors affecting the economy as a whole or the industry (as described in the ValueVision 10-K) in which ValueVision competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to ValueVision or any of 14 22 its Subsidiaries having a ValueVision Material Adverse Effect; (iii) any material change by ValueVision or its Subsidiaries in their respective accounting methods, principles or practices to which National Media has not previously consented in writing; (iv) any revaluation by ValueVision or its Subsidiaries of any of their respective assets having a ValueVision Material Adverse Effect; or (v) any other action or event that would have required the consent of National Media pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement and that, individually or in the aggregate, has had or is reasonably likely to have a ValueVision Material Adverse Effect. Section 3.7. Taxes. (a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. For purposes of this Agreement, "Taxes" also includes any obligations under any agreements or arrangements with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity. (b) ValueVision and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a ValueVision Material Adverse Effect. There are no audits known by ValueVision to be pending or contemplated with respect to ValueVision's tax returns. Neither the Internal Revenue Service (the "IRS") nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of ValueVision, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a ValueVision Material Adverse Effect. ValueVision and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a ValueVision Material Adverse Effect. Neither ValueVision nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such elections that are not reasonably likely, individually or in the aggregate, to have a ValueVision Material Adverse Effect. There are no liens for Taxes upon the assets of ValueVision or any of its Subsidiaries (other than liens for Taxes that are not yet due or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a ValueVision Material Adverse Effect. No extension of a statute of limitations relating to any Taxes is in effect with respect to ValueVision and its Subsidiaries. 15 23 (c) Neither ValueVision nor any of its Subsidiaries has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after February 1, 1991, other than a group the common parent of which was ValueVision or any Subsidiary of ValueVision. (d) Neither ValueVision nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity, except for obligations that are not reasonably likely, individually or in the aggregate, to have a ValueVision Material Adverse Effect. (e) Neither ValueVision nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Section 3.8. Properties. (a) Neither ValueVision nor any of its Subsidiaries is in default under any of their respective leases for real property, except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a ValueVision Material Adverse Effect. (b) Except as set forth on the ValueVision Disclosure Schedule, with respect to each item of real property that ValueVision or any of its Subsidiaries owns, except for such matters that, individually or in the aggregate, are not reasonably likely to have a ValueVision Material Adverse Effect: (i) ValueVision or the identified Subsidiary has good and clear record and marketable title to such property, insurable by a recognized national title insurance company at standard rates, free and clear of any lien, encumbrance, security interest, easement, covenant or other restriction, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or occupancy of such property; and (ii) the improvements constructed on such property are in good condition, and all mechanical and utility systems servicing such improvements are in good condition, free in each case of material defects. Section 3.9. Intellectual Property. Each of ValueVision and its Subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all trademarks, trade names, service marks, copyrights, and any applications for such trademarks, trade names, service marks and copyrights, know-how, computer software programs or applications and tangible or intangible proprietary information or material that are necessary to conduct the business of each of ValueVision and its Subsidiaries as currently conducted, subject to such exceptions that would not be reasonably likely to have a ValueVision Material Adverse Effect. Neither ValueVision nor any of its Subsidiaries has any knowledge of any assertion or claim challenging the validity of any of such intellectual property, except such assertions or claims that, individually or in the aggregate, are not reasonably likely to have a ValueVision Material Adverse Effect. 16 24 Section 3.10. Agreements, Contracts and Commitments. Neither ValueVision nor any of its Subsidiaries has breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment filed or required to be filed as an exhibit to the ValueVision SEC Reports ("ValueVision Material Contracts") in such a manner as, individually or in the aggregate, is reasonably likely to have a ValueVision Material Adverse Effect. Each ValueVision Material Contract that has not expired by its terms is in full force and effect. Section 3.11. Litigation. Except as described in the ValueVision SEC Reports filed prior to the date hereof or except as set forth on the ValueVision Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration or investigation against ValueVision or any of its Subsidiaries pending or as to which ValueVision or any of its Subsidiaries has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a ValueVision Material Adverse Effect or a material adverse effect on the ability of ValueVision to consummate the transactions contemplated by this Agreement. Section 3.12. Environmental Matters. (a) To the knowledge of ValueVision and its Subsidiaries, except as disclosed in the ValueVision SEC Reports filed prior to the date hereof or on the ValueVision Disclosure Schedule and except for such matters that, individually or in the aggregate, are not reasonably likely to have a ValueVision Material Adverse Effect: (i) ValueVision and its Subsidiaries are in material compliance with all applicable Environmental Laws (as defined in Section 3.12(b)); (ii) the properties currently owned or operated by ValueVision and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances (as defined in Section 3.12(c)); (iii) the properties formerly owned or operated by ValueVision or any of its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership or operation by ValueVision or any of its Subsidiaries; (iv) neither ValueVision nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither ValueVision nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither ValueVision nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that ValueVision or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vii) neither ValueVision nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) there are no circumstances or conditions involving ValueVision or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of ValueVision pursuant to any Environmental Law. (b) As used in this Agreement, the term "Environmental Law" means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources, (B) the handling, use, presence, disposal, 17 25 release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property. (c) As used in this Agreement, the term "Hazardous Substance" means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law. Section 3.13. Employee Benefit Plans. (a) ValueVision has listed on the ValueVision Disclosure Schedule all employee benefit plans ("Employee Benefit Plans"), as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all other material benefit arrangements that are not Employee Benefit Plans, including, but not limited to any employment or consulting agreement, any arrangement providing insurance benefits, any incentive bonus or deferred bonus arrangement, any arrangement providing termination allowance, severance or similar benefits, any equity compensation plan, any deferred compensation plan, and any compensation policy or practice ("Benefit Arrangements"), (i) which are maintained, contributed to or required to be contributed to by ValueVision or any entity that, together with ValueVision as of the relevant measuring date under ERISA, is or was required to be treated as a single employer under Section 414 of the Code ("ValueVision ERISA Affiliate") or under which ValueVision or any ValueVision ERISA Affiliate may incur any liability, and (ii) which cover the employees, former employees, directors or former directors of ValueVision or any ValueVision ERISA Affiliate ("ValueVision Employee Plans"). (b) A true and complete copy of each written ValueVision Employee Plan that covers employees or former employees of ValueVision or any Subsidiary of ValueVision, including, if applicable, each amendment thereto and any trust agreement, insurance contract, collective bargaining agreement, or other funding or investment arrangements for the benefits under such ValueVision Employee Plan, has been delivered to National Media. In addition, with respect to each such ValueVision Employee Plan to the extent applicable, ValueVision has delivered to National Media the most recently filed Federal Forms 5500, the most recent summary plan description (including any summaries of material modifications), the most recent IRS determination letter, if applicable, the most recent actuarial report or valuation, if applicable, and all material employee communications with respect to each such ValueVision Employee Plan. (c) Except as set forth on the ValueVision Disclosure Schedule: (i) neither ValueVision nor any ValueVision ERISA Affiliate sponsors or has previously sponsored, maintained, contributed to or incurred an obligation to contribute to any Employee Benefit Plan regulated under Title IV of ERISA, including any "multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of ERISA; 18 26 (ii) neither ValueVision nor any ValueVision ERISA Affiliate sponsors or has previously sponsored, maintained, contributed to or incurred an obligation to contribute to any Employee Benefit Plan that provides or will provide benefits described in Section 3(1) of ERISA to any former employee or retiree of ValueVision or any ValueVision ERISA Affiliate, except as required under Part 6 of Title I of ERISA and Section 4980B of the Code; (iii) all ValueVision Employee Plans that cover or have covered employees or former employees of ValueVision have been maintained and operated, and currently are, in compliance in all material respects with their terms, the requirements prescribed by any and all applicable laws (including ERISA and the Code), orders, or governmental rules and regulations in effect with respect thereto, and ValueVision and the ValueVision ERISA Affiliates have performed all material obligations required to be performed by them under, are not in any material respect in default under or in violation of, and have no knowledge of any default or violation by any other party to, any of the ValueVision Employee Plans; (iv) each ValueVision Employee Plan that covers or has covered employees or former employees of ValueVision and is intended to qualify under Section 401(a) of the Code and each trust established pursuant to each such ValueVision Employee Plan that is intended to qualify under Section 501(a) of the Code is the subject of a favorable determination letter from the IRS, a copy of which has been delivered to National Media, and, to ValueVision's knowledge, nothing has occurred which may reasonably be expected to impair such determination or otherwise adversely affect the tax-qualified status of such ValueVision Employee Plan; (v) ValueVision and the ValueVision ERISA Affiliates have made full and timely payment of all amounts required to be contributed under the terms of each ValueVision Employee Plan and applicable law or required to be paid as expenses under such ValueVision Employee Plan; and (vi) other than claims for benefits in the ordinary course, there is no claim, suit, action, dispute, arbitration or legal, administrative or other proceeding or governmental investigation or audit pending, or, to the knowledge of ValueVision, threatened, alleging any breach of the terms of any ValueVision Employee Plan or of any fiduciary duty thereunder or violation of any applicable law with respect to any such ValueVision Employee Plan. (d) With respect to the ValueVision Employee Plans, individually and in the aggregate, no event has occurred, and to the knowledge of ValueVision, there exists no condition or set of circumstances in connection with which ValueVision could be subject to any liability that is reasonably likely to have a ValueVision Material Adverse Effect under ERISA, the Code or any other applicable law. (e) Except as set forth on the ValueVision Disclosure Schedule and except as disclosed in the ValueVision SEC Reports filed prior to the date of this Agreement, and except as provided for in this Agreement, neither ValueVision nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of ValueVision or any of its 19 27 Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving ValueVision of the nature contemplated by this Agreement, (ii) agreement with any officer of ValueVision providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof and for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. None of the execution and delivery of this Agreement or any of the Transaction Documents or the consummation of the transactions contemplated hereunder or thereunder will trigger any "change of control" or similar provisions resulting in the acceleration of benefits or compensation with respect to any agreements with any officer or other key employee of ValueVision or any of its Subsidiaries except for such applicable agreements as set forth on the ValueVision Disclosure Schedule (the "ValueVision Parachute Agreements"). The aggregate amounts payable under the ValueVision Parachute Agreements as a result of the transactions contemplated by this Agreement and each of the Transaction Documents will not exceed $0. Section 3.14. Compliance With Laws. Each of ValueVision and its Subsidiaries has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a ValueVision Material Adverse Effect. Section 3.15. Accounting and Tax Matters. (a) To the knowledge of ValueVision and its Subsidiaries, after consulting with its independent auditors, neither ValueVision nor any of its Affiliates (as defined in Section 5.12) has taken or agreed to take any action which would prevent the ValueVision Merger from constituting a transaction qualifying as a reorganization under Section 368 of the Code or the Mergers from constituting transactions qualifying as transfers under Section 351 of the Code. (b) To the knowledge of ValueVision and its Subsidiaries, the stockholders of ValueVision have no present plan, intention or arrangement to sell or otherwise dispose of any of the Parent Common Stock received in the ValueVision Merger that would cause the ValueVision Merger to fail to qualify as a reorganization under Section 368 of the Code or the Mergers to fail to qualify as transfers under Section 351 of the Code. Section 3.16. Registration Statement; Joint Proxy Statement/Prospectus. The information to be supplied by ValueVision or its Subsidiaries or about ValueVision or its Subsidiaries by ValueVision's agents for inclusion in the registration statement on Form S-4 pursuant to which shares of Parent Common Stock issued in the Mergers will be registered under the Securities Act (the "Registration Statement"), shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make 20 28 the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information supplied by ValueVision or its Subsidiaries for inclusion in the joint proxy statement/prospectus to be sent to the stockholders of National Media and ValueVision in connection with the meeting of ValueVision' stockholders (the "ValueVision Stockholders' Meeting") and the meeting of National Media's stockholders (the "National Media Stockholders' Meeting") to consider this Agreement and the Mergers (the "Joint Proxy Statement/Prospectus") shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of ValueVision or National Media, at the time of the ValueVision Stockholders' Meeting and the National Media Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the ValueVision Stockholders' Meeting or the National Media Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to ValueVision or any of its Affiliates, officers or directors should be discovered by ValueVision which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, ValueVision shall promptly inform National Media. Section 3.17 Labor Matters. Except as disclosed in the ValueVision SEC Reports filed prior to the date hereof, neither ValueVision nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is ValueVision or any of its Subsidiaries the subject of any material proceeding asserting that ValueVision or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of ValueVision, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving ValueVision or any of its Subsidiaries. Section 3.18. Insurance. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by ValueVision or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of ValueVision and its Subsidiaries and their respective properties and assets, and are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a ValueVision Material Adverse Effect. Section 3.19. Opinion of Financial Advisor. The financial advisor of ValueVision, Bear Stearns & Co., has delivered to ValueVision an opinion dated the date of this Agreement to the effect that the ValueVision Exchange Ratio is fair to the holders of ValueVision Common Stock from a financial point of view. 21 29 Section 3.20. No Existing Discussions. As of the date hereof, neither ValueVision nor any of its Affiliates is engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal (as defined in Section 5.3). Section 3.21. Sections 302A.671 and 302A.673 of the MBCA Not Applicable. The Board of Directors of ValueVision has taken all actions necessary under the MBCA, including approving the transactions contemplated by the Agreement and each of the Transaction Documents to which it is a party, to ensure that Section 302A.673 of the MBCA applicable to a "business combination" does not, and will not, apply to the transactions contemplated hereunder and thereunder. The restrictions contained in Section 302A.671 of the MBCA applicable to "control share acquisitions" will not apply to the authorization, execution, delivery and performance of this Agreement or each of the Transaction Documents by ValueVision to which it is a party or the consummation of the ValueVision Merger by ValueVision. No other "fair price," "moratorium," or other similar anti-takeover statute or regulation is applicable to ValueVision or (by reason of ValueVision's participation therein) the ValueVision Merger or the other transactions contemplated by this Agreement or the other Transaction Documents to which it is a party. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NATIONAL MEDIA National Media represents and warrants to ValueVision that the statements contained in this Article IV are true and correct, except as set forth on the disclosure schedules delivered by National Media to ValueVision on or before the date of this Agreement (the "National Media Disclosure Schedule"). The National Media Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV and the disclosure in any paragraph shall qualify other paragraphs in this Article IV only to the extent that it is reasonably apparent from a reading of such document that it also qualifies or applies to such other paragraphs. Section 4.1. Organization of National Media. Each of National Media and National Media's Material Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, properties, financial condition or results of operations of National Media and its Subsidiaries, taken as a whole (a "National Media Material Adverse Effect"). Except as set forth on the National Media Disclosure Schedule or in the National Media SEC Reports (as defined in Section 4.4) filed prior to the date hereof, neither National Media nor any of its Subsidiaries directly or indirectly owns (other than ownership interests in National Media or in one or more of its Subsidiaries) any equity or similar interest in, or any interest that is mandatorily convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding securities in any publicly traded company held for investment by National Media and comprising less than 22 30 five percent (5%) of the outstanding stock of such company. A true, correct and complete copy of the Certificate of Incorporation and other similar organizational documents of National Media and each of National Media's Material Subsidiaries (as defined below) has been delivered to ValueVision. "National Media's Material Subsidiaries" shall mean those subsidiaries of National Media set forth on the National Media Disclosure Schedule, which Subsidiaries constitute all of National Media's "significant subsidiaries" as defined in Rule 1-02 of Regulation S-X under the Securities Act. Section 4.2. National Media Capital Structure. (a) The authorized capital stock of National Media consists of 75,000,000 shares of Common Stock, $.01 par value, and 10,000,000 shares of Preferred Stock, $.01 par value. As of the date hereof, (i) 25,507,436 shares of National Media Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, and (ii) 705,280 shares of National Media Common Stock were held in the treasury of National Media or by Subsidiaries of National Media. The National Media Disclosure Schedule shows the number of shares of National Media Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date hereof, the plans under which such options were granted and award agreements pursuant to which "non-plan" options were granted (collectively, the "National Media Stock Plans"), and the entities or persons to whom such options were granted. The National Media Disclosure Schedule also shows the agreements under which the warrants to purchase an aggregate of 7,093,413 shares of National Media Common Stock granted and outstanding as of the date hereof (the "National Media Warrants," and together with the ValueVision Warrants, the "Warrants") were issued and to whom such warrants were granted. As of the date hereof, an aggregate number of 86,250 shares of Series B Convertible Preferred Stock, par value $.01 per share, of National Media, which are currently convertible into 862,500 shares of National Media Common Stock and which are currently entitled to vote on all matters submitted to the stockholders of National Media (with the exception of the election of directors) on an "as converted" basis (the "Series B Convertible Preferred Stock") and 20,000 shares of Series C Convertible Preferred Stock, par value $.01 per share, of National Media which are currently convertible into 3,300,330 (the quotient of $20 million divided by $6.06) shares of National Media Common Stock, plus the number of shares of National Media Common Stock equal to the quotient of the Accrued Premium (as defined in the Certificate of Designations (as defined below)) divided by $6.06 (the "Series C Convertible Preferred Stock" and, together with the Series B Convertible Preferred Stock the "National Media Convertible Preferred Stock") are issued and outstanding. All shares of National Media Common Stock subject to issuance as specified above are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. Except as set forth on the National Media Disclosure Schedule, there are no obligations, contingent or otherwise, of National Media or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of National Media Common Stock or the capital stock of any Subsidiary or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any such Subsidiary or any other entity other than guarantees of bank obligations of Subsidiaries entered into in the ordinary course of business. Except as set forth on the National Media Disclosure Schedule, all of the outstanding shares of capital stock of each of National Media's Subsidiaries are duly authorized, validly issued, fully 23 31 paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are beneficially owned by National Media or another Subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations in National Media's voting rights, charges or other encumbrances of any nature. (b) Except as set forth in this Section 4.2 or as reserved for future grants of options under the National Media Stock Plans or the ValueVision Stock Option Agreement, and except for the Series A Junior Participating Preferred Stock issued and issuable under the Rights Agreement dated as of January 3, 1994 between National Media and Mellon Securities Trust Company, as amended (the "National Media Rights Plan") or as disclosed on the National Media Disclosure Schedule, (i) there are no equity securities of any class of National Media or any of its Subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding; (ii) except as set forth in the Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock (the "Certificate of Designations") and the Registration Rights Agreement dated as of September 4, 1997 among National Media and the holders of the Series C Convertible Preferred Stock, there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which National Media or any of its Subsidiaries is a party or by which it is bound obligating National Media or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of National Media or any of its Subsidiaries or obligating National Media or any of its Subsidiaries to grant, extend, accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement; and (iii) to the best knowledge of National Media, there are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of National Media. Section 4.3. Authority; No Conflict; Required Filings and Consents. (a) National Media has all requisite corporate power and authority to enter into this Agreement and each of the Transaction Documents to which it is a party and to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party. The execution and delivery of this Agreement and each of the Transactions Documents to which it is a party and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party by National Media have been duly authorized by all necessary corporate action on the part of National Media, subject only to the approval and adoption of this Agreement by National Media's stockholders under the DGCL. This Agreement and each of the Transaction Documents to which it is a party have been duly executed and delivered by National Media and constitute the valid and binding obligations of National Media, enforceable in accordance with their terms, subject to the Bankruptcy and Equity Exception. (b) Except as set forth on the National Media Disclosure Schedule, the execution and delivery of this Agreement and each of the Transaction Documents to which it is a party by National Media does not, and the consummation of the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of National Media or any of its Subsidiaries, (ii) result in any violation or breach of, or 24 32 constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which National Media or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (including the Series C Convertible Preferred Stock), or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to National Media or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which are not, individually or in the aggregate, reasonably likely to have a National Media Material Adverse Effect. The Redemption Agreement pursuant to which holders of the outstanding shares of Series C Convertible Preferred Stock consent to the authorization, execution and delivery of this Agreement and each of the Transaction Documents and the consummation of the transactions contemplated hereunder and thereunder, is being entered into concurrently with the execution of this Agreement and a form is attached hereto as Exhibit K. The Series B Consent Agreement pursuant to which holders of the outstanding shares of National Media Series B Convertible Preferred Stock consent to the authorization, execution and delivery of this Agreement and each of the Transaction Documents and the consummation of the transactions contemplated hereunder and thereunder, is being entered into concurrently with the execution of this Agreement and a form is attached hereto as Exhibit L. The CoreStates Consent Agreement pursuant to which CoreStates consents to the authorization, execution and delivery of this Agreement and each of the Transaction Documents and the consummation of the transactions contemplated hereunder and thereunder, is being entered into concurrently with the execution of this Agreement and a form is attached hereto as Exhibit M. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to National Media or any of its Subsidiaries in connection with the execution and delivery of this Agreement and each of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, except for (i) the filing of the pre-merger notification report under the HSR Act, (ii) the filing of a Certificate of Merger with respect to the National Media Merger with the Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement/Prospectus with the SEC in accordance with the Exchange Act, (iv) applicable approvals of the FCC pursuant to the Communications Act, (v) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state or foreign securities laws, and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not be reasonably likely to have a National Media Material Adverse Effect. Section 4.4. SEC Filings; Financial Statements. (a) National Media has filed and made available to ValueVision all forms, reports and documents filed or required to be filed by National Media with the SEC since January 1, 1995 (collectively, the "National Media SEC Reports"). The National Media SEC Reports (i) except as set forth on the National Media Disclosure Schedule, at the time filed, complied in 25 33 all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such National Media SEC Reports or necessary in order to make the statements in such National Media SEC Reports, in the light of the circumstances under which they were made, not misleading. None of National Media's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes) contained in the National Media SEC Reports complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, in conformity with the requirements of Form 10-Q under the Exchange Act) and fairly presented in all material respects the consolidated financial position of National Media and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. The audited balance sheet of National Media as of March 31, 1997 is referred to herein as the "National Media Balance Sheet." Section 4.5. No Undisclosed Liabilities. Except as disclosed in the National Media SEC Reports filed prior to the date hereof or on the National Media Disclosure Schedule, and except for normal or recurring liabilities incurred since March 31, 1997 in the ordinary course of business consistent with past practices, National Media and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate, are reasonably likely to have a National Media Material Adverse Effect. Section 4.6. Absence of Certain Changes or Events. Except as disclosed in the National Media SEC Reports filed prior to the date hereof or on the National Media Disclosure Schedule, since the date of the National Media Balance Sheet, National Media and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (i) any Material Adverse Change in National Media and its Subsidiaries, taken as a whole (other than changes that are the effect or result of economic factors affecting the economy as a whole or the industry (as described in National Media's Form 10-K for the fiscal year ended March 31, 1997 (the "National Media 10-K") in which National Media competes) or any development or combination of developments of which the management of National Media is aware that, individually or in the aggregate, has had, or is reasonably likely to have, a National Media Material Adverse Effect (other than changes that are the effect or result of economic factors affecting the economy as a whole or the industry (as described in the National Media 10-K) in which National Media competes); (ii) any damage, destruction or loss (whether or not covered by insurance) with 26 34 respect to National Media or any of its Subsidiaries having a National Media Material Adverse Effect; (iii) any material change by National Media or its Subsidiaries in their respective accounting methods, principles or practices to which ValueVision has not previously consented in writing; (iv) any revaluation by National Media or its Subsidiaries of any of their assets having a National Media Material Adverse Effect; or (v) any other action or event that would have required the consent of ValueVision pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement and that, individually or in the aggregate, has had or is reasonably likely to have a National Media Material Adverse Effect. Section 4.7. Taxes. (a) National Media and each of its Subsidiaries have (i) filed all federal, state, local and foreign Tax returns and reports required to be filed by them prior to the date of this Agreement (taking into account all applicable extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of clauses (i), (ii) or (iii) for any such filings, payments or accruals that are not reasonably likely, individually or in the aggregate, to have a National Media Material Adverse Effect. There are no audits known by National Media to be pending or contemplated with respect to National Media's tax returns. Neither the IRS nor any other taxing authority has asserted any claim for Taxes, or to the actual knowledge of the executive officers of National Media, is threatening to assert any claims for Taxes, which claims, individually or in the aggregate, are reasonably likely to have a National Media Material Adverse Effect. National Media and each of its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected, except for amounts that are not reasonably likely, individually or in the aggregate, to have a National Media Material Adverse Effect. Neither National Media nor any of its Subsidiaries has made an election under Section 341(f) of the Code, except for any such elections that are not reasonably likely, individually or in the aggregate, to have a National Media Material Adverse Effect. There are no liens for Taxes upon the assets of National Media or any of its Subsidiaries (other than liens for Taxes that are not yet due or that are being contested in good faith by appropriate proceedings), except for liens that are not reasonably likely, individually or in the aggregate, to have a National Media Material Adverse Effect. No extension of a statute of limitations relating to any Taxes is in effect with respect to National Media and its Subsidiaries. (b) Neither National Media nor any of its Subsidiaries has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) for any taxable period beginning on or after April 1, 1991, other than a group the common parent of which was National Media or any Subsidiary of National Media. (c) Neither National Media nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other person with respect to Taxes of such other person (including pursuant to Treas. Reg. Section 1.1502-6 or comparable provisions of state, local or foreign 27 35 tax law) and including any liability for Taxes of any predecessor entity, except for obligations that are not reasonably likely, individually or in the aggregate, to have an National Media Material Adverse Effect. (d) Neither National Media nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Section 4.8. Properties. (a) Neither National Media nor any of its Subsidiaries is in default under any of their respective leases for real property, except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a National Media Material Adverse Effect. (b) Neither National Media nor any of its Subsidiaries owns any real property. Section 4.9. Intellectual Property. Other than as set forth on the National Media Disclosure Schedule, each of National Media and its Subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all trademarks, trade names, service marks, copyrights, and any applications for such trademarks, trade names, service marks and copyrights, know-how, computer software programs or applications, and tangible or intangible proprietary information or material that are necessary to conduct the business of each of National Media and its Subsidiaries as currently conducted, subject to such exceptions that would not be reasonably likely to have a National Media Material Adverse Effect. Other than as set forth on the National Media Disclosure Schedule, neither National Media nor any of its Subsidiaries has any knowledge of any assertion or claim challenging the validity of any of such intellectual property, except such assertions or claims that, individually or in the aggregate, are not reasonably likely to have a National Media Material Adverse Effect. Section 4.10. Agreements, Contracts and Commitments. Neither National Media nor any of its Subsidiaries has breached, or received in writing any claim or notice that it has breached, any of the terms or conditions of any material agreement, contract or commitment filed or required to be filed as an exhibit to the National Media SEC Reports ("National Media Material Contracts") in such a manner as, individually or in the aggregate, is reasonably likely to have a National Media Material Adverse Effect. Each National Media Material Contract that has not expired by its terms is in full force and effect. Section 4.11. Litigation. Except as described in the National Media SEC Reports filed prior to the date hereof or as set forth on the National Media Disclosure Schedule, there is no action, suit or proceeding, claim, arbitration or investigation against National Media or any of its Subsidiaries pending or as to which National Media or any of its Subsidiaries has received any written notice of assertion, which, individually or in the aggregate, is reasonably likely to have a National Media Material Adverse Effect or a material adverse effect on the ability of National Media to consummate the transactions contemplated by this Agreement. Section 4.12. Environmental Matters. To the knowledge of National Media and its Subsidiaries, except as disclosed in the National Media SEC Reports filed prior to the date hereof 28 36 and except for such matters that, individually or in the aggregate, are not reasonably likely to have a National Media Material Adverse Effect: (i) National Media and its Subsidiaries are in material compliance with all applicable Environmental Laws; (ii) the properties currently owned or operated by National Media and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances; (iii) the properties formerly owned or operated by National Media or any of its Subsidiaries were not contaminated with Hazardous Substances during the period of ownership or operation by National Media or any of its Subsidiaries; (iv) neither National Media nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither National Media nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither National Media nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that National Media or any of its Subsidiaries may be in violation of or liable under any Environmental Law; (vii) neither National Media nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) there are no circumstances or conditions involving National Media or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use or transfer of any property of National Media pursuant to any Environmental Law. Section 4.13. Employee Benefit Plans. (a) National Media has listed on the National Media Disclosure Schedule all Employee Benefit Plans, as defined in Section 3.13(a) of this Agreement, and all Benefit Arrangements, as defined in Section 3.13(a) of this Agreement, (i) which are maintained, contributed to or required to be contributed to by National Media or any entity that, together with National Media as of the relevant measuring date under ERISA, is or was required to be treated as a single employer under Section 414 of the Code ("National Media ERISA Affiliate") or under which National Media or any National Media ERISA Affiliate may incur any liability, and (ii) which cover the employees, former employees, directors or former directors of National Media or any National Media ERISA Affiliate ("National Media Employee Plans"). (b) A true and complete copy of each written National Media Employee Plan that covers employees or former employees of National Media or any Subsidiary of National Media, including each amendment thereto and any trust agreement, insurance contract, collective bargaining agreement, or other funding or investment arrangements for the benefits under such National Media Employee Plan, has been delivered to ValueVision. In addition, with respect to each such National Media Employee Plan to the extent applicable, National Media has delivered to ValueVision the most recently filed Federal Forms 5500 (solely with respect to the National Media 401(k) Plan), the most recent summary plan description (including any summaries of material modifications), the most recent IRS determination letter, if applicable, the most recent actuarial report or valuation, if applicable, and all material employee communications with respect to each such National Media Employee Plan. (c) Except as set forth on the National Media Disclosure Schedule: 29 37 (i) Neither National Media nor any National Media ERISA Affiliate sponsors, maintains, contributes to, or has any obligation to contribute to any Employee Benefit Plan regulated under Title IV of ERISA, other than a "multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of ERISA, ("Pension Plan"); with respect to any Pension Plan previously sponsored, maintained or contributed to by National Media or any National Media ERISA Affiliate or with respect to which National Media or any National Media ERISA Affiliate previously incurred an obligation to contribute: (A) As of the last day of the last plan year of each such Pension Plan and as of the Closing Date, the "amount of unfunded benefit liabilities" as defined in Section 4001(a)(18) of ERISA (but excluding from the definition of "current value" of "assets" of such Pension Plan, accrued but unpaid contributions) did not and will not exceed zero. (B) No such Pension Plan has been terminated so as to subject, directly or indirectly, National Media or any National Media ERISA Affiliate to any liability, contingent or otherwise, or the imposition of any lien under Title IV of ERISA; (C) No proceeding has been initiated by any person, including the Pension Benefit Guaranty Corporation ("PBGC"), to terminate any such Pension Plan; (D) No liability to the PBGC exists or is reasonably expected to be incurred with respect to any such Pension Plan that could subject, directly or indirectly, National Media or any National Media ERISA Affiliate to any liability, contingent or otherwise, or the imposition of any lien under Title IV of ERISA, whether to the PBGC or to any other person; (E) No "reportable event," as defined in Section 4043 of ERISA (to the extent the reporting of such event to the PBGC has not been waived) has occurred and is continuing with respect to any such Pension Plan; (F) No such Pension Plan which is subject to Section 302 of ERISA or Section 412 of the Code has incurred an "accumulated funding deficiency," within the meaning of Section 302 of ERISA and 412 of the Code, whether or not such deficiency has been waived; (G) Neither National Media nor any National Media ERISA Affiliate has, at any time, (i) ceased operations at a facility so as to become subject to the provisions of Section 4068(e) of ERISA, (ii) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA, or (iii) ceased making contributions on or before the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA to which National Media or any National Media ERISA Affiliate made contributions during the five years prior to the Closing Date. 30 38 (ii) neither National Media nor any National Media ERISA Affiliate sponsors or has previously sponsored, maintained, contributed to or incurred an obligation to contribute to any "multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of ERISA; (iii) neither National Media nor any National Media ERISA Affiliate sponsors or has previously sponsored, maintained, contributed to or incurred an obligation to contribute to any Employee Benefit Plan that provides or will provide benefits described in Section 3(1) of ERISA to any former employee or retiree of National Media or any National Media ERISA Affiliate, except as required under Part 6 of Title I of ERISA and Section 4980B of the Code; (iv) all National Media Employee Plans that cover or have covered employees or former employees of National Media have been maintained and operated, and currently are, in compliance in all material respects with their terms, the requirements prescribed by any and all applicable laws (including ERISA and the Code), orders, or governmental rules and regulations in effect with respect thereto, and National Media and the National Media ERISA Affiliates have performed all material obligations required to be performed by them under, are not in any material respect in default under or in violation of, and have no knowledge of any default or violation by any other party to, any of the National Media Employee Plans; (v) each National Media Employee Plan that covers or has covered employees or former employees of National Media and is intended to qualify under Section 401(a) of the Code and each trust established pursuant to each such National Media Employee Plan that is intended to qualify under Section 501(a) of the Code is the subject of a favorable determination letter from the IRS, a copy of which has been delivered to ValueVision, and, to National Media's knowledge, nothing has occurred which may reasonably be expected to impair such determination or otherwise adversely affect the tax-qualified status of such National Media Employee Plan; (vi) National Media and the National Media ERISA Affiliates have made full and timely payment of all amounts required to be contributed under the terms of each National Media Employee Plan and applicable law or required to be paid as expenses under such National Media Employee Plan; and (vii) other than claims for benefits in the ordinary course, there is no claim, suit, action, dispute, arbitration or legal, administrative or other proceeding or governmental investigation or audit pending, or, to the knowledge of National Media, threatened, alleging any breach of the terms of any National Media Employee Plan or of any fiduciary duty thereunder or violation of any applicable law with respect to any such National Media Employee Plan. (d) With respect to the National Media Employee Plans, individually and in the aggregate, no event has occurred, and to the knowledge of National Media, there exists no condition or set of circumstances in connection with which National Media could be subject to any liability that is reasonably likely to have a National Media Material Adverse Effect under ERISA, the Code or any other applicable law. 31 39 (e) Except as disclosed in the National Media SEC Reports filed prior to the date of this Agreement or on the National Media Disclosure Schedule, and except as provided for in this Agreement, neither National Media nor any of its Subsidiaries is a party to any oral or written (i) agreement with any officer or other key employee of National Media or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving National Media of the nature contemplated by this Agreement, (ii) agreement with any officer of National Media providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof and for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. None of the execution or delivery of this Agreement or any of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereunder or thereunder will trigger any "change in control" or similar provisions resulting in an acceleration of benefits or compensation thereunder with respect to any agreements with any officer or other key employee of National Media or any of its Subsidiaries except for such applicable agreements as set forth on the National Media Disclosure Schedule (the "National Media Parachute Agreements"). Except as set forth on the National Media Disclosure Schedule, the aggregate amounts payable under the National Media Parachute Agreements as a result of the transactions contemplated by this Agreement and each of the Transaction Documents will not exceed $600,000. Section 4.14. Compliance With Laws. Except as disclosed on the National Media Disclosure Schedule, each of National Media and its Subsidiaries has complied with, is not in violation of, and has not received any notices of violation with respect to, any federal, state or local statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a National Media Material Adverse Effect. Section 4.15. Accounting and Tax Matters. (a) To the knowledge of National Media and its Subsidiaries, after consulting with its independent auditors, neither National Media nor any of its Affiliates (as defined in Section 5.12) has taken or agreed to take any action which would prevent the Mergers from constituting transactions qualifying as transfers under Section 351 of the Code. (b) To the knowledge of National Media and its Subsidiaries, the stockholders of National Media have no present plan, intention or arrangement to sell or otherwise dispose of any of the Parent Common Stock received in the National Media Merger that would cause the Mergers to fail to qualify as transfers under Section 351 of the Code. (c) None of National Media's non-United States Subsidiaries have, excluding the effects of any guarantees made by any such Subsidiaries with respect to the Demand Note, any 32 40 "applicable earnings" for purposes of Section 956 of the Code as of the end of each such Subsidiary's tax year ending on or after the date hereof. Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus. The information to be supplied by National Media or its Subsidiaries or about National Media or its Subsidiaries by National Media's agents for inclusion in the Registration Statement shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information to be supplied by National Media or its Subsidiaries or about National Media or its Subsidiaries by National Media's agents for inclusion in the Joint Proxy Statement/Prospectus shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to stockholders of National Media or ValueVision, at the time of the National Media Stockholders' Meeting and the ValueVision Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, omit to state any material fact necessary in order to make the statements made in the Joint Proxy Statement/Prospectus not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the National Media Stockholders' Meeting or the ValueVision Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to National Media or any of its Affiliates, officers or directors should be discovered by National Media which should be set forth in an amendment to the Registration Statement or a supplement to the Joint Proxy Statement/Prospectus, National Media shall promptly inform ValueVision. Section 4.17. Labor Matters. Except as disclosed in the National Media SEC Reports filed prior to the date hereof, neither National Media nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor, as of the date hereof, is National Media or any of its Subsidiaries the subject of any material proceeding asserting that National Media or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor, as of the date of this Agreement, is there pending or, to the knowledge of the executive officers of National Media, threatened, any material labor strike, dispute, walkout, work stoppage, slow-down or lockout involving National Media or any of its Subsidiaries. Section 4.18. Insurance. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by National Media or any of its Subsidiaries are with reputable insurance carriers, provide full and adequate coverage for all normal risks incident to the business of National Media and its Subsidiaries and their respective properties and assets, and are in character and amount at least equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that, individually or in the aggregate, are not reasonably likely to have a National Media Material Adverse Effect. 33 41 Section 4.19. Opinion of Financial Advisor. The financial advisor of National Media, Lehman Brothers, Inc., has delivered to National Media an opinion dated the date of this Agreement to the effect that the National Media Exchange Ratio is fair to the holders of National Media Common Stock from a financial point of view. Section 4.20. No Existing Discussions. As of the date hereof, neither National Media nor any of its Affiliates is engaged, directly or indirectly, in any discussions or negotiations with any other party with respect to an Acquisition Proposal. Section 4.21. Section 203 of the DGCL and Sections 2538, 2555, and 2564 of the Pennsylvania Business Corporation Law Not Applicable. The Board of Directors of National Media has taken all actions necessary under the DGCL and the Pennsylvania Business Corporation Law ("PBCL"), including approving the transactions contemplated by this Agreement and each of the Transaction Documents to which it is a party, to ensure that Section 203 of the DGCL applicable to a "business combination" (as defined in Section 203 of the DGCL) and Sections 2538, 2555 and 2564 of the PBCL applicable to a "business combination," "control share acquisitions and transaction with "interested shareholders," do not, and will not, apply to the transactions contemplated hereunder and thereunder. No other "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation is applicable to National Media or (by reason of National Media's participation therein) the National Media Merger or the other transactions contemplated by this Agreement or the other Transaction Documents to which it is a party. Section 4.22. National Media Rights Plan. Under the terms of the National Media Rights Plan, the transactions contemplated by this Agreement will not cause a Distribution Date to occur or cause the rights issued pursuant to the National Media Rights Plan to become exercisable and all such rights shall become non-exercisable at the Effective Time. ARTICLE V. COVENANTS Section 5.1. Conduct of Business. Except as set forth on Section 5.1 of the ValueVision Disclosure Schedule or the National Media Disclosure Schedule, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, ValueVision and National Media each agrees as to itself and its respective Subsidiaries (except to the extent that the other party shall otherwise consent in writing) to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, to pay its debts and taxes when due subject to good faith disputes over such debts or taxes, to pay or perform its other obligations when due, and, to the extent consistent with such business, use all reasonable efforts consistent with past practices and policies to (i) preserve intact its present business organization, (ii) keep available the services of its present officers and key employees and (iii) preserve its relationships with customers, suppliers, distributors, and others having business dealings with it. Except as expressly contemplated by this Agreement (including the Exhibits attached hereto) or as set forth on Section 5.1 of the ValueVision Disclosure Schedule or the National Media Disclosure Schedule, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, ValueVision and National Media each shall 34 42 not (and shall not permit any of its respective Subsidiaries to), without the written consent of the other party: (a) Accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan of such party or authorize cash payments in exchange for any options granted under any of such plans, except as required by the terms of such plans or any related agreements in effect as of the date of this Agreement; (b) Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock, except from former employees, directors and consultants in accordance with agreements providing for the repurchase of shares in connection with any termination of service to such party; (c) Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or securities convertible into or exchangeable for shares of its capital stock, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities, other than (i) the grant of options consistent with past practices to employees, officers, directors or consultants, but in no event grant more than the total number of authorized options available under such party's stock option plans and (ii) the issuance of shares of ValueVision Common Stock or National Media Common Stock, as the case may be, pursuant to the exercise of options, warrants or the National Media Convertible Preferred Stock outstanding on the date of this Agreement; (d) Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division, or otherwise acquire or agree to acquire any assets (other than inventory and other items in the ordinary course of business), except for any such acquisitions involving aggregate consideration of not more than $1,000,000; (e) Sell, lease, license or otherwise dispose of any of its material properties or assets, except for transactions in the ordinary course of business; provided, however, that in no event shall either party enter into any agreement, option or other arrangements (including without limitation any joint venture) involving the licensing of such party's name or system in any foreign country, except for transactions in the ordinary course of business; (f) (i) Increase or agree to increase the compensation payable or to become payable to its directors, officers, employees or consultants, except for increases in salary or wages of employees (other than officers) in accordance with past practices, (ii) grant any additional severance or termination pay to, or enter into any employment or severance agreements with, any consultants, employees, officers or directors (iii) enter into any collective bargaining agreement (other than as required by law or extensions to existing agreements in the ordinary course of business), or (iv) establish, adopt, enter into or amend any bonus, profit 35 43 sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers, employees or consultants; (g) Amend or propose to amend its Certificate of Incorporation or Articles of Incorporation, as the case may be, or Bylaws; (h) Incur any indebtedness for borrowed money other than in the ordinary course of business; (i) Take any action that would or is reasonably likely to result in a material breach of any provision of this Agreement or any of the Transaction Documents to which it is a party or in any of its representations and warranties set forth in this Agreement or any of the Transaction Documents to which it is a party being untrue on and as of the Closing Date; (j) Make or rescind any material express or deemed election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or change any of its methods of reporting income or deductions for federal income Tax purposes from those employed in the preparation of its federal income tax return for the taxable year ending January 31, 1997 with respect to ValueVision and March 31, 1997 with respect to National Media, except as may be required by applicable law; (k) Settle any stockholder litigation relating to the transactions contemplated hereby; or (l) Take, or agree in writing or otherwise to take, any of the actions described in Sections (a) through (k) above. Section 5.2. Cooperation; Notice; Cure. Subject to compliance with applicable law, from the date hereof until the Effective Time, each of ValueVision and National Media shall confer on a regular and frequent basis with one or more representatives of the other party to report on the general status of ongoing operations and shall promptly provide the other party or its counsel with copies of all filings made by such party with the SEC or with any Governmental Entity in connection with this Agreement, the Mergers and the transactions contemplated hereby and thereby. Each of ValueVision and National Media shall notify the other of, and will use all commercially reasonable efforts to cure before the Closing Date, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that causes or will cause any covenant or agreement of ValueVision or National Media under this Agreement to be breached or that renders or will render untrue any representation or warranty of ValueVision or National Media contained in this Agreement. Each of ValueVision and National Media also shall notify the other in writing of, and will use all commercially reasonable efforts to cure, before the Closing Date, any violation or breach, as soon as practical after it becomes known to such party, of any representation, warranty, covenant or agreement made by ValueVision or National Media. No notice given pursuant to this paragraph shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein. Notwithstanding anything to the 36 44 contrary in this Agreement, (i) neither ValueVision nor any of its Subsidiaries nor National Media nor any of its Subsidiaries shall be obligated to sell or otherwise transfer any of its broadcast assets to obtain the FCC Consent Application (as defined in Section 5.8(a)) and (ii) if any of National Media's Directors (as defined in Section 5.19(a)) are not approved of by the FCC, then National Media shall as expeditiously as possible upon notice of such nonapproval replace any such director with another National Media Director until all of National Media's Directors have been approved of by the FCC. Section 5.3. No Solicitation. (a) ValueVision and National Media each shall not, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent of such party (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transaction involving such party or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or discussions with any third party concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal; provided, however, that nothing contained in this Agreement shall prevent ValueVision or National Media, or their respective Board of Directors, from (A) furnishing non-public information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide written Acquisition Proposal by such person or entity or modifying or withdrawing its recommendation with respect to the transactions contemplated hereby or recommending an unsolicited bona fide written Acquisition Proposal to the stockholders of such party, if and only to the extent that (1) the Board of Directors of such party believes in good faith (after consultation with its financial advisor) that such Acquisition Proposal is reasonably capable of being completed on the terms proposed and, after taking into account the strategic benefits anticipated to be derived from the Mergers and the long-term prospects of ValueVision and National Media as a combined company, would, if consummated, result in a transaction more favorable to the stockholders of such party over the long term than the transaction contemplated by this Agreement and the Board of Directors of such party determines in good faith after consultation with outside legal counsel that such action is required for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law and (2) prior to furnishing such non-public information to, or entering into discussions or negotiations with, such person or entity, such Board of Directors receives from such person or entity an executed confidentiality and standstill agreement with terms no less favorable to such party than those contained in the Confidentiality Agreement dated August 19, 1997 between National Media and ValueVision (the "Confidentiality Agreement"); or (B) complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. Each of ValueVision and National Media agrees not to release any third party from, or waive any provision of, any standstill agreement to which it is a party or any confidentiality agreement between it and another person who has made, or who may reasonably be considered likely to make, an Acquisition Proposal, unless its Board of Directors determines in good faith after 37 45 consultation with outside legal counsel that such action is necessary for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law. (b) ValueVision and National Media shall each notify the other party immediately after receipt by ValueVision or National Media (or their advisors) of any Acquisition Proposal or any request for nonpublic information in connection with an Acquisition Proposal or for access to the properties, books or records of such party by any person or entity that informs such party that it is considering making, or has made, an Acquisition Proposal. Such notice shall be made orally and in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact. Such party shall continue to keep the other party hereto informed, on a current basis, of the status of any such discussions or negotiations and the terms being discussed or negotiated. Section 5.4. Joint Proxy Statement/Prospectus; Registration Statement. (a) As promptly as practicable after the execution of this Agreement, ValueVision and National Media shall prepare and file with the SEC the Joint Proxy Statement/Prospectus and will cause Parent to prepare and file with the SEC the Registration Statement in which the Joint Proxy Statement/Prospectus will be included as a prospectus. ValueVision and National Media shall use all reasonable efforts to cause the Registration Statement to become effective as soon after such filing as practical. The Joint Proxy Statement/Prospectus shall include the recommendation of the Board of Directors of ValueVision in favor of this Agreement and the ValueVision Merger and the recommendation of the Board of Directors of National Media in favor of this Agreement and the National Media Merger; provided that the Board of Directors of either party may modify or withdraw such recommendation if such Board of Directors believes in good faith after consultation with outside legal counsel that the modification or withdrawal of such recommendation is necessary for such Board of Directors to comply with its fiduciary duties under applicable law. (b) ValueVision and National Media shall make all necessary filings with respect to the Merger under the Securities Act, the Exchange Act, applicable state blue sky laws and the rules and regulations thereunder. (c) ValueVision and National Media shall use their best efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in the Joint Proxy Statement/Prospectus and the Registration Statement) in connection with the transactions contemplated by this Agreement. Section 5.5. Nasdaq Quotation and NYSE Listing. ValueVision agrees to use its reasonable best efforts to continue the quotation of ValueVision Common Stock on Nasdaq during the term of this Agreement and National Media agrees to use its reasonable best efforts to continue the quotation and listing of National Media Common Stock on the New York Stock Exchange (the "NYSE") during the term of this Agreement. Section 5.6. Access to Information. Upon reasonable notice, ValueVision and National Media shall each (and shall cause each of their respective Subsidiaries to) afford to the officers, 38 46 employees, accountants, counsel and other representatives of the other, access, during normal business hours during the period prior to the Effective Time, to all its personnel, properties, books, contracts, commitments and records and, during such period, each of ValueVision and National Media shall, and shall cause each of their respective Subsidiaries to, furnish promptly to the other (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (b) all other information concerning its business, properties and personnel as such other party may reasonably request. The parties will hold any such information which is nonpublic in confidence in accordance with the Confidentiality Agreement. No information or knowledge obtained in any investigation pursuant to this Section 5.6 shall affect or be deemed to modify any representation or warranty contained in this Agreement or the conditions to the obligations of the parties to consummate the Merger. Section 5.7. Stockholders Meetings. ValueVision and National Media each shall call a meeting of its respective stockholders to be held as promptly as practicable for the purpose of voting, in the case of ValueVision, upon this Agreement and the ValueVision Merger and, in the case of National Media, upon this Agreement and the National Media Merger. Subject to Sections 5.3 and 5.4, ValueVision and National Media shall, through their respective Boards of Directors, recommend to their respective stockholders approval of such matters and shall coordinate and cooperate with respect to the timing of such meetings and shall use their best efforts to hold such meetings on the same day and as soon as practicable after the date hereof. Unless otherwise required to comply with the applicable fiduciary duties of the respective directors of ValueVision and National Media, as determined by such directors in good faith after consultation with outside legal counsel, each party shall use all reasonable efforts to solicit from stockholders of such party proxies in favor of such matters. Section 5.8. Legal Conditions to Merger. (a) ValueVision and National Media shall each use all reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, (ii) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by ValueVision or National Media or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby including, without limitation, the Mergers, and (iii) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Mergers required under (A) the Securities Act and the Exchange Act, and any other applicable federal or state securities laws, (B) the HSR Act and any related governmental request thereunder, (C) the Communications Act (including the filing of one or more requisite applications with the FCC requesting its written consent to the transactions contemplated hereby (the "FCC Consent Application"), and (D) any other applicable law. ValueVision and National Media shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if 39 47 requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. (b) ValueVision and National Media agree, and shall cause each of their respective Subsidiaries, to cooperate and to use their respective best efforts to obtain any government clearances required for Closing (including through compliance with the HSR Act and any applicable foreign government reporting requirements), to respond to any government requests for information, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an "Order") that restricts, prevents or prohibits the consummation of the Mergers or any other transactions contemplated by this Agreement. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act, the Communications Act or any other federal, state or foreign antitrust or fair trade law. ValueVision and National Media shall cooperate and work together in any proceedings or negotiations with any Governmental Entity relating to any of the foregoing. Notwithstanding anything to the contrary in this Section 5.8, neither ValueVision nor National Media, nor any of their respective Subsidiaries, shall be required to take any action that would reasonably be expected to substantially impair the overall benefits expected, as of the date hereof, to be realized from the consummation of the Mergers. (c) Each of ValueVision and National Media shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, all reasonable efforts to obtain any third party consents related to or required in connection with the Mergers. (d) National Media shall duly comply with all of its obligations under, and shall diligently prosecute all of its rights under, the Redemption Agreement. Section 5.9. Public Disclosure. ValueVision and National Media shall agree on the form and content of the initial press release regarding the transactions contemplated hereby and thereafter shall consult with each other before issuing, and use all reasonable efforts to agree upon, any press release or other public statement with respect to any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation. Section 5.10. Tax-Free Reorganization and Transfer. ValueVision and National Media shall each use all reasonable efforts to cause the ValueVision Merger to be treated as a reorganization within the meaning of Section 368 of the Code and the Mergers to be treated as transfers within the meaning of Section 351 of the Code. Section 5.11. Affiliate Agreements. Upon the execution of this Agreement, ValueVision and National Media will provide each other with a list of those persons who are, in ValueVision's or National Media's respective reasonable judgment, "affiliates" of ValueVision or National Media, as the case may be, within the meaning of Rule 145 (each such person who is 40 48 an "affiliate" of ValueVision or National Media within the meaning of Rule 145 is referred to as an "Affiliate") promulgated under the Securities Act ("Rule 145"). ValueVision and National Media shall provide each other such information and documents as the other party shall reasonably request for purposes of reviewing such list and shall notify the other party in writing regarding any change in the identity of its Affiliates prior to the Closing Date. ValueVision and National Media shall each use all reasonable efforts to deliver or cause to be delivered to each other by January 30, 1998 (and in any case prior to the Effective Time) from each of its Affiliates, an executed Affiliate Agreement, substantially similar to the form attached hereto as Exhibit F, by which each Affiliate of ValueVision and each Affiliate of National Media agrees to comply with the applicable requirements of Rule 145 and for the ValueVision Merger to qualify as a tax-free reorganization within the meaning of Section 368 and the Mergers to qualify as transfers within the meaning of Section 351 of the Code (an "Affiliate Agreement"). Parent shall be entitled to place appropriate legends on the certificates evidencing any Parent Common Stock to be received by such Affiliates of ValueVision or National Media pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the transfer agent for Parent Common Stock, consistent with the terms of the Affiliate Agreements (provided that such legends or stop transfer instructions shall be removed, when such shares of Parent Common Stock are generally transferable without any restrictions imposed by Rule 145, upon the request of any stockholder that is not then an Affiliate of Parent). Section 5.12. National Listing or Nasdaq Quotation. ValueVision and National Media shall cause Parent to promptly prepare and submit an application to the NYSE, if Parent is eligible for such listing, or, if not so eligible, to another national securities exchange or market to list or quote the shares of Parent Common Stock to be issued in the Mergers and upon exercise or conversion of ValueVision Stock Options, the ValueVision Warrants, the National Media Stock Options and the National Media Warrants, and shall use all reasonable efforts to cause such shares to be approved for listing or quotation on the NYSE or such other exchange or market, as the case may be, prior to the Effective Time, subject to official notice of issuance. Section 5.13. Stock Plans. (a) At the Effective Time, each outstanding ValueVision Stock Option under the ValueVision Stock Plans and each outstanding National Media Stock Option under the National Media Stock Plans, in each case whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such ValueVision Stock Option or National Media Stock Option, as the case may be the same number of shares of Parent Common Stock as the holder of such ValueVision Stock Option or National Media Stock Option, as the case may be, would have been entitled to receive pursuant to the ValueVision Merger or the National Media Merger, respectively, had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of ValueVision Common Stock or National Media Common Stock, as the case may be, purchasable pursuant to such ValueVision Stock Option or such National Media Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to such ValueVision Stock Option or National Media Stock Option, as the case may be, in accordance with the foregoing. 41 49 (b) As soon as practicable after the Effective Time, Parent shall deliver to the participants in the ValueVision Stock Plans and the National Media Stock Plans appropriate notice setting forth such participants' rights pursuant thereto and the grants pursuant to ValueVision Stock Plans or National Media Stock Plans, as the case may be, shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 5.13 after giving effect to the Mergers). (c) Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery under ValueVision Stock Plans and National Media Stock Plans assumed in accordance with this Section 5.13. As soon as practicable after the Effective Time, Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms), or another appropriate form with respect to the shares of Parent Common Stock subject to such options and shall use its best efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. (d) The Board of Directors of each of ValueVision and National Media shall, prior to or as of the Effective Time, take all necessary actions, pursuant to and in accordance with the terms of the ValueVision Stock Plans and the instruments evidencing the ValueVision Stock Options, or the National Media Stock Plans and the instruments evidencing the National Media Stock Options, as the case may be, to provide for the conversion of the ValueVision Stock Options and the National Media Stock Options into options to acquire Parent Common Stock in accordance with this Section 5.13, and that no consent of the holders of the ValueVision Stock Options or National Media Stock Options is required in connection with such conversion. (e) The Board of Directors of each of ValueVision and National Media shall, prior to or as of the Effective Time, take appropriate action to approve the deemed disposition of the ValueVision Stock Options or National Media Stock Options, as the case may be, for purposes of excepting such disposition under Rule 16b-3(e) promulgated under the Exchange Act. The Board of Directors of Parent shall, prior to or as of the Effective Time, take appropriate action to approve the deemed grant of options to purchase Parent Common Stock under the ValueVision Stock Options and the National Media Stock Options (as converted pursuant to this Section 5.13) for purposes of excepting such grant under Rule 16b-3(d) promulgated under the Exchange Act. (f) At the Effective Time, the Parent shall adopt the stock plan (the "Parent Stock Plan") substantially in the form attached hereto as Exhibit O. Section 5.14. Brokers or Finders. Each of National Media and ValueVision represents, as to itself, its Subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except Bear Stearns & Co. Incorporated, whose fees and expenses will be paid by ValueVision in accordance with ValueVision's agreement with such firm (a copy of which has been delivered by ValueVision to National Media prior to the date of this Agreement), and Lehman Brothers, Inc., whose fees and expenses will be paid by National Media in accordance with National Media's agreement with such firm (a copy of which has been delivered by 42 50 National Media prior to the date of this Agreement); provided, however, that if the Mergers are consummated, such fees shall be paid by ValueVision in accordance with Section 7.3 hereof. Each of National Media and ValueVision agrees to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any such fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by such party or any of its Affiliates. Section 5.15. Indemnification. (a) From and after the Effective Time, Parent agrees that it will, and will cause the Surviving Corporations to, indemnify and hold harmless each present and former director and officer of ValueVision and National Media (the "Indemnified Parties"), against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that ValueVision or National Media, as the case may be, would have been permitted under Minnesota law and Delaware law, as the case may be, and its articles or certificate of incorporation, as the case may be, or bylaws in effect on the date hereof to indemnify such Indemnified Party (and Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided the Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification). (b) For a period of six years after the Effective Time, Parent shall maintain or shall cause the Surviving Corporations to maintain (to the extent available in the market) in effect a directors' and officers' liability insurance policy covering those persons who are currently covered by ValueVision's or National Media's directors' and officers' liability insurance policy (copies of which have been heretofore delivered by ValueVision and National Media to each other) with coverage in amount and scope at least as favorable as ValueVision's or National Media's existing coverage; provided that in no event shall Parent or the Surviving Corporations be required to expend in excess of 200% of the annual premium currently paid by ValueVision or National Media, as the case may be, for such coverage (in either case, the "Current Premium"); and if such premium would at any time exceed 200% of the Current Premium, then the Surviving Corporations shall maintain insurance policies which provide the maximum and best coverage available at an annual premium equal to 200% of the Current Premium. (c) The provisions of this Section 5.15 are intended to be in addition to the rights otherwise available to the current officers and directors of ValueVision and National Media by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. Section 5.16. Letter of National Media's Accountants. National Media shall use all reasonable efforts to cause to be delivered to ValueVision and National Media a letter of Ernst & Young LLP, National Media's independent accountants, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to 43 51 ValueVision, in form reasonably satisfactory to ValueVision and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. Section 5.17. Letter of ValueVision's Accountants. ValueVision shall use all reasonable efforts to cause to be delivered to National Media and ValueVision a letter of Arthur Andersen LLP, ValueVision's independent accountants, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to National Media, in form reasonably satisfactory to National Media and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. Section 5.18. Stock Option Agreements. National Media and ValueVision each agree to fully perform their respective obligations under the Stock Option Agreements. Section 5.19. Post-Merger Parent Corporate Governance. (a) At the Effective Time, the total number of persons serving on the Board of Directors of Parent shall be ten (unless otherwise agreed in writing by ValueVision and National Media prior to the Effective Time), five of whom shall be ValueVision Directors, five of whom shall be National Media Directors (as such terms are defined below), all of which ValueVision Directors and National Media Directors shall be spread as evenly as possible among Parent's three classes of Directors; provided, however, that if the Board of Directors shall have elected a Chief Executive Officer to succeed the interim Chief Executive Officer identified in Section 5.19(b)(i) below prior to the Effective Time and such officer takes office prior to such date, then the Board of Directors of Parent shall be expanded to 11 members and such officer shall be appointed to the Board of Directors to fill the vacancy created by such expansion of the Board. The persons to serve initially on the Board of Directors of Parent at the Effective Time who are ValueVision Directors shall be selected solely by and at the absolute discretion of the Board of Directors of ValueVision prior to the Effective Time; and, subject to the second following sentence, the persons to serve initially on the Board of Directors of Parent at the Effective Time who are National Media Directors shall be selected solely by and at the absolute discretion of the Board of Directors of National Media prior to the Effective Time. In the event that, prior to the Effective Time, any person so selected to serve on the Board of Directors of Parent after the Effective Time is unable or unwilling to serve in such position, the Board of Directors which selected such person shall designate another of its members to serve in such person's stead in accordance with the provisions of the immediately preceding sentence. To the extent any holder of National Media's or Parent's Series B Convertible Preferred Stock is entitled to designate any director to the Board of Directors of Parent, such director shall be deemed to be a National Media Director. The term "ValueVision Director" means any person serving as a Director of ValueVision or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and any successor director appointed or elected pursuant to Article III, Section 1 of the Bylaws of Parent; and the term "National Media Director" means any person serving as a Director of National Media or any of its Subsidiaries on the date hereof who becomes a Director of Parent at the Effective Time and any successor director appointed or elected pursuant to Article III, Section 1 of the Bylaws of Parent. 44 52 (b) Subject to Section 8.5, at the Effective Time, (i) Robert L. Johander, the current Chief Executive Officer of ValueVision, shall hold the position of interim Chief Executive Officer and Co-Chairman of the Board of Parent, (ii) Frederick S. Hammer, a current director of National Media, shall hold the position of Co-Chairman of the Board of Parent, (iii) Nicholas M. Jaksich, the current President and Chief Operating Officer of ValueVision, shall hold the position of President and Chief Operating Officer of Parent and (iv) Stuart R. Romenesko, the current Chief Financial Officer of ValueVision, shall hold the position of Chief Financial Officer of Parent. If any of the persons identified in the preceding sentence is unable or unwilling to hold such offices as set forth above, his successor shall be selected by the Board of Directors of Parent in accordance with the Bylaws of Parent. (c) Subject to Section 8.5, at the Effective Time and continuing until the third anniversary of the Effective Time, Parent shall have an Executive Committee which shall always be comprised of three ValueVision Directors (who initially shall be Marshall S. Geller, Nicholas M. Jaksich and Robert L. Johander) and two National Media Directors (who initially shall be Frederick S. Hammer and Robert N. Verratti). Until the third anniversary of the Effective Time, the Executive Committee shall have responsibility for recommending to the full Board of Directors a successor Chief Executive Officer (and any successor thereto) to the interim Chief Executive Officer of the Parent, which search for such successor Chief Executive Officer shall commence as promptly as reasonably practicable, and shall have, to the fullest extent permitted by Delaware law, all of the powers, duties and responsibilities (including, without limitation, those relating to any and all issues relating to the FCC and any assets subject to its regulation) of the entire Board of Directors of Parent (except with respect to those actions that require a Supermajority Vote as set forth and defined in the Bylaws of Parent). (d) Subject to Section 8.5, at the Effective Time and continuing until the third anniversary of the Effective Time, Parent shall have a Compensation Committee which shall always be comprised of two ValueVision Directors and one National Media Director, each of whom shall meet the requirements of independence as established by the exchange or market on which Parent's stock is then traded or quoted. Until the third anniversary of the Effective Time, the Compensation Committee shall have responsibility for (i) reviewing the compensation and employee benefit policies of Parent, (ii) recommending to the Executive Committee base salary amounts and incentive awards for all elected officers of Parent and setting guidelines for the administration of all salaries, (iii) administering incentive compensation and awarding stock options to employees under any Parent stock option or compensation plan and amending or modifying any provisions of such stock option or compensation plan that may be amended or modified without stockholder approval and (iv) supervising all administrative matters with respect to the foregoing. (e) Each of ValueVision and National Media shall take such action as shall reasonably be deemed by either thereof to be advisable to give effect to the provisions set forth in this Section 5.19, including without limitation incorporating such provisions in the Bylaws of Parent in effect at the Effective Time. Section 5.20. Name of Parent. Prior to the Effective Time, ValueVision and National Media shall use reasonable efforts to decide on a new corporate name for Parent. 45 53 Section 5.21. Parent Stockholder Rights Plan. Prior to the Effective Time, ValueVision and National Media shall cause Parent to adopt a Stockholder Rights Plan (the "Parent Rights Plan") that is substantially in the form of the Stockholders Rights Agreement attached hereto as Exhibit P. Section 5.22. The Warrants. At the Effective Time, each Warrant shall thereafter solely represent the right to acquire, on the same terms and conditions as are currently applicable under the Warrants, the same number of shares of Parent Common Stock as a holder of the Warrants would have been entitled to receive pursuant to the ValueVision Merger or the National Media Merger, as the case may be, had such holder exercised the Warrants in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at the price per share (rounded downward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of ValueVision Common Stock or the National Media Common Stock, as the case may be, purchasable pursuant to the Warrants immediately prior to the Effective Time divided by (z) the number of full shares of Parent Common Stock deemed purchasable pursuant to the Warrants in accordance with the foregoing. At the Effective Time, Parent shall agree to issue any required shares of Parent Common Stock upon exercise of the Warrants in accordance with the foregoing. Section 5.23. Conveyance Taxes. ValueVision and National Media shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees or any similar taxes which become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be filed on or before the Effective Time. ValueVision shall pay, and National Media shall pay, without deduction or withholding from any amount payable to the holders of ValueVision Common Stock or National Media Common Stock, as the case may be, any such taxes or fees imposed by any Governmental Entity (and any penalties and interest with respect to such taxes and fees), which become payable in connection with the transactions contemplated by this Agreement, on behalf of their respective stockholders. Section 5.24. Stockholder Litigation. Each of ValueVision and National Media shall give the other the reasonable opportunity to participate in the defense of any stockholder litigation against ValueVision or National Media, as applicable, and its directors relating to the transactions contemplated hereby. Section 5.25. Annual Reports for Welfare Benefit Plans. Prior to the Closing Date, National Media shall cause to be filed any Annual Return/Report Federal Form 5500 ("Annual Report") for any National Media Employee Plan that is an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA with respect to which: (i) a filing obligation exists under Section 101 of ERISA or Section 6039D of the Code and (ii) no Annual Report has been timely filed. National Media further agrees to cause any such filing to be made and civil penalties paid in accordance with the procedures outlined by the U.S. Department of Labor for the Delinquent Filer Voluntary Compliance Program at 60 Federal Register 20874, dated April 27, 1995. Section 5.26. Employment Agreements. Except as set forth on the National Media Disclosure Schedule, National Media shall, and shall cause each of its relevant Subsidiaries to, 46 54 take any and all necessary action to prevent the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder from triggering any "change of control" or similar provisions resulting in an acceleration of benefits or compensation thereunder with respect to any agreements with any officer or other key employee of National Media or any of its Subsidiaries. Section 5.27. Funding Advance for Redemption Agreement.If all of the conditions to ValueVision's obligations as set forth in Sections 6.1 and 6.2 hereof (other than the second sentence of Section 6.2(e)) have been satisfied, then ValueVision shall concurrently with the Closing, advance to National Media, pursuant to the Series C Note, in immediately available funds, such amounts as are necessary to consummate the transactions contemplated by the Redemption Agreement. ARTICLE VI. CONDITIONS TO MERGER Section 6.1. Conditions to Each Party's Obligation to Effect the Mergers. The respective obligations of each party to this Agreement to effect the Mergers shall be subject to the satisfaction or waiver in writing by each of National Media and ValueVision prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement, the ValueVision Merger and the National Media Merger shall have been approved in the manner required under the MBCA and the DGCL, as the case may be, by the respective holders of the issued and outstanding shares of capital stock of ValueVision and National Media. (b) HSR Act. The waiting period applicable to the consummation of the Mergers under the HSR Act shall have expired or been terminated. (c) FCC Consents. Subject to the last sentence of Section 5.2, the FCC shall have granted by Final Order the FCC Consent Application, without conditions, qualifications or other restrictions that are likely to have a material adverse effect immediately after the Closing Date on Parent or any of its Subsidiaries, whether imposed by the FCC or any other Governmental Entity. "Final Order" means an order, action or decision of a Governmental Entity that has not been reversed, stayed, or enjoined and as to which the time to appeal, petition for certiorari or seek reargument or rehearing or administrative reconsideration or review has expired and as to which no appeal, reargument, petition for certiorari or rehearing or petition for reconsideration or application for review is pending or as to which any right to appeal, reargue, petition for certiorari or rehearing or reconsideration or review has been waived in writing by each party having such a right or, if any appeal, reargument, petition for certiorari or rehearing or reconsideration or review thereof has been sought, the order or judgment of the court or agency has been affirmed by the highest court (or the administrative entity or body) to which the order was appealed or from which the argument or rehearing or reconsideration or review was sought, or certiorari has been denied, and the time to take any further appeal or to seek certiorari or further reargument or rehearing, or reconsideration or review, has expired. 47 55 (d) Approvals. Other than the filing provided for by Section 1.4, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity the failure of which to file, obtain or occur is reasonably likely to have a ValueVision Material Adverse Effect or a National Media Material Adverse Effect shall have been filed, obtained or occurred. (e) Registration Statement. The Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order. (f) No Injunctions. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction or statute, rule, regulation which is in effect and which has the effect of making the Mergers illegal or otherwise prohibiting consummation of the Mergers. (g) National Listing or Nasdaq Quotation. The shares of Parent Common Stock to be issued in the Merger and upon exercise or conversion of ValueVision Options, the ValueVision Warrants, the National Media Options, and the National Media Warrants shall have been approved for listing on a national securities exchange or for quotation on The Nasdaq Stock Market, subject to official notice of issuance. (h) Consents Under ValueVision Agreements. ValueVision shall have obtained the consent or approval of any person whose consent or approval shall be required under any agreement or instrument in order to permit the consummation of the transactions contemplated hereby, except those of which, if not obtained, would not, individually or in the aggregate, have (i) a ValueVision Material Adverse Effect or (ii) a material adverse effect on the business, properties, financial condition or results of operations of Parent after the Merger (a "Parent Material Adverse Effect"). (i) Consents Under National Media Agreements. National Media shall have obtained the consent or approval of any person whose consent or approval shall be required under any agreement or instrument in order to permit the consummation of the transactions contemplated hereby, except those which, if not obtained, would not, individually or in the aggregate, have (i) a National Media Material Adverse Effect or (ii) a Parent Material Adverse Effect. (j) Corporate Governance. ValueVision and National Media shall have taken all actions necessary so that (i) not later than the Effective Time, the Certificate of Incorporation and Bylaws of Parent shall have been amended to be substantially in the form of Exhibit C and Exhibit D attached hereto; and (ii) at the Effective Time, the composition of the Board of Directors of Parent and of each Committee of the Board of Directors of Parent shall comply with Section 5.19 hereof (assuming ValueVision has designated the ValueVision Directors and National Media has designated the National Media Directors, in each case as contemplated by Section 5.19(a) hereof) and (iii) not later than the Effective Time, Parent shall have adopted the Parent Rights Plan. 48 56 (k) No Trigger of National Media Rights Plan. No event shall have occurred that has or would result in the triggering of any right or entitlement of stockholders of National Media under the National Media Rights Plan, or will occur as a result of the consummation of the Mergers. (l) Dissenters' Rights. Holders of no more than 5% of the issued and outstanding shares of ValueVision Common Stock shall have made the demands and given the notices required under Minnesota law to assert dissenters' appraisal rights. (m) Montgomery Ward. The transactions contemplated by the Stipulation between Montgomery Ward & Co., Incorporated and ValueVision regarding the Assumption and Modification of Executory Contracts and Related Agreements (the "Settlement Agreement") shall have been approved by the United States Bankruptcy Court for the District of Delaware (the "Court") on terms substantially similar to those set forth in the Settlement Agreement; provided, that, this condition shall be deemed to be satisfied if National Media does not object to the terms of any approval by the Court within three business days after any such approval becomes final and non-appealable. ValueVision shall have consummated the repurchase of the securities contemplated by the Settlement Agreement. Section 6.2. Additional Conditions to Obligations of ValueVision. The obligation of ValueVision to effect the ValueVision Merger is subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by ValueVision: (a) Representations and Warranties. The representations and warranties of National Media set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement and (ii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a National Media Material Adverse Effect (without regard to any materiality limitations contained in any such representation or warranty), or a material adverse effect upon the consummation of the transactions contemplated hereby; provided, however, that the last three sentences in Section 4.3(b) must be true and correct in all respects; and ValueVision shall have received a certificate signed on behalf of National Media by the chief executive officer and the chief financial officer of National Media to such effect. (b) Performance of Obligations of National Media. National Media shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date, and ValueVision shall have received a certificate signed on behalf of National Media by the chief executive officer and the chief financial officer of National Media to such effect. (c) Tax Opinion. ValueVision shall have received the opinion of Latham & Watkins, counsel to ValueVision, to the effect that, for Federal income tax purposes, the ValueVision Merger will be treated as a tax-free reorganization within the meaning of Section 368 of the Code and each of the Mergers will be treated as transfers within the meaning of 49 57 Section 351 of the Code (it being agreed that National Media shall provide reasonable cooperation, including the delivery of such certifications as shall be reasonably requested, to Latham & Watkins to enable it to render such opinion). (d) Termination of Telemarketing, Production and Post-Production Agreement. The Telemarketing, Production and Post-Production Agreement dated as of April 13, 1995 by and between National Media and ValueVision, as amended, shall have been terminated and all liabilities, obligations and amounts owed or incurred by ValueVision to National Media thereunder shall have been released and forever discharged. (e) Series C Convertible Preferred Stock. Each of the holders of the Series C Convertible Preferred Stock shall have duly executed the Redemption Agreement in the form attached hereto as Exhibit K, which Agreement shall be in full force and effect and no material breach shall have occurred thereunder as of the Closing Date. National Media shall have, as of the Effective Time, redeemed all of the outstanding shares of the Series C Convertible Preferred Stock (and the Series D Convertible Preferred Stock issued in exchange therefore) pursuant to such Redemption Agreement and none of such shares shall remain outstanding as of the Effective Time. (f) Transaction Documents. National Media shall have executed each of the Transaction Documents to which it is a party, each of which shall be in full force and effect and legally binding against National Media and no material breach by National Media shall have occurred thereunder as of the Closing Date. Each of National Media's Subsidiaries shall have executed the Subsidiary Guarantee in the form attached hereto as Exhibit Q, which shall be in full force and effect and legally binding against such Subsidiaries. Section 6.3. Additional Conditions to Obligations of National Media. The obligations of National Media to effect the National Media Merger are subject to the satisfaction of each of the following conditions prior to the Effective Time, any of which may be waived in writing exclusively by National Media: (a) Representations and Warranties. The representations and warranties of ValueVision set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (i) changes contemplated by this Agreement, (ii) inaccuracies which relate to the Settlement Agreement or the failure to consummate the transactions contemplated thereby and (iii) inaccuracies which, individually or in the aggregate, have not had and are not reasonably likely to have a ValueVision Material Adverse Effect (without regard to any materiality limitations contained in any such representation or warranty), or a material adverse effect upon the consummation of the transactions contemplated hereby; and National Media shall have received a certificate signed on behalf of ValueVision by the chief executive officer and the chief financial officer of ValueVision to such effect. (b) Performance of Obligations of ValueVision. ValueVision shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date; and National Media shall have received a 50 58 certificate signed on behalf of ValueVision by the chief executive officer and the chief financial officer of ValueVision to such effect. (c) Tax Opinion. National Media shall have received a written opinion from Drinker, Biddle & Reath, LLP, tax counsel to National Media, to the effect that each of the Mergers will be treated for Federal income tax purposes as transfers within the meaning of Section 351 of the Code (it being agreed that ValueVision shall provide reasonable cooperation, including the delivery of such certifications as shall be reasonably requested, to Drinker, Biddle & Reath, LLP to enable it to render such opinion). (d) Transaction Documents. ValueVision shall have duly executed each of the Transaction Documents to which it is a party, and the Guaranty attached hereto as Exhibit R (the "VVI Guaranty"), and such Transaction Documents and VVI Guaranty shall be in full force and effect and legally binding against ValueVision and no material breach by ValueVision shall have occurred thereunder as of the Closing Date. ARTICLE VII. TERMINATION AND AMENDMENT Section 7.1. Termination. This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(g), by written notice by the terminating party to the other party), whether before or after approval of the matters presented in connection with the Mergers by the stockholders of ValueVision or National Media: (a) by mutual written consent of ValueVision and National Media; or (b) by either ValueVision or National Media if the Mergers shall not have been consummated by June 1, 1998 (the "Outside Date"); provided, however, that if the Mergers shall have not been consummated by the Outside Date due to the failure of the condition set forth in Section 6.1(c), the Outside Date shall be extended to August 31, 1998; and provided, further, however, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the Mergers to occur on or before such date; or (c) by either ValueVision or National Media if a court of competent jurisdiction or other Governmental Entity shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Mergers; or (d) (i) by ValueVision, if, at the National Media Stockholders' Meeting (including any adjournment or postponement thereof), the requisite vote of the stockholders of National Media in favor of the approval and adoption of this Agreement and the National Media Merger shall not have been obtained; or (ii) by National Media if, at the ValueVision Stockholders' Meeting (including any adjournment or postponement thereof), the requisite vote of the stockholders of ValueVision in favor of the approval and adoption of this Agreement and the ValueVision Merger shall not have been obtained; or 51 59 (e) by ValueVision, if (i) the Board of Directors of National Media shall have withdrawn or modified its recommendation of this Agreement or the National Media Merger; (ii) after the receipt by National Media of an Acquisition Proposal, ValueVision requests in writing that the Board of Directors of National Media reconfirm its recommendation of this Agreement and the National Media Merger to the stockholders of National Media and the Board of Directors of National Media fails to do so within 10 business days after its receipt of ValueVision's request; (iii) the Board of Directors of National Media shall have recommended to the stockholders of National Media an Alternative Transaction (as defined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of National Media Common Stock is commenced (other than by ValueVision or an Affiliate of ValueVision) and the Board of Directors of National Media recommends that the stockholders of National Media tender their shares in such tender or exchange offer; or (v) for any reason National Media fails to call and hold the National Media Stockholders' Meeting by the Outside Date (provided that ValueVision's right to terminate this Agreement under such clause (v) shall not be available if at such time National Media would be entitled to terminate this Agreement under Section 7.1(g)); or (f) by National Media, if (i) the Board of Directors of ValueVision shall have withdrawn or modified its recommendation of this Agreement or the ValueVision Merger; (ii) after the receipt by ValueVision of an Acquisition Proposal, National Media requests in writing that the Board of Directors of ValueVision reconfirm its recommendation of this Agreement and the ValueVision Merger to the stockholders of National Media and the Board of Directors of ValueVision fails to do so within 10 business days after its receipt of National Media's request; (iii) the Board of Directors of ValueVision shall have recommended to the stockholders of ValueVision an Alternative Transaction; (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of ValueVision Common Stock is commenced (other than by National Media or an Affiliate of National Media) and the Board of Directors of ValueVision recommends that the stockholders of ValueVision tender their shares in such tender or exchange offer; or (v) for any reason ValueVision fails to call and hold the ValueVision Stockholders' Meeting by the Outside Date (provided that National Media's right to terminate this Agreement under such clause (v) shall not be available if at such time ValueVision would be entitled to terminate this Agreement under Section 7.1(g)); or (g) by ValueVision or National Media, if there has been a breach of any representation, warranty, covenant or agreement on the part of the other party set forth in this Agreement, which breach (i) will cause the conditions set forth in Section 6.2(a) or (b) (in the case of termination by ValueVision) or 6.3(a) or (b) (in the case of termination by National Media) not to be satisfied, and (ii) shall not have been cured within 20 business days following receipt by the breaching party of written notice of such breach from the other party. Section 7.2. Effect of Termination. In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall immediately become void and there shall be no liability or obligation on the part of ValueVision, National Media, Parent or their respective officers, directors, stockholders or Affiliates, except as set forth in Sections 5.15 and 7.3 and except that such termination shall not limit liability for a willful breach of this Agreement; provided that, the provisions of Sections 5.15 and 7.3 of this Agreement, the Stock Option 52 60 Agreements, the Demand Note, the Series C Note, the Warrant Agreement, the Registration Rights Agreement and the Confidentiality Agreement shall remain in full force and effect and survive any termination of this Agreement. Section 7.3. Fees and Expenses. (a) Except as set forth in this Section 7.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, if the Mergers are not consummated; provided, however, that if the Mergers are consummated, ValueVision shall pay for all fees and expenses incurred by National Media in connection with the Mergers and the transactions contemplated hereunder. (b) ValueVision shall pay National Media a termination fee of $5.0 million upon the earliest to occur of the following events: (i) the termination of this Agreement by National Media pursuant to Section 7.1(d)(ii), but only if a proposal for an Alternative Transaction involving ValueVision shall have been publicly announced prior to the ValueVision Stockholders' Meeting and either a definitive agreement for an Alternative Transaction is entered into, or an Alternative Transaction is consummated, within eighteen months of such termination; or (ii) the termination of this Agreement by National Media pursuant to Section 7.1(f), if a proposal for an Alternative Transaction involving ValueVision shall have been made prior to the ValueVision Stockholders' Meeting. ValueVision's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of National Media against ValueVision and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by ValueVision. Notwithstanding the foregoing, if and to the extent that National Media has purchased shares of ValueVision Common Stock pursuant to the National Media Stock Option Agreement, the amount payable to National Media under this Section 7.3(b), together with (i) (x) the amount received by National Media pursuant to ValueVision' repurchase of Shares (as defined in the National Media Stock Option Agreement) pursuant to Section 7 of the National Media Stock Option Agreement, less (y) National Media's purchase price for such Shares, and (ii) (x) the net cash amounts received by National Media pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged) to any unaffiliated party, less (y) National Media's purchase price for such Shares, shall not exceed $7.5 million. (c) National Media shall pay ValueVision a termination fee of $5.0 million upon the earliest to occur of the following events: (i) the termination of this Agreement by ValueVision pursuant to Section 7.1(d)(i), but only if a proposal for an Alternative Transaction involving National Media shall have been publicly announced prior to the National Media Stockholders' Meeting and 53 61 either an Alternative Transaction is entered into, or an Alternative Transaction is consummated, within eighteen months of such termination; or (ii) the termination of this Agreement by ValueVision pursuant to Section 7.1(e), if a proposal for an Alternative Transaction involving National Media shall have been made prior to the National Media Stockholders' Meeting. National Media's payment of a termination fee pursuant to this subsection shall be the sole and exclusive remedy of ValueVision against National Media and any of its Subsidiaries and their respective directors, officers, employees, agents, advisors or other representatives with respect to the occurrences giving rise to such payment; provided that this limitation shall not apply in the event of a willful breach of this Agreement by National Media. Notwithstanding the foregoing, if and to the extent that ValueVision has purchased shares of National Media Common Stock pursuant to the ValueVision Stock Option Agreement, the amount payable to ValueVision under this Section 7.3(c), together with (i) (x) the amount received by ValueVision pursuant to National Media's repurchase of Shares (as defined in the ValueVision Stock Option Agreement) pursuant to Section 7 of the ValueVision Stock Option Agreement, less (y) ValueVision' purchase price for such Shares, and (ii) (x) the net cash amounts received by ValueVision pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged) to any unaffiliated party, less (y) ValueVision' purchase price for such Shares, shall not exceed $7.5 million. (d) The expenses and fees, if applicable, payable pursuant to Section 7.3(b) or 7.3(c) shall be paid concurrently with the first to occur of the events described in Section 7.3(b)(i) or (ii) or 7.3(c)(i) or (ii). (e) As used in this Agreement, "Alternative Transaction" means either (i) a transaction pursuant to which any person (or group of persons) other than ValueVision or National Media or their respective affiliates (a "Third Party"), acquires more than 20% of the outstanding shares of ValueVision Common Stock or National Media Common Stock, as the case may be, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving ValueVision or National Media pursuant to which any Third Party acquires more than 20% of the outstanding shares of ValueVision Common Stock or National Media Common Stock, as the case may be, or the entity surviving such merger or business combination, (iii) any other transaction pursuant to which any Third Party acquires control of assets (including for this purpose the outstanding equity securities of Subsidiaries of ValueVision or National Media, and the entity surviving any merger or business combination including any of them) of ValueVision or National Media having a fair market value (as determined by the Board of Directors of ValueVision or National Media, as the case may be, in good faith) equal to more than 20% of the fair market value of all the assets of ValueVision or National Media, as the case may be, and their respective Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. Section 7.4. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Mergers by the stockholders of 54 62 ValueVision or National Media, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto; provided, however, that this Agreement may be amended in writing without obtaining the signatures of ValueVision, National Media or Parent solely for the purpose of adding Merger Sub 1 and Merger Sub 2 as parties to this Agreement. Section 7.5. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions of the other parties hereto contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE VIII. MISCELLANEOUS Section 8.1. Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for the agreements contained in Sections 1.6, 1.7, 1.8, 2.1, 2.2, 2.3, 2.4, 2.5, 5.10, 5.13, 5.14, 5.15, 5.18, 5.19, 5.22, 5.23, 5.24, 5.25 and 5.26 and this Article VIII, and the agreements of the Affiliates delivered pursuant to Section 5.11. The Confidentiality Agreement shall survive the execution and delivery of this Agreement. Section 8.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to ValueVision, to ValueVision International, Inc. 6740 Shady Oak Road Eden Prairie, Minnesota 55344-3433 Attention: General Counsel Telecopy: (612) 947-0141 55 63 with a copy to Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Attention: Michael W. Sturrock, Esq. Telecopy: (213) 891-8763 (b) if to National Media, to National Media Corporation Eleven Penn Center Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 Attention: General Counsel Telecopy: (215) 988-4900 with a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers LLP 1401 Walnut Street Philadelphia, Pennsylvania 19102-3163 Attention: Stephen T. Burdumy, Esq. Telecopy (215) 568-6603 Section 8.3. Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "the date of this Agreement", "the date hereof," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to January 5, 1998. Section 8.4. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 8.5. Entire Agreement; No Third Party Beneficiaries. This Agreement and all documents and instruments referred to herein (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) except as provided in Section 5.15, are not intended to confer upon any person (including, without limitation, the individuals identified in Section 5.19) other than the parties hereto any rights or remedies hereunder; provided that the Confidentiality Agreement shall remain in full force and effect until the Effective Time. Each 56 64 party hereto agrees that, except for the representations and warranties contained in this Agreement, neither ValueVision nor National Media makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, notwithstanding the delivery or disclosure to the other or the other's representatives of any documentation or other information with respect to any one or more of the foregoing. Section 8.6. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to any applicable conflicts of law. Section 8.7. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 8.8 References to "Stockholders". All references to "stockholder" or "stockholders" in this Agreement shall be deemed to refer to "shareholder" or "shareholders," respectively, with respect to ValueVision. [Signature Page to Follow] 57 65 IN WITNESS WHEREOF, ValueVision, National Media and Parent have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. VALUEVISION INTERNATIONAL, INC. /s/ Robert L. Johander --------------------------------- By: Robert L. Johander Its: Chairman and Chief Executive Officer NATIONAL MEDIA CORPORATION /s/ Robert N. Verratti --------------------------------- By: Robert N. Verratti Its: President and Chief Executive Officer V-L HOLDINGS CORP. /s/ Robert L. Johander --------------------------------- By: Robert L. Johander Its: Chief Executive Officer S-1 EX-10.2 3 EX-10.2 1 EXHIBIT 10.2 STOCK OPTION AGREEMENT (VALUEVISION) STOCK OPTION AGREEMENT, dated as of January 5, 1998 (the "Agreement"), between VALUEVISION INTERNATIONAL, INC., a Minnesota corporation (the "Grantee"), and NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Grantor"). WHEREAS, the Grantee, V-L HOLDINGS CORP., a newly-formed Delaware corporation ("Parent"), and the Grantor are entering into an Agreement and Plan of Reorganization and Merger, dated as of the date hereof (the "Merger Agreement"), which provides, among other things, for the merger (the "National Media Merger") of a wholly-owned subsidiary of Parent with and into the Grantor and the merger (the "ValueVision Merger") of another wholly-owned subsidiary of Parent with and into the Grantee, such that the Grantor and the Grantee will become wholly-owned subsidiaries of Parent and the stockholders of the Grantor and the Grantee will become stockholders of Parent (the National Media Merger and the ValueVision Merger collectively, the "Mergers"); WHEREAS, pursuant to a Stock Option Agreement dated as of the date hereof between the Grantee and the Grantor, the Grantee has granted the Grantor an option to acquire shares of common stock of the Grantee on terms that are substantially similar to the terms of this Agreement (the "National Media Option"); WHEREAS, as a condition and inducement to their willingness to enter into the Merger Agreement and the National Media Option, the Grantee and Parent have requested that the Grantor grant to the Grantee an option to purchase 5,075,979 shares of Common Stock, par value $0.01 per share, of the Grantor (the "Common Stock"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce the Grantee to enter into the Merger Agreement and grant the National Media Option, the Grantor is willing to grant the Grantee the requested option. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Option; Exercise; Adjustments; Payment of Spread. (a) Contemporaneously herewith the Grantee, Parent and the Grantor are entering into the Merger Agreement. Subject to the other terms and conditions set forth herein, the Grantor hereby grants to the Grantee an irrevocable option (the "Option") to purchase up to 5,075,979 (as adjusted as provided herein) shares of Common Stock (together with the associated purchase rights issued with respect thereto pursuant to the Rights Agreement dated as of January 3, 1994 between the Grantor and Mellon Securities Trust Company (the "Grantor Rights Plan")) (the "Shares") at a per share cash purchase price equal to the lower of (i) $3.4375 per Share or (ii) the average closing sales price of the Common Stock on the New York Stock Exchange ("NYSE") Composite Tape for the five consecutive trading days beginning on and 2 including the day that the Mergers are publicly announced (as adjusted as provided herein) (such lower price being the "Purchase Price"). The Option may be exercised by the Grantee, in whole or in part, at any time, or from time to time, following the occurrence of one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 10 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, reclassification, recapitalization, merger or other change in the corporate or capital structure of the Grantor (including the occurrence of a Distribution Date under the Grantor Rights Plan), the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore the Grantee to its rights hereunder, including its right to purchase Shares representing 19.9% of the capital stock of the Grantor entitled to vote generally for the election of the directors of the Grantor which is issued and outstanding immediately prior to the exercise of the Option at an aggregate purchase price equal to the Purchase Price multiplied by 5,075,979. In the event that any additional shares of Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the preceding sentence), the number of Shares subject to this Option shall be increased by 19.9% of the number of the additional shares of Common Stock so issued (and such additional Shares shall have a purchase price per share equal to the Purchase Price). (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing sales price of the shares of Common Stock on the NYSE Composite Tape on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing sales prices (or the average of the closing bid and asked prices if closing sales prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such 2 3 property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant to this Section 1(c) and the payment of such cash to the Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be terminated with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. Conditions to Delivery of Shares. The Grantor's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated and all other consents, approvals, orders, notifications or authorizations, the failure of which to obtain or make would have the effect of making the issuance of the Shares illegal (collectively, the "Regulatory Approvals") shall have been obtained or made; and (c) (i) a proposal for an Alternative Transaction involving the Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the time of the making of such proposal: (A) the requisite vote of the stockholders of the Grantor in favor of adoption and approval of the Merger Agreement shall not have been obtained at the National Media Stockholders' Meeting (as defined in Section 3.16 of the Merger Agreement) or any adjournment or postponement thereof; (B) the Board of Directors of the Grantor shall have withdrawn or modified its recommendation of the Merger Agreement or the National Media Merger or failed to confirm its recommendation of the Merger Agreement or the National Media Merger to the stockholders of the Grantor within ten business days after a written request by the Grantee to do so; (C) the Board of Directors of the Grantor shall have recommended to the stockholders of the Grantor an Alternative Transaction; (D) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by the Grantee or an affiliate of the Grantee) and the Board of Directors of the Grantor shall have recommended that the stockholders of the Grantor tender their shares in such tender or exchange offer; or (E) for any reason the Grantor shall have failed to call and hold the National Media Stockholders' Meeting by the Outside Date (as defined in Section 7.1(b) of the Merger Agreement); provided, however, that the Option may not be exercised if the Grantee is in material breach of any of its material representations, warranties, covenants or agreements contained in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall have been terminated by the Grantee pursuant to Section 7.1(g) of the Merger Agreement. 3 4 3. The Closing. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 11:00 A.M., Eastern Standard Time, at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, NY 10022-4802, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. Representations And Warranties of the Grantor. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act and other than any filings required under the blue sky laws of any states or by the NYSE, the execution and delivery of this Agreement by the Grantor and the issuance of Shares upon exercise of the Option do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; (e) no "fair price", 4 5 "moratorium", "control share acquisition" or other form of antitakeover statute or regulation (including, without limitation, the restrictions on "business combinations" set forth in Section 203 of the Delaware General Corporation Law) is or shall be applicable to the acquisition of Shares pursuant to this Agreement (and the Board of Directors of Grantor has taken all action to approve the acquisition of the Shares to the extent necessary to avoid such application) and (f) the Grantor has taken all corporate action necessary so that the grant and any subsequent exercise of the Option by the Grantee will not result in the separation or exercisability of rights under the Grantor Rights Plan. 5. Representations and Warranties of the Grantee. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option after the Grantee has been afforded the opportunity to obtain, and has obtained, sufficient information regarding the Grantor to make an informed investment decision with respect to the Grantee's purchase of the Shares issuable upon the exercise thereof, and, if and when the Grantee exercises the Option, it will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. Listing of Shares; HSR Act Filings; Regulatory Approvals. Subject to applicable law and the rules and regulations of the NYSE, the Grantor will promptly file an application to have the Shares listed on the NYSE and will use its best efforts to obtain approval of such quotation and to file all necessary filings by the Grantor under the HSR Act, provided, however, that if the Grantor is unable to effect such listing on the NYSE by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and all Regulatory Approvals, if any, necessary to the consummation of the transactions contemplated. 7. Repurchase of Shares; Sale of Shares. At any time following the Grantor's receipt of a Stock Exercise Notice, the Grantor shall have, on or after the closing date of the purchase under the Stock Exercise Notice, the right to purchase (the "Repurchase Right") all, but not less than all, of the Shares then beneficially owned by the Grantee or any of its affiliates at a price per share equal to the greater of (i) the Purchase Price, or (ii) the average of the closing sales prices for shares of Common Stock on the twenty trading days ending five days prior to the date the Grantor gives written notice of its intention to exercise the Repurchase Right. If the Grantor does not exercise the Repurchase Right within thirty days following the Grantor's receipt of a Stock Exercise Notice, the Repurchase Right terminates. In the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a written notice to the Grantee specifying a date (not later than 10 business days and not earlier than the next business day following the date such notice is given) for the closing of such purchase. 5 6 8. Registration Rights. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement which complies with the requirements of applicable federal and state securities laws and entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 120 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 8, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary to keep effective for at least 180 days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers, directors and controlling persons from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by 6 7 reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 9. Profit Limitation. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $7.5 million and, if it does exceed such amount, the Grantee, at its sole election, shall, within five business days, either (a) deliver to the Grantor for cancellation Shares (valued, for the purposes of this Section 9(a), at the average closing sales price of the Common Stock on the NYSE Composite Tape for the twenty consecutive trading days preceding the day on which the Grantee's Total Profit exceeds $7.5 million) previously purchased by the Grantee, (b) pay cash or other consideration to the Grantor or (c) undertake any combination thereof, so that the Grantee's Total Profit shall not exceed $7.5 million after taking into account the foregoing actions. (b) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by the Grantee pursuant to Section 7.3(c) of the Merger Agreement and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount received by the Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) the Grantee's purchase price for such Shares. 10. Expenses. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 11. Specific Performance. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 12. Notice. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended or delivered by registered or certified 7 8 mail, return receipt requested, or if sent by facsimile transmission, upon receipt of oral confirmation that such transmission has been received, to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person: If to the Grantee: ValueVision International, Inc. 6740 Shady Oak Road Eden Prairie, Minnesota 55344-3433 Attention: General Counsel Telecopy: (612) 947-0141 With a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attention: Michael W. Sturrock, Esq. Telecopy: (213) 891-8763 If to the Grantor: National Media Corporation Eleven Penn Center Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 Attention: General Counsel Telecopy: (215) 988-4871 8 9 With a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers LLP 1401 Walnut Street Philadelphia, Pennsylvania 19102-3163 Attention: Stephen T. Burdumy, Esq. Telecopy: (215) 568-6603 13. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective permitted successors and assigns; provided, however, that such successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Except as set forth in Section 8, nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. Entire Agreement; Amendments. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 15. Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. Any assignment made in violation of this Section 15 shall be void. 16. Headings. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law). 19. Termination. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement), (ii) the date on which the Grantee realizes a Total Profit of $7.5 million, (iii) the 9 10 date on which the Merger Agreement is terminated; provided that the Option is not exercisable at such time and does not become exercisable simultaneous with such termination and (iv) 90 days after the date the Option becomes exercisable (the date referred to in clause (iv) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to the Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 21. Public Announcement. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law. [Signature Page to Follow] 10 11 Signature Page for Stock Option Agreement (ValueVision) IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. NATIONAL MEDIA CORPORATION /s/ Robert N. Verratti --------------------------------------- By: Robert N. Verratti Its: President and Chief Executive Officer VALUEVISION INTERNATIONAL, INC. /s/ Robert L. Johander --------------------------------------- By: Robert L. Johander Its: Chairman and Chief Executive Officer S-1 EX-10.3 4 EX-10.3 1 EXHIBIT 10.3 STOCK OPTION AGREEMENT (NATIONAL MEDIA) STOCK OPTION AGREEMENT, dated as of January 5, 1998 (the "Agreement"), between NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Grantee"), and VALUEVISION INTERNATIONAL, INC., a Minnesota corporation (the "Grantor"). WHEREAS, the Grantee, V-L HOLDINGS CORP., a newly-formed Delaware corporation ("Parent"), and the Grantor are entering into an Agreement and Plan of Reorganization and Merger, dated as of the date hereof (the "Merger Agreement"), which provides, among other things, for the merger (the "National Media Merger") of a wholly-owned subsidiary of Parent with and into the Grantee and the merger (the "ValueVision Merger") of another wholly-owned subsidiary of Parent with and into the Grantor, such that the Grantee and the Grantor will become wholly-owned subsidiaries of Parent and the stockholders of the Grantee and the Grantor will become stockholders of Parent (the National Media Merger and the ValueVision Merger collectively, the "Mergers"); WHEREAS, pursuant to a Stock Option Agreement dated as of the date hereof between the Grantee and the Grantor, the Grantee has granted the Grantor an option to acquire shares of common stock of the Grantee on terms that are substantially similar to the terms of this Agreement (the "ValueVision Option"); WHEREAS, as a condition and inducement to their willingness to enter into the Merger Agreement and the ValueVision Option, the Grantee and Parent have requested that the Grantor grant to the Grantee an option to purchase 5,579,119 shares of Common Stock, par value $0.01 per share, of the Grantor (the "Common Stock"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce the Grantee to enter into the Merger Agreement and grant the ValueVision Option, the Grantor is willing to grant the Grantee the requested option. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. The Option; Exercise; Adjustments; Payment of Spread. (a) Contemporaneously herewith the Grantee, Parent and the Grantor are entering into the Merger Agreement. Subject to the other terms and conditions set forth herein, the Grantor hereby grants to the Grantee an irrevocable option (the "Option") to purchase up to 5,579,119 as adjusted as provided herein) shares of Common Stock (the "Shares") at a per share cash purchase price equal to the lower of (i) $3.875 per Share or (ii) the average closing sales price of the Common Stock on the Nasdaq National Market ("Nasdaq") for the five consecutive trading days beginning on and including the day that the Mergers are publicly announced (as adjusted as provided herein) (such lower price being the "Purchase Price"). The Option may be exercised by the Grantee, in whole or in part, at any time, or from time to time, 2 following the occurrence of one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 10 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, reclassification, recapitalization, merger or other change in the corporate or capital structure of the Grantor, the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore the Grantee to its rights hereunder, including its right to purchase Shares representing 19.9% of the capital stock of the Grantor entitled to vote generally for the election of the directors of the Grantor which is issued and outstanding immediately prior to the exercise of the Option at an aggregate purchase price equal to the Purchase Price multiplied by 5,579,119. In the event that any additional shares of Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the preceding sentence), the number of Shares subject to this Option shall be increased by 19.9% of the number of the additional shares of Common Stock so issued (and such additional Shares shall have a purchase price per share equal to the Purchase Price). (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in clause (i), (ii) or (iii) of Section 7.3(e) of the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing sales price of the shares of Common Stock on the Nasdaq on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing sales prices (or the average of the closing bid and asked prices if closing sales prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of the Grantee's right to receive cash pursuant to this Section 1(c) and the payment of such cash to the Grantee, the obligations of the Grantor to deliver Shares pursuant to 2 3 Section 3 shall be terminated with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. Conditions to Delivery of Shares. The Grantor's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated, applicable approvals of the Federal Communications Commission ("FCC") pursuant to the Communications Act of 1934, as amended (the "Communications Act") shall have been obtained, and all other consents, approvals, orders, notifications or authorizations, the failure of which to obtain or make would have the effect of making the issuance of the Shares illegal (collectively, the "Regulatory Approvals") shall have been obtained or made; and (c) (i) a proposal for an Alternative Transaction involving the Grantor shall have been publicly announced prior to the time the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the time of the making of such proposal: (A) the requisite vote of the stockholders of the Grantor in favor of adoption and approval of the Merger Agreement shall not have been obtained at the ValueVision Stockholders' Meeting (as defined in Section 3.16 of the Merger Agreement) or any adjournment or postponement thereof; (B) the Board of Directors of the Grantor shall have withdrawn or modified its recommendation of the Merger Agreement or the ValueVision Merger or failed to confirm its recommendation of the Merger Agreement or the ValueVision Merger to the stockholders of the Grantor within ten business days after a written request by the Grantee to do so; (C) the Board of Directors of the Grantor shall have recommended to the stockholders of the Grantor an Alternative Transaction; (D) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by the Grantee or an affiliate of the Grantee) and the Board of Directors of the Grantor shall have recommended that the stockholders of the Grantor tender their shares in such tender or exchange offer; or (E) for any reason Grantor shall have failed to call and hold the ValueVision Stockholders' Meeting by the Outside Date (as defined in Section 7.1(b) of the Merger Agreement; provided, however, that the Option may not be exercised if the Grantee is in material breach of any of its material representations, warranties, covenants or agreements contained in this Agreement or in the Merger Agreement; or (ii) the Merger Agreement shall have been terminated by the Grantee pursuant to Section 7.1(g) of the Merger Agreement. 3. The Closing. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 11:00 A.M., Eastern Standard Time, at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New 3 4 York, NY 10022-4802, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. Representations And Warranties of the Grantor. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act and other than any filings required under the blue sky laws of any states or by the Communications Act and Nasdaq, the execution and delivery of this Agreement by the Grantor and the issuance of Shares upon exercise of the Option do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; and (e) no "fair price", "moratorium" or other form of antitakeover statute or regulation (including, without limitation, the restrictions on "business combinations" and "control share acquisitions" set forth in Section 302A.673 and 302A.671, respectively, of the Minnesota Business Corporation Act) is or shall be applicable to the acquisition of Shares pursuant to this Agreement (and the Board of Directors of Grantor has taken all action to approve the acquisition of the Shares to the extent necessary to avoid such application). 4 5 5. Representations and Warranties of the Grantee. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option after the Grantee has been afforded the opportunity to obtain, and has obtained, sufficient information regarding the Grantor to make an informed investment decision with respect to the Grantee's purchase of the Shares issuable upon the exercise thereof, and, if and when the Grantee exercises the Option, it will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. Quotation of Shares; HSR Act Filings; Regulatory Approvals. Subject to applicable law and the rules and regulations of the Nasdaq, the Grantor will promptly file an application to have the Shares quoted on the Nasdaq and will use its best efforts to obtain approval of such quotation and to file all necessary filings by the Grantor under the HSR Act and the Communications Act; provided, however, that if the Grantor is unable to effect such quotation on the Nasdaq by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and all Regulatory Approvals, if any, necessary to the consummation of the transactions contemplated. 7. Repurchase of Shares; Sale of Shares. At any time following the Grantor's receipt of a Stock Exercise Notice, the Grantor shall have, on or after the closing date of the purchase under the Stock Exercise Notice, the right to purchase (the "Repurchase Right") all, but not less than all, of the Shares then beneficially owned by the Grantee or any of its affiliates at a price per share equal to the greater of (i) the Purchase Price, or (ii) the average of the closing sales prices for shares of Common Stock on the twenty trading days ending five days prior to the date the Grantor gives written notice of its intention to exercise the Repurchase Right. If the Grantor does not exercise the Repurchase Right within thirty days following the Grantor's receipt of a Stock Exercise Notice, the Repurchase Right terminates. In the event the Grantor wishes to exercise the Repurchase Right, the Grantor shall send a written notice to the Grantee specifying a date (not later than 10 business days and not earlier than the next business day following the date such notice is given) for the closing of such purchase. 8. Registration Rights. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement which complies with the requirements of applicable federal and state securities laws, entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting 5 6 agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 120 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 8, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary to keep effective for at least 180 days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers, directors and controlling persons from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained or incorporated by reference in, and omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 9. Profit Limitation. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $7.5 million and, if it does 6 7 exceed such amount, the Grantee, at its sole election, shall, within five business days, either (a) deliver to the Grantor for cancellation Shares (valued, for the purposes of this Section 9(a), at the average closing sales price of the Common Stock on the Nasdaq for the twenty consecutive trading days preceding the day on which the Grantee's Total Profit exceeds $7.5 million) previously purchased by the Grantee, (b) pay cash or other consideration to the Grantor or (c) undertake any combination thereof, so that the Grantee's Total Profit shall not exceed $7.5 million after taking into account the foregoing actions. (b) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by the Grantee pursuant to Section 7.3(c) of the Merger Agreement and Section 1(c) hereof, (ii)(x) the net cash amount received by the Grantee pursuant to the Grantor's repurchase of Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase price for such Shares, and (iii)(x) the amount received by the Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged), less (y) the Grantee's purchase price for such Shares. 10. Expenses. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 11. Specific Performance. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 12. Notice. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended or delivered by registered or certified mail, return receipt requested, or if sent by facsimile transmission, upon receipt of oral confirmation that such transmission has been received, to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person: 7 8 If to the Grantee: National Media Corporation Eleven Penn Center Suite 1100 1835 Market Street Philadelphia, Pennsylvania 19103 Attention: General Counsel Telecopy: (215) 988-4871 With a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers LLP 1401 Walnut Street Philadelphia, Pennsylvania 19102-3163 Attention: Stephen T. Burdumy, Esq. Telecopy: (215) 568-6603 If to the Grantor: ValueVision International, Inc. 6740 Shady Oak Road Eden Prairie, Minnesota 55344-3433 Attention: General Counsel Telecopy: (612) 947-0141 With a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Attention: Michael W. Sturrock, Esq. Telecopy: (213) 891-8763 13. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective permitted successors and assigns; provided, however, that such successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Except as set forth in Section 8, nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. Entire Agreement; Amendments. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such 8 9 transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 15. Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. Any assignment made in violation of this Section 15 shall be void. 16. Headings. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law). 19. Termination. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement), (ii) the date on which the Grantee realizes a Total Profit of $7.5 million, (iii) the date on which the Merger Agreement is terminated; provided that the Option is not exercisable at such time and does not become exercisable simultaneous with such termination and (iv) 90 days after the date the Option becomes exercisable (the date referred to in clause (iv) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to the Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 21. Public Announcement. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law. 9 10 [SIGNATURE PAGE TO FOLLOW] 10 11 Signature page for Stock Option Agreement (National Media) IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement to be signed by their respective duly authorized officers as of the date first written above. NATIONAL MEDIA CORPORATION /s/ Robert N. Verratti --------------------------------------- By: Robert N. Verratti Its: President and Chief Executive Officer VALUEVISION INTERNATIONAL, INC. /s/ Robert L. Johander --------------------------------------- By: Robert L. Johander Its: Chairman and Chief Executive Officer S-1 EX-10.4 5 EX-10.4 1 EXHIBIT 10.4 REDEMPTION AND CONSENT AGREEMENT THIS REDEMPTION AND CONSENT AGREEMENT (this "Agreement") is entered into as of this 5th day of January, 1998, by and between National Media Corporation, a Delaware corporation ("NMC"), Value Vision International, Inc., a Minnesota corporation ("VVI") (for the limited purposes set forth herein), and Capital Ventures International and RGC International Investors, LDC (collectively, the "Class C Holders"). RECITALS WHEREAS, NMC and the Class C Holders entered into that certain Securities Purchase Agreement dated as of September 4, 1997 (the "Purchase Agreement") with respect to, among other things, the purchase of NMC's Series C Convertible Preferred Stock, $.01 par value per share (collectively, with the securities for which such shares of preferred stock may be exchanged as contemplated by Section 5.2(d) below, the "Class C Stock"). All capitalized terms not defined in this Agreement shall have the meaning set forth in the Purchase Agreement; WHEREAS, NMC has been engaged in discussions with VVI, and NMC has indicated to the Class C Holders that VVI has expressed an interest in proceeding with a business combination with NMC pursuant to the Agreement and Plan of Reorganization and Merger attached hereto as Exhibit A (collectively, with the Exhibits and Schedules thereto, the "Merger Agreement"). All references to the Merger Agreement in this Agreement shall include any amendments thereto which have been adopted in compliance with Section 1.3(b) of this Agreement; WHEREAS, pursuant to the Merger Agreement, NMC and VVI would each merge with subsidiaries of V-L Holdings Corp., newly-formed Delaware corporation, one-half of the issued and outstanding capital stock of which will initially be owned by each of NMC and VVI ("V-L"), and the common shareholders of each NMC and VVI would receive shares of V-L common stock in exchange for the shares they currently hold in NMC and VVI; and WHEREAS, NMC has advised the Class C Holders that VVI requires as a condition precedent to the consummation of the transactions contemplated by the Merger Agreement, the Class C Holders agree to the matters set forth below. NOW THERFORE, in consideration of the premises and intending to be legally bound, the parties hereby agree as follows: 2 ARTICLE I. THE REDEMPTION AND CONSENT SECTION 1.1. SALE AND PURCHASE OF CLASS C STOCK Upon the terms and subject to the conditions contained herein, the Class C Holders will sell, convey, transfer, assign and deliver to NMC, and NMC will acquire (the "Purchase") on the Closing Date (as defined in Section 1.5 below), all of the outstanding shares of the Class C Stock other than those which may have been converted prior to the Closing Date not in violation of this Agreement. Neither NMC nor the Class C Holders shall have an obligation to effect the Purchase from and after the Merger Termination Date (as defined in Section 1.2(b) below). SECTION 1.2. PURCHASE PRICE FOR THE CLASS C STOCK (a) As consideration for the Purchase, NMC shall pay a per share purchase price equal to the sum of (i) $1,000, plus (ii) the accrued Premium (as defined in the Certificate of Designation) thereon from (but excluding) September 18, 1997 through (but excluding) the Closing Date, plus (iii) an amount equal to 18% per annum on the sum of (i) and (ii) calculated from (but excluding) September 18, 1997 through (but excluding) the Closing Date, plus (iv) any other amounts which may become payable to the Class C Holders pursuant to Paragraph A of Article VI of the Certificate of Designation after the date hereof and prior to the Closing Date (the "Purchase Price"). (b) Provided that the Merger Agreement has not been terminated in accordance with the provisions thereunder (such termination date, the "Merger Termination Date") and subject to the terms and conditions set forth in Section 5.27 of the Merger Agreement, in the event NMC does not have adequate funds to pay the Purchase Price when due, VVI agrees that it shall advance to NMC the full amount of the Purchase Price on or before the Closing Date, or otherwise take reasonable steps to assure payment of the Purchase Price. SECTION 1.3. CONSIDERATION FOR EXECUTING THIS AGREEMENT (a) Upon the terms and subject to the conditions contained herein, as consideration for the execution of this Agreement by the Class C Holders, NMC hereby issues to the Class C Holders stock purchase warrants (the "New Warrants") evidencing the right to purchase an aggregate of 500,000 shares of common stock, $.01 par value per share, of NMC (the "Common Stock"). The New Warrants will be substantially identical to the Warrants and will be exercisable for five years from the date hereof, will have a per share exercise price of $6.82, subject to certain adjustments as provided therein, and will be delivered to the Class C Holders within five business days of the date of this Agreement. (b) As further consideration for the execution of this Agreement by the Class C Holders, NMC and VVI each agree with each of the Class C Holders that they will 2 3 not, without the prior written consent of each of the Class C Holders, which consent will not be unreasonably withheld, agree to (i) an amendment to Section 7.1 of the Merger Agreement, (ii) an amendment to Section 5.27 of the Merger Agreement, (iii) an amendment to Sections 1,2,3 and 6 of the Demand Note (as defined in the Merger Agreement), (iv) the addition of any material conditions to those set forth in Article VI of the Merger Agreement or, (v) a waiver of the condition set forth in Section 6.2 (e) of the Merger Agreement. SECTION 1.4. CONSENT TO THE MERGER Each of the Class C Holders hereby consents to the execution and delivery of the Merger Agreement by NMC and VVI, and to the consummation of the transactions contemplated thereby, subject to their right to consent to certain amendments and changes as set forth in Section 1.3 (b) above. Each of the Class C Holders hereby acknowledges that all notices required to be given to it pursuant to the Purchase Agreement, the Registration Rights Agreement, the Certificate of Designation, the Warrants or otherwise as a result of the execution and delivery of the Merger Agreement (and, pursuant to the Purchase Agreement and the Certificate of Designation, to the consummation of the transactions contemplated thereby) by NMC and VVI have been duly given. SECTION 1.5. THE CLOSING The closing of the Purchase (the "Closing") will take place on the same date that the closing of the transactions contemplated by the Merger Agreement take place (the "Closing Date"), at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022-4802, unless another date, place or time is agreed to in writing by NMC and VVI. NMC shall give the Class C Holders at least three (3) business days prior written notice of the Closing Date and time and place of Closing. The Purchase Price shall be paid to the Class C holders at Closing (as defined below) by wire transfer of immediately available funds, against delivery to NMC of duly endorsed certificates evidencing the Class C Stock subject to the Purchase. Any transfer or similar taxes due upon completion of the Purchase but not income or similar taxes) shall be paid by NMC. At the Closing, each of the Class C Holders shall deliver to NMC and VVI, and each of NMC and VVI shall deliver to each of the Class C Holders, a release in the form attached hereto as Exhibit B. ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 2.1 REPRESENTATIONS BY NMC VVI AND CLASS C HOLDERS Each of NMC and VVI hereby represents and warrants to each of the Class C Holders, and each of the Class C Holders hereby represents and warrants to each of NMC and VVI, that the following statements with respect to itself are true and correct as of the date hereof: (a) such party has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereunder, (b) the execution and delivery of this 3 4 Agreement and the consummation of the transactions hereunder have been duly authorized by all necessary action by such party, (c) this Agreement has been duly executed and delivered by such party, and constitutes the valid and binding obligations of such party, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equitable principles, and (d) the execution and delivery of this Agreement by such party and the announcement of the transactions contemplated thereby does not, and the consummation of the transactions contemplated by this Agreement will not (1) conflict with, or result in any violation or breach of, any provisions of the charter, bylaws or other governing documents of such party or any of its subsidiaries (or controlled affiliates), (2) assuming the execution and delivery of this Agreement by the parties hereto, result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any contract, agreement, instrument or obligation to which such party or any of its subsidiaries (or controlled affiliates) is a party or by which any of them or any of their properties or assets may be bound, or (3) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such party or any of its subsidiaries (or controlled affiliates) and of its or their properties or assets, except in the case of (2) and (3), such conflicts, violations, defaults, terminations, cancellations or accelerations which would not, individually or in the aggregate, prevent or delay such party's ability to timely consummate the transactions herein contemplated. SECTION 2.2 TITLE Each of the Class C Holders represents and warrants to NMC that the following statements with respect to itself are true and correct as of the date hereof: (a) such Class C Holder is the beneficial and record owner of the number of the shares of the Class C Stock set forth next to such Class C Holder's name on the signature pages hereto free and clear of any liens, charges, encumbrances, security interests and rights of others except as set forth on Schedule 2.2 hereto, and that, upon consummation of the Purchase at Closing, NMC will acquire good and marketable title to all of the shares of Class C Stock then owned by such Class C Holder free and clear of any liens, charges, encumbrances, security interests and rights of others whatsoever, and (b) except for this Agreement and the Merger Agreement, there are no outstanding agreements, options, warrants or rights to purchase or acquire or agreements (whether voting or otherwise) relating to any of the shares of Class C Stock owned by such Class C Holder. 4 5 SECTION 2.3 REPRESENTATIONS AND COVENANTS OF NMC NMC hereby represents, warrants, covenants and agrees to and with each of the Class C Holders that: (a) no document, agreement, statement or certificate made or delivered to the Class C Holders in connection with the transactions contemplated by the Merger Agreement or the negotiation and preparation of this Agreement contains any untrue statement of a material fact, taking into account the circumstances under which such statements were made or delivered, or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made when considered in the aggregate, not misleading, (b) except as set forth on Schedule 2.3 attached hereto, no employee, officer or director of or consultant to NMC, or any affiliate of such person, shall receive compensation of any type in connection with or as a result of the transactions contemplated by the Merger Agreement, (c) NMC shall use its commercially reasonable best efforts to fulfill all of its obligations under the Merger Agreement such that the transactions contemplated by the Merger Agreement are consummated in accordance with the terms thereof,(d) NMC shall request one or more advances under and subject to the Demand Note promptly at such time(s) as it determines a need for the funds available to it under such Note, and shall otherwise diligently prosecute all its rights under the Merger Agreement and the Demand Note, (e) NMC hereby agrees to indemnify and hold harmless each Class C Holder, its partners, shareholders, members, officers, directors, employees, agents and affiliates from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under state or federal securities laws or state corporation laws, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on this Agreement, the Merger Agreement or the transactions contemplated hereby or thereby other than those losses, claims, liabilities, expenses or damages that arise out of or are based on any Class C Holder's fraud, or wilfull or reckless misconduct, and (f) no less than $7,000,000 has been advanced to NMC by VVI pursuant to the terms of the Demand Note prior to or simultaneous with the execution of this Agreement. SECTION 2.4 REPRESENTATIONS AND COVENANTS OF THE CLASS C HOLDERS Each of the Class C Holders hereby represents, warrants and covenants to and with NMC that such Class C Holder: (i) is an "Accredited Investor" as that term is defined in Rule 501 of Regulation D, (ii) and its counsel, if any, have been furnished all materials relating to the business, finances and operations of NMC and materials relating to the Purchase which have been specifically requested by such Class C Holder or its counsel, (iii) and its counsel have been afforded the opportunity to ask questions of NMC and have received what each of the Class C Holders believes to be satisfactory answers to any such inquiries, and (iv) prior to the Adjustment Date (as defined in Section 3.1 below) will not assert or threaten to assert a claim against NMC for a breach of NMC's representation set forth in Section 2.3 (a) above. 5 6 SECTION 2.5 REPRESENTATIONS AND COVENANTS OF VVI VVI hereby represents, warrants, covenants and agrees to and with each of the Class C Holders that: (i) no less than $7,000,000 has been advanced to NMC by VVI pursuant to the terms of the Demand Note prior to or simultaneous with the execution of this Agreement, and (ii) VVI will not exercise any "piggyback" or similar right it may otherwise have to include any securities owned by or issuable to VVI in any registration statement filed by NMC at the demand or request of the Class C Holders. VVI is entitled to exercise "demand" or similar rights it may have to request a registration statement to be filed by NMC for VVI's benefit. ARTICLE III COVENANTS SECTION 3.1 EXERCISE OF RIGHTS UNDER CLASS C STOCK During the period beginning of the date hereof and continuing until the "Adjustment Date," which shall be the earliest to occur of (w) June 1, 1998, (x) the date it is publicly announced that VVI is unwilling to proceed with the transactions contemplated by the Merger Agreement on the terms then set forth therein, (y) the Merger Termination Date, or (z) the date on which demand is made upon NMC for payment of principal pursuant to the Demand Note, each of the Class C Holders hereby: (A) agrees not to exercise the conversion privileges of the Class C Stock at a conversion price below $6.06 per share of Common Stock, and (B) waives its rights, benefits and claims under the Purchase Agreement, the Registration Rights Agreement, and the Certificate of Designation to the extent set forth on Schedule 3.1 hereto; provided, however, that all waivers set forth on Schedule 3.1 shall be null and void ab initio on the Adjustment Date. In addition, all waivers set forth on Schedule 3.1 shall be of no further force and effect following the Closing Date. Notwithstanding the foregoing, the date set forth in (w) above shall be extended to no later than August 31, 1998 if, on June 1, 1998, NMC and VVI shall deliver to each of the Class C Holders a certification executed by the chief executive officer of each of NMC and VVI to the effect that all conditions precedent to completion of the transactions contemplated by the Merger Agreement have been satisfied or waived, excepting only the consent required pursuant to Section 6.1 (c) of the Merger Agreement. Such certification shall not preclude a termination of the Merger Agreement in accordance with its terms subsequent to June 1, 1998 on the basis of events which occur or first become known after June 1, 1998 which, had they occurred or been known on June 1, 1998 would have precluded delivery of the certificate. SECTION 3.2 CONVERSION PRICE ADJUSTMENTS On the Adjustment Date, Section III.D. of the certificate of designation defining the shares then held by the Class C Holders in exchange for the Class C Stock as contemplated by Section 5.2 (d) below shall provide that, effective upon the Adjustment Date, the Fixed Conversion Price shall mean the lower of (x) 101% of the closing bid price of the Common Stock on June 1, 1998, (y) 101% of the closing bid price of the Common Stock on the first 6 7 trading day after the Merger Termination Date, or (z) the Fixed Conversion Price at the close of business on the trading day immediately prior to the Adjustment Date. SECTION 3.3 EXERCISE PRICE ADJUSTMENT On the Adjustment Date, each of the Warrants and the New Warrants shall be amended to provide that, effective upon the Adjustment Date, the exercise prices therein shall be the lowest of (x) 101% of the closing bid price of the Common Stock on June 1, 1998, (y) 101% of the closing bid price of the Common Stock on the first trading day after the Merger Termination Date, or (z) the Exercise Price (as defined in the Warrants) at the close of business on the trading day immediately prior to the Adjustment Date; provided, however, that upon consummation of the transactions contemplated by the Merger Agreement, the adjustments to the exercise prices provided for in the foregoing clause shall be nullified and voided, and such exercise prices shall be readjusted to $6.82 per share (or to such other price as would have been in effect had the aforesaid adjustment not taken place so long as such other price was not adjusted as a result of the execution and delivery of the Merger Agreement and the other Transaction Documents (as defined in the Merger Agreement) and the consummation of the transactions contemplated thereby or the public announcement of any of the foregoing). Except as set forth herein and notwithstanding anything to the contrary in the Warrants, if the Closing occurs no other adjustments to the exercise price of the Warrants or the New Warrants will be made (or required to be made), before or after the Closing, as a result of the execution and delivery of the Merger Agreement and the Transaction Documents by NMC and VVI, the announcement of the transactions contemplated thereby and the consummation by NMC and VVI of the transactions contemplated thereby. SECTION 3.4 CERTAIN ACTIONS BY CLASS C HOLDERS During the period beginning on the date hereof and continuing until the Merger Termination Date, each Class C Holder, jointly and severally, covenants and agrees with NMC as follows: (a) Except as provided for in Section 3.1 (A) and Section 5.2 (d), such Class C Holder shall not sell, assign, transfer, encumber (except as set forth on Schedule 2.2) or otherwise disposed of any shares of Class C Stock or enter into any contract, agreement or understanding with respect to the direct or indirect acquisition or sale, assignment, transfer, encumbrance or other disposition of any shares of Class C Stock, or grant proxies or enter into any voting trust or any other agreement or arrangement with respect to any shares of Class C Stock, except pursuant to the terms hereof; (b) Such Class C Holder shall not take or cause to be taken any of the following actions, the result of any of which could be reasonably expected to prevent or delay the transactions contemplated hereunder or under the Merger Agreement: (i) make or in any way participate in, any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) to vote or seek to advise or influence in any manner whatsoever any person or entity with respect to the voting of any securities of NMC, (ii) 7 8 otherwise act, whether alone or in concert with others, to seek to control, change or influence the management, Board of Directors or policies of NMC, or nominate any person as a Director of NMC who is not nominated by the then incumbent Directors, or propose any matter to be voted upon by the shareholders of NMC, or (iii) advise, assist or encourage any other person in connection with or announce an intention to, or enter into any discussion, negotiations, arrangements or understandings with any third party with respect to any of the foregoing clauses (i) through (iii); and, (c) Such Class C Holder shall not take or commit to take any action that would cause or make any of its representations and warranties contained in Article II herein inaccurate in any material respect. ARTICLE IV. CONDITIONS TO THE CLOSING SECTION 4.1 CONDITIONS TO OBLIGATIONS OF NMC AND VVI The obligation of NMC to effect the Purchase (and of VVI to provide the Purchase Price, as necessary) is subject to the satisfaction of each of the following conditions prior to the Closing Date, any of which may be waived in writing exclusively by both NMC and VVI; (a) Representations and Warranties. The representations and warranties of the Class C Holders set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (x) changes contemplated by this Agreement or (y) which would not, individually or in the aggregate, prevent or delay the Class C Holders' ability to timely consummate the transactions herein contemplated; and NMC shall have received a certificate signed on behalf of each Class C Holder by a duly authorized agent of each Class C Holder to such effect. (b) Performance of Obligations of the Class C Holders. Each of the Class C Holders shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and NMC shall have received a certificate signed on behalf of each Class C Holder by a duly authorized agent of each Class C Holder to such effect. (c) Merger Agreement. The transactions contemplated by the Merger Agreement shall be effected concurrently with the consummation of the transactions contemplated by this Agreement. 8 9 SECTION 4.2. CONDITIONS TO OBLIGATIONS OF THE CLASS C HOLDERS The obligation of the Class C Holders to effect the Purchase is subject to the satisfaction of each of the following conditions prior to the Closing Date, any of which may be waived in writing exclusively by all of the Class C Holders: (a) Representations and Warranties. The representations and warranties of NMC and VVI set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, except for, (x) changes contemplated by this Agreement or (y) which would not, individually or in the aggregate, prevent or delay NMC's ability to timely consummate the transactions herein contemplated; and the Class C Holders shall have received certificates signed on behalf of each of VVI and NMC by their respective chief executive and chief financial officers. (b) Performance of Obligations of NMC. NMC and VVI shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and the Class C Holders shall have received certificates signed on behalf of each of VVI and NMC by their respective chief executive and chief financial officers. (c) Merger Agreement. The transactions contemplated by the Merger Agreement shall be effected concurrently with the consummation of the transactions contemplated by this Agreement. ARTICLE V. MISCELLANEOUS SECTION 5.1. SURVIVAL The provisions set forth in Sections 1.4, 2.1, 2.2, 2.3(e), 2.4, 3.3, 5.2(c), 5.2(a), 5.2(b), 5.2(d), 5.3, 5.4 and 5.7 shall survive the Closing Date. Any obligations of NMC or VVI which survive Closing shall be deemed to be obligations of V-L, and the Merger Agreement shall so provide. SECTION 5.2. SCOPE OF AGREEMENT (a) This Agreement reflects only the Class C Holders' agreement to the matters herein set forth. Except as specifically set forth herein, nothing contained in this Agreement or otherwise shall be construed as a waiver or release of any other right or benefit that the Class C Holders may have under the Purchase Agreement, the Registration Rights Agreement, the Certificate of Designation and the Warrants. (b) Except as specifically set forth herein, nothing contained in this Agreement or otherwise shall be construed to amend any term or provision of the Purchase Agreement, the 9 10 Registration Rights Agreement, the Certificate of Designation and the Warrants. Each of such agreements shall continue in full force and effect in accordance with its terms, except as specifically set forth herein. (c) Except as specifically set forth herein, this Agreement and all documents and instruments referred to herein (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (d) In order to accomplish the changes to the Certificate of Designation contemplated by Article III above, NMC shall issue to the Class C Holders shares of a newly designated preferred stock providing rights substantially identical to those of the Class C Stock, but with the appropriate rights, preferences, etc. as reflected in this Agreement, in exchange for the Class C Stock then held by the Class C Holders (the "Exchange"). NMC shall prepare and submit to the Class C Holders for their approval certificate(s) of designation promptly after execution of this Agreement. NMC hereby agrees to use its best efforts to have the S-3 Registration Statement No. 333- 36637 (the "Registration Statement") declared effective as promptly as possible after the date hereof (the "Effective Date"), and will in any event (unless the Registration Statement has previously been declared effective) within ten days after the date hereof file a pre-effective amendment to the Registration Statement which is responsive to all outstanding staff comments. So long as NMC continues to use its best efforts as aforesaid, the Class C holders hereby waive (subject to the following proviso) the right to receive the payments that might otherwise be due them pursuant to Section 2.b of the Registration Rights Agreement (the "Payments"); provided, however, that if NMC fails to use its best efforts as aforesaid or if the Effective Date does not occur prior to the first to occur of (x) the Adjustment Date or (y) January 30, 1998 (or, if the Securities and Exchange Commission ("SEC") staff subjects the Registration Statement to substantial review, or requires the inclusion of pro forma financial information reflecting the proposed merger or other information not then readily available to NMC, February 27, 1998), then the Class C Holders shall be entitled to receive all Payments due them effective from January 2, 1998 through the Effective Date. NMC shall promptly after the date hereof file with the SEC a registration statement on Form S-3 for the shares to be issued to the Class C Holders in the Exchange (the "New S-3"), and shall have the New S-3 declared effective within ten business days after the date on which it is filed (unless the New S-3 is subject to review by the SEC staff, in which event it shall be effective within ninety days of the date of this Agreement). The Exchange will occur simultaneous with the New S-3 being declared effective. Simultaneous with the Exchange, NMC and the Class C Holders shall either amend the Registration Rights Agreement or enter into a substantially identical agreement covering both the shares issued in the Exchange and the New Warrants. Notwithstanding anything to the contrary in the Purchase Agreement, the Registration Rights Agreement, any new registration rights agreement entered into pursuant to Section 5.2(d), the Certificate of Designation, the Warrants or the New Warrants, each of the Class C Holders hereby consents to, and hereby waive any claims, benefits or rights with respect to, the failure of VVI and V-L to have a registration statement covering the shares of V-L 10 11 common stock issuable upon exercise of the Warrants and the New Warrants effective during the 120 days following the Closing; provided, however, that such consent and waiver are contingent upon such registration statement being filed with the SEC within thirty days after the Closing, and being declared effective by the SEC within one hundred twenty days after the Closing. (e) Each of the parties hereto acknowledges that the obligation to effect the Purchase is conditioned upon the concurrent consummation of the transactions contemplated by the Merger Agreement. Accordingly, immediately upon the Merger Termination Date, there shall be no further obligation or liability hereunder on the part of either VVI or the Class C Holders, or their respective officers, directors, stockholders or Affiliates (as defined in the Merger Agreement), except for wilfull breaches of this Agreement. SECTION 5.3. FURTHER ASSURANCES, COOPERATION AND NOTICE Each of the Class C Holders and NMC and VVI will use its best efforts and cooperate with each other in executing and delivering any and all documents, amendments and other agreements that may be necessary to evidence or effect the agreements set forth in this Agreement. Each of NMC and VVI and the Class C Holders shall notify the other of, and will use all commercially reasonable efforts to cure before the Closing Date, any event, transaction or circumstance, as soon as practicable after it becomes known to such party, that causes or will cause any covenant or agreement of NMC, VVI or the Class C Holders under this Agreement to be breached or that renders or will render untrue any representation or warranty of NMC, VVI or the Class C Holders contained in this Agreement. Each of NMC, VVI and the Class C Holders also shall notify the other in writing of, and will use all commercially reasonable efforts to cure, before the Closing Date, any violation or breach, as soon as practicable after it becomes known to such party, of any representations, warranty, covenant or agreement made by NMC, VVI or the Class C Holders. No notice given pursuant to this paragraph shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein. SECTION 5.4 ATTORNEY'S FEES NMC shall, promptly upon presentation of detailed invoices therefore, reimburse the Class C Holders for all of the Class C Holders' reasonable expenses, including but not limited to counsel fees and disbursements incurred in connection with this Agreement and the matters contemplated hereby; provided, however, that NMC shall not be obligated to reimburse more than $35,000 in such expenses. SECTION 5.5 COUNTERPARTS This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more 11 12 counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 5.6 GOVERNING LAW This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to any applicable conflicts of law. SECTION 5.7 ASSIGNMENT; BINDING EFFECT Except for any assignments by NMC or VVI arising by operation of law as a result of the consummation of the transactions contemplated by the Merger Agreement, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable only by the parties and their respective successors and assigns, and no person or entity not a party to a provision herein set forth is intended to be a beneficiary of such provision. [Signature Page to Follow] 12 13 IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have executed this Agreement as of the day and date first above written. CAPITAL VENTURES INTERNATIONAL (15,000 shares of Class C Stock) By: Heights Capital Management, its authorized agent By: /s/ Andrew Frost, President -------------------------------------------- Heights Capital Management, Inc. RGC INTERNATIONAL INVESTORS, LDC (5,000 shares of Class C Stock) By: Rose Glen Capital Management, L.P., Investment Manager By: RGC General Partner Corp., General Partner By: /s/ Gary Kaminsky -------------------------------------------- NATIONAL MEDIA CORPORATION By: /s/ Brian J. Sisko -------------------------------------------- Sr. Vice President VALUEVISION INTERNATIONAL, INC By: /s/ David T. Quinby -------------------------------------------- Vice President EXHIBITS AND SCHEDULES EXHIBIT A - The Merger Agreement EXHIBIT B - Form of Release to be delivered to NMC at Closing pursuant to Section 1.5 SCHEDULE 2.2 - Encumbrances on Class C Stock SCHEDULE 2.3 - Compensation in Connection with Merger SCHEDULE 3.1 - Waiver of Certain Rights by Class C Holders 13 EX-10.5 6 EX-10.5 1 EXHIBIT 10.5 DEMAND PROMISSORY NOTE $10,000,000 January 5, 1998 FOR VALUE RECEIVED, the undersigned, National Media Corporation, a Delaware corporation ("Borrower"), promises to pay on demand, which demand may be made at any time after the occurrence of the Triggering Event (as defined below), to ValueVision International, Inc., a Minnesota corporation ("Lender"), at its office at 6740 Shady Oak Road, Eden Prairie, MN 55344-3433 or at such other place as Lender may designate in writing, in lawful money of the United States of America and in immediately available funds (except as otherwise expressly provided in Section 2(b) below), the lesser of (i) the principal amount of Ten Million Dollars ($10,000,000), and (ii) the unpaid principal amount of all amounts loaned by Lender to Borrower hereunder. In addition, Borrower agrees: 1. INTEREST. a. Generally. Borrower promises to pay interest on the principal, expenses and other amounts due hereunder (all such amounts due hereunder, including any interest thereon, collectively referred to as the "Obligations"). Interest shall accrue on the Obligations from the date such Obligations are advanced or otherwise due hereunder until paid in full at the Prime Rate (as defined below) in effect from time to time, plus 1.5% per annum. "Prime Rate" shall mean the prime, reference or other comparable rate announced from time to time by Norwest Bank, N.A. ("Norwest Bank"), as reasonably determined by Lender, with the understanding that the Prime Rate is intended by the parties to be one of Norwest Bank's base rates and may serve as the basis upon which effective rates of interest are calculated for those loans making reference thereto. When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced by Norwest Bank. Interest shall be due and payable in immediately available funds (i) quarterly, on January 1, April 1, July 1 and October 1, and (ii) as of any date in which any principal payment is due and payable hereunder (whether in cash or otherwise, as provided herein). b. Default Interest. During the occurrence of an Event of Default (as defined below), the Obligations shall bear interest until paid in full in immediately available funds at an increased rate per annum equal to the Prime Rate in effect from time to time, plus three percent (3.0%) per annum. 2. PAYMENTS GENERALLY. a. Repayment. Principal shall be due and payable on written demand, which demand may be made by Lender for full or partial payment at any time after the occurrence of the Triggering Event. "Triggering Event" means the earliest to occur of (i) January 1, 1999, (ii) termination of the Agreement and Plan of Reorganization and Merger dated as of the date hereof between Lender and Borrower, as may be amended from time to time (the "Merger Agreement") if such termination results from a breach of any covenant by Borrower or the 2 inaccuracy of any representation or warranty of Borrower or in the event the shareholders of Borrower do not approve the terms of the proposed merger as contemplated by the Merger Agreement, (iii) the announcement of a material transaction involving Borrower (such as a merger, share exchange, a sale of all or substantially all of the assets of Borrower or another similar event), (iv) a Change of Control (as defined below) of Borrower, or (v) the acceleration of the Obligations pursuant to Section 6(b)(i) hereof. "Change of Control" shall mean an event as a result of which: (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934 (the "Exchange Act")), other than ValueVision and/or any affiliate of ValueVision, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 20% of the total voting power of the voting stock of the Company; (b) the Company consolidates with, or merges with or into another corporation (other than ValueVision and/or any affiliate of ValueVision), or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person (other than ValueVision and/or any affiliate of ValueVision), or any corporation (other than ValueVision and/or any affiliate of ValueVision) consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding voting stock of the Company is changed into or exchanged for cash, securities or other property, other than any such transaction where (A) the outstanding voting stock of the Company is changed into or exchanged for (x) voting stock of the surviving or transferee corporation or (y) cash, securities (whether or not including voting stock) or other property, and (B) the holders of the voting stock of the Company immediately prior to such transaction own, directly or indirectly, not less than 50% of the voting power of the voting stock of the surviving corporation immediately after such transaction; (c) during any period of two consecutive years (beginning as of the date hereof), individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of the Directors of the Company then in office; provided, however, that any individual who ceases to be a member of the Board of Directors of the Company by reason of voluntary resignation and such resignation is not taken in connection with an extraordinary transaction involving the Company (including, without limitation, a merger, acquisition, disposition or reorganization) or in connection with an actual or threatened proxy contest, shall not be counted for purposes of determining whether a Change of Control under this clause (c) has occurred, or (d) the Company is liquidated or dissolved or adopts a plan of liquidation. Borrower shall pay the demanded amount within five Business Days (as defined below) of demand. In the event Lender makes a demand for repayment and Borrower cannot repay the demanded amount in cash, Lender may, in its sole discretion, elect repayment of any or all of the principal and/or interest in shares of the common stock of Borrower, par value $.01 per share (the "Common Stock"), which have been duly and validly issued, fully paid and non-assessable, with each such share being deemed to have a value equal to the lower of the Fixed Conversion Price (as defined in, and determined in accordance with, the Certificate of 2 3 Designations, Preferences and Rights of the Series C Convertible Preferred Stock, a copy of which is attached hereto as Exhibit A (the "Series C Preferred Stock Certificate") and the Variable Conversion Price (as defined in, and determined in accordance with, the Series C Preferred Stock Certificate). b. Prepayment. Borrower may prepay principal on any portion of this Note at any time, in any amount and without penalty; provided, however, that any such prepayments shall, in Lender's sole discretion, be paid in immediately available funds and/or shares of Common Stock which have been duly and validly issued, fully paid and non-assessable, with each such share deemed to have a value equal to the higher of the Fixed Conversion Price and the Variable Conversion Price. c. Payment of Certain Obligations. Any Obligations (other than principal and interest) due hereunder by Borrower to Lender shall be due and payable within five (5) Business Days after notice thereof is sent by Lender to Borrower. d. Application of Payments. Each cash payment made on this Note shall be credited first, to any indemnity, expense, fee or other obligations due hereunder; second, to interest then due; and third, to the outstanding principal balance hereof. e. Payment Procedures; Calculations. Borrower shall make all payments, or cause all payments to be made, which are due and payable under this Note or any guaranty, security agreement or other agreement, certificate, instrument or other document entered into in connection herewith, including, without limitation, the Warrant Agreement dated as of the date hereof between Lender and Borrower and the Registration Rights Agreement dated as of the date hereof between Lender and Borrower (collectively, together with this Note, as each may be amended from time to time, the "Loan Documents") not later than 2:00 P.M. (Minnesota time) on the day when due, in immediately available funds (except as expressly provided herein), to Lender at its address. Except as otherwise provided herein, all Obligations shall be paid in lawful money of the United States of America. Interest and any fees that may accrue hereunder shall be computed on the basis of a 360-day year and the actual number of days elapsed. Each determination by Lender of an interest rate, fees, expenses or other payments hereunder shall be conclusive and presumptively binding for all purposes, absent manifest error. f. Business Days. If a payment hereunder would otherwise be due and payable on a day other than on a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon during such extension. "Business Day" shall mean any day, except a Saturday, Sunday or any other day designated as a holiday under Federal or Minnesota statute or regulation. 3. CONDITIONS PRECEDENT. a. Conditions to Initial Loan. Subject to Section 3(c) below, the obligation of Lender to advance Seven Million Dollars ($7,000,000) on the later of the date hereof and the Borrower's receipt of all required consents to such advance, is subject to the satisfaction or waiver of the following conditions precedent: 3 4 (1) Note and Other Loan Documents. Lender shall have received executed and delivered copies of this Note, any guaranties and any other Loan Documents reasonably requested thereby, and opinions of counsel in substantially the form set forth in Schedule A attached hereto, each in form and substance satisfactory to Lender, in its reasonable discretion, and each Loan Document shall be in full force and effect, without any defenses thereto. (2) Merger Agreement. Lender shall have received an executed and delivered copies of the Merger Agreement (as amended from time to time with the prior written consent of Lender, the "Merger Agreement") and all documents to be entered into in connection therewith (collectively, together with the Merger Agreement, as each may be amended from time to time with the prior written consent of Lender, the "Merger Documents"), in form and substance satisfactory to Lender, in its sole discretion, and each Merger Document shall be in full force and effect. (3) Compliance with Agreements, Representations. Each Borrower and any guarantor hereof (collectively, "Loan Parties" and individually, "Loan Party") shall be in compliance with all covenants and agreements contained in this Note, any other Loan Documents, the Merger Agreement or any other Merger Documents. All representations and warranties contained in this Note, any other Loan Documents, the Merger Agreement or any other Merger Documents shall be true and correct on and as of the date hereof, as if then made, other than representations and warranties that relate solely to an earlier date (but which shall have been true and correct as of such earlier date). No Event of Default shall exist or default under the Merger Agreement or would exist as a result of the passage of time or giving of notice, as of the date of such advance or after giving effect thereto. (4) Insolvency Event. No Insolvency Event (as defined below) shall have occurred with respect to any Loan Party or any corporation or other entity in which such Loan Party directly or indirectly owns or controls the shares of stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or appoint other managers of such corporation or other entity (a "Subsidiary"). An "Insolvency Event" with respect to any entity is any of the following: (a) a voluntary or involuntary petition for bankruptcy or other relief involving such entity, its assets or its liabilities under Title 11 of the U.S. Code (11 U.S.C. ss.ss. 101 et seq.), as amended from time to time and any successor statute, or any similar statute, (b) an assignment of its assets for the benefit of creditors, (c) its failure or suspension of business operations, (d) appointment of a receiver or trustee for it or a substantial portion of its assets, or (e) general failure to pay its debts as they become due. b. Conditions Precedent to any Subsequent Loan. Subject to Section 3(c) below, the obligation of Lender to make any subsequent advances after the date hereof (which advances shall not exceed Three Million Dollars ($3,000,000) in the aggregate) is subject to the satisfaction of the following conditions precedent: (1) Note, Other Loan Documents, Merger Agreement. This Note, the other Loan Documents, the Merger Agreement and the other Merger Documents shall be in full force and effect, without any defenses thereto. 4 5 (2) Request for Advance. Borrower shall have delivered a written request for an advance, executed by Borrower and each other Loan Party, setting forth the requested amount of the advance, the requested advance date, certification that the conditions to such advance have been satisfied and any other information reasonably requested by Lender related to such request for an advance, which Lender shall have received no less than ten Business Days prior to the requested advance date. (3) Compliance with Agreements, Representations. Each Loan Party shall be in compliance with all covenants and agreements contained in this Note, any other Loan Documents, the Merger Agreement or any Merger Documents. All representations and warranties contained in this Note, any other Loan Documents, the Merger Agreement or any Merger Documents shall be true and correct on and as of the date of such advance, as if then made, other than representations and warranties that relate solely to an earlier date (but which shall have been true and correct as of such earlier date). No Event of Default or default under the Merger Agreement shall exist or could exist as a result of the passage of time or giving of notice, as of the date of such advance or after giving effect thereto. (4) Insolvency Event. No Insolvency Event shall have occurred with respect to any Loan Party or any of its Subsidiaries. c. Termination of Advancement Obligation. The obligation of Lender to advance any funds hereunder shall terminate on the earliest to occur of (i) the termination of the Merger Agreement unless such termination is the result of (a) a breach of any covenant by Lender or the inaccuracy of any representation or warranty of Lender; (b) the failure to obtain the written consent of the Federal Communications Commission ("FCC") to the transactions contemplated by the Merger Agreement (so long as Lender has used all reasonable efforts to obtain such consent); or (c) in the event the shareholders of Lender do not approve the terms of the proposed merger as contemplated by the Merger Agreement, (ii) the Effective Time (as such term is defined in the Merger Agreement) and (iii) December 31, 1998. 4. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this Note and to make advances hereunder, Borrower represents and warrants to Lender that the following are true, correct and complete. a. Authority. Borrower and each other Loan Party has all requisite corporate power and authority to enter into and perform its obligations under each of the Loan Documents to which it is a party. The execution, delivery and performance of each of the Loan Documents have been duly authorized by all necessary corporate action on the part of Borrower and each other Loan Party that is party thereto. b. Enforceability. This Note and each other Loan Document constitute the valid and binding obligations of each Loan Party which is a party thereto, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar law of general applicability relating to or affecting creditors' rights and to general equitable principles. 5 6 c. No Conflict. The execution, delivery and performance of each Loan Document by any Loan Party will not (i) conflict with, or result in any violation or breach of, any provision of the certificate of incorporation, articles of incorporation, bylaws or other corporate governance documents of such Loan Party, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture (collectively, "Debt Documents"), lease, contract or other agreement, instrument or obligation to which such Loan Party is a party or by which any of its properties or assets may be bound, or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to any Loan Party which is a party thereto or any of its properties or assets, except in the case of (ii) (other than Debt Documents), and (iii) any such conflicts, violations, defaults, terminations, or cancellations which are not, individually or in the aggregate, reasonable likely to have a material adverse effect on the business, properties, financial condition or results of operations of either Borrower or Borrower and the other Loan Parties, taken as a whole, or prevent or materially delay or impair Loan Party's ability to perform its obligations hereunder or Lender's ability to enforce its rights hereunder (a "Material Adverse Effect"). d. Consents and Filings. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality is required by or with respect to any Loan Party in connection with the execution, delivery and performance of any Loan Document, except those that have been obtained or made, a copy of which has been delivered to Lender and which is satisfactory to Lender in its sole and absolute discretion, and such other consents, authorizations, filings, approvals and registrations which,if not obtained or made, would not be reasonably likely to have a Material Adverse Effect. e. Government Regulation. None of the Loan Parties is subject to regulation under any requirement of law that limits its ability to incur indebtedness or its ability to consummate the transactions contemplated in any Loan Document. f. Solvency. After giving effect to the receipt of proceeds of any advances hereunder, the fair saleable value of the assets of Borrower exceeds all its probable liabilities, including those to be incurred pursuant to this Note and the other Loan Documents. After giving effect to the receipt of proceeds of any advances hereunder, Borrower (i) will not have unreasonably small capital in relation to the business in which it is or proposes to be engaged and (ii) does not believe it will have incurred debts beyond its ability to pay as such debts become due. g. Merger Agreement Representations. All representations and warranties made under or pursuant to the Merger Agreement or any other Merger Document are true and correct and are hereby incorporated by reference, regardless of whether any of such documents have been or are subsequently terminated. Such representations and warranties shall survive the termination of any Loan Document, Merger Agreement or other Merger Document delivered. 6 7 5. COVENANTS. Until termination of this Note and repayment in full of all Obligations pursuant hereto, Borrower shall, and shall cause each other Loan Party to, comply with the following covenants: a. Use of Proceeds. The advances hereunder shall be used by Borrower for working capital and other general corporate purposes, to the extent permitted by the Merger Agreement; provided, however, that such proceeds shall not be applied to the costs and expenses of the consummation of the transactions contemplated by the Merger Agreement. b. Ordinary Course Payments. Except such payments as are agreed to and acknowledged by the parties as set forth in Disclosure Schedule 5.1 to the Merger Agreement, none of Borrower, any other Loan Party or any of their respective Subsidiaries shall make any payments outside of the ordinary course of business, including, without limitation, severance or other "parachute" type payments in any amount greater than $50,000, settlement of any threatened or pending litigation matters involving, in the aggregate including all such matters, consideration in excess of $100,000, repayment of any debt for borrowed money (except with respect to scheduled amortization payments), payment of any dividends, redemption or repurchase of any equity or debt securities, in each case, without the prior written consent of Lender. Upon request by Borrower for Lender's consent to any payments that are otherwise prohibited hereunder, Lender shall not unreasonably delay the consideration of such request, which consideration shall be in its sole discretion. The payment by Borrower of accrued but unpaid liabilities existing as of the date hereof (including any accrued and unpaid settlement payments) shall not be deemed to be outside the ordinary course of business for purposes of this Section 5(b). c. Conduct of Business. Except as set forth in Disclosure Schedule 5.1 to the Merger Agreement, each Loan Party shall carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted (including to not grant any interest in its assets or incur additional indebtedness (unless such indebtedness is adequately subordinated to the Obligations on terms reasonably satisfactory to Lender), without the prior written consent of Lender), to pay its debts and taxes when due subject to good faith disputes over such debts or taxes, to pay or perform its other obligations when due, and to the extent consistent with such business, use all reasonable efforts consistent with past practices and policies to (i) preserve intact its present business organization, (ii) keep available the services of its present officers and key employees and (iii) preserve its relationships with customers, suppliers, distributors, and others having business dealings with it. d. Merger Agreement Covenants. Each Loan Party shall perform and comply with all covenants and agreements contained in the Merger Agreement or any other Merger Document, and each such covenant and agreement is hereby incorporated by reference, regardless of whether any of such documents have been or are subsequently terminated. The obligation to perform such covenants and agreements shall survive the termination of any Loan Document, Merger Agreement or other Merger Document. e. Further Assurances. Borrower shall take, and shall cause each of the other Loan Parties to take, all such further actions (including, without limitation, delivery of any 7 8 information reasonably requested by Lender relating to any of the Loan Documents or the business, properties, financial condition or results of operations of any Loan Party) and execute all such further documents and instruments as Lender may at any time determine in its sole discretion to be necessary or desirable to further carry out and consummate the transactions contemplated by the Loan Documents. 6. EVENTS OF DEFAULT. a. Events of Default Defined. The occurrence of any of the following events shall constitute an Event of Default hereunder: (1) Failure to Pay. Any Loan Party shall fail to pay any amount hereunder or any other Loan Document when due. (2) Breach of Covenant. Any Loan Party shall fail to comply with any covenant or agreement contained herein or in any other Loan Document to which it is a party or (after giving effect to any applicable notice requirements and cure period set forth in the Merger Agreement) in any Merger Document to which it is a party. (3) Breach of Representation or Warranty. Any representation or warranty made or deemed to be made by any Loan Party in any Loan Document to which it is a party or in any Merger Document to which it is a party, or in any statement or certificate given pursuant hereto or thereto, shall be false or misleading in any material respect when made or deemed to be made (and, with respect to any such representation or warranty under the Merger Agreement, after giving effect to any applicable notice requirements and cure period set forth in the Merger Agreement). (4) Insolvency Event. Any Loan Party shall become subject to an Insolvency Event. (5) Cross Default. A default or event of default (after giving effect to any applicable notice requirements and cure period set forth therein) shall occur under any note, agreement or instrument evidencing any other indebtedness owing to (i) CoreStates Bank, N.A. ("CoreStates") or any lender which is a party to any credit facility or syndicate in which Corestates is a party or participant or (ii) any lender which refinances any indebtedness to any of the lenders described in the foregoing clause (i); provided, however, that if there is a failure to comply with any of the covenants contained in Article 9 of the Amended and Restated Loan and Security Agreement dated June 26, 1996 by and among CoreStates, as successor to Meridian Bank, Borrower and certain of Borrower's subsidiaries (the "Amended and Restated Loan Agreement"), as amended by Section 8 of the Loan Modification Agreement dated September 18, 1997 by and among CoreStates, Borrower and certain of Borrower's subsidiaries, and such failure amounts to less than 10% of the applicable dollar amount or ratio, as the case may be, set forth in such covenant (e.g., if the Working Capital Ratio (as defined in the Amended and Restated Loan Agreement) falls below 2.0 to 1.0 but is greater than 1.8 to 1.0), such failure shall not constitute an Event of Default under this Section 6(a)(5) unless and until 8 9 any of the remedies set forth under the Loan Documents, including Section 14.2 of the Amended and Restated Loan Agreement, are exercised by CoreStates or any lender that is party thereto. (6) Failure of Enforceability of Loan Document. Any covenant, agreement or obligation of any Loan Party contained in or evidenced by any of the Loan Documents shall cease to be enforceable, or shall be determined to be unenforceable, in accordance with its terms; or any Loan Party shall deny or disaffirm its obligations under any of the Loan Documents or any rights granted in connection therewith. b. Remedies. Upon the occurrence of an Event of Default, Lender may take any or all of the following actions, without prejudice to the rights of Lender to enforce its claims against Borrower: (1) Acceleration. Upon delivery of written notice to Borrower, all Obligations shall be declared to be immediately due and payable (except with respect to any Event of Default set forth in Section 6(a)(5) hereof, in which case all Obligations shall automatically become immediately due and payable without the necessity of any notice or other demand to Borrower), without presentment, demand, protest or any other action or obligation of Lender. (2) Termination of Obligation to Advance. Upon delivery of written notice to Borrower, Lender shall no longer be obligated to make any additional advances or loans hereunder. (3) Right of Setoff. Lender shall have the right to appropriate and apply to the payment of the Obligations all obligations then or thereafter owing by Lender to such Loan Party. (4) Deficiencies; Remedies Cumulative. The cash proceeds resulting from Lender's exercise of any of the foregoing rights shall be applied by Lender in accordance herewith. Borrower shall remain liable to Lender for any deficiencies. The foregoing remedies are not intended to be exhaustive and the full or partial exercise of any of them shall not preclude the full or partial exercise of any other available remedy hereunder or any other Loan Document, at equity or at law. 7. MISCELLANEOUS. a. GOVERNING LAW. THIS NOTE AND THE OTHER LOAN DOCUMENTS, AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION THEREWITH, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF MINNESOTA. b. SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG ANY LOAN PARTY AND LENDER SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN MINNESOTA, AND THE COURTS TO WHICH AN APPEAL 9 10 THEREFROM MAY BE TAKEN. BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY LENDER. BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS. c. SERVICE OF PROCESS. BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, INC., NO. 405, SECOND AVENUE SOUTH, MINNEAPOLIS, MN 55401, AS THE DESIGNEE, APPOINTEE AND AGENT OF BORROWER TO RECEIVE, FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY LOAN DOCUMENTS. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO BORROWER, BUT FAILURE OF BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. d. WAIVER OF JURY TRIAL. ANY DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS SHALL BE RESOLVED IN A BENCH TRIAL. ANY RIGHT TO A JURY TRIAL IS WAIVED. e. LIMITATION OF LIABILITY. LENDER SHALL NOT HAVE ANY LIABILITY TO BORROWER FOR LOSSES SUFFERED BY BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS NOTE OR ANY OTHER LOAN DOCUMENT EXCLUDING THE MERGER CONTEMPLATED BY THE MERGER AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON LENDER THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. f. Delays. No delay or omission of Lender to exercise any right or remedy hereunder shall impair any such right or operate as a waiver thereof. g. Notices. Except as otherwise provided herein, all notices and correspondences hereunder shall be in writing and sent by certified or registered mail, return receipt requested, or by telex or facsimile transmission, or by overnight delivery service, with all charges prepaid, if to Lender, then to Chief Executive Officer, 6740 Shady Oak Road, Eden Prairie, MN 55344-3433, and if to Borrower, then to Chief Executive Officer, Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, PA 19103, or by facsimile transmission, promptly confirmed in writing sent by first class mail, if to Lender, at (612) 947-0141, and if to Borrower at (215) 988-4869. All such notices and correspondence shall be deemed given (i) if sent by certified or registered mail, three Business Days after being postmarked, (ii) if sent by overnight delivery service, when received at the above stated addresses or when delivery is 10 11 refused, and (iii) if sent by telex or facsimile transmission, when receipt of such transmission is acknowledged. h. Indemnification; Reimbursement of Expenses. Borrower hereby indemnifies and agrees to defend and hold harmless Lender and its directors, officers, agents, employees and counsel from and against any and all losses, claims, damages (other than consequential damages), liabilities, deficiencies, judgments or expenses incurred by any of them (except to the extent that it is finally judicially determined to have resulted from their own gross negligence or willful misconduct) arising out of or by reason of (a) any litigations, investigations, claims or proceedings which arise out of or are in any way related to (i) this Note, any other Loan Document or the transactions contemplated hereby or thereby, (ii) any actual or proposed use by Borrower of the proceeds of the loans advanced hereunder, or (iii) Lender's entering into this Note, the other Loan Documents or any other agreements and documents relating hereto, including, without limitation, amounts paid in settlement, court costs and the fees and disbursements of counsel incurred in connection with any such litigation, investigation, claim or proceeding or any advice rendered in connection with any of the foregoing and (b) any remedial or other action taken by Borrower or Lender in connection with compliance by Borrower or any other Loan Party, or any of their respective properties, with any federal, state or local environmental laws, acts, rules, regulations, orders, directions, ordinances, criteria or guidelines. In addition, Borrower shall, within five Business Days after written notice is sent by Lender to Borrower, pay to Lender all costs and expenses (including the reasonable fees and disbursements of counsel and other professionals) paid or incurred by Lender in (i) negotiating, preparing, executing and delivering any of the Loan Documents, including any amendments, modifications or waivers hereto or thereto, (ii) enforcing or defending its rights under or in respect of this Note, the other Loan Documents or any other document or instrument now or hereafter executed and delivered in connection herewith, (iii) collecting the loans or other Obligations hereunder, and (iv) obtaining any legal, accounting or other advice in connection with any of the foregoing. i. Guaranties. To the extent legally permissible, the Obligations shall be unconditionally guaranteed by each Subsidiary of Borrower designated as a "Material Subsidiary" in Disclosure Schedule 4.1 to the Merger Agreement, pursuant to a guaranty in form and substance satisfactory to Lender, in its sole discretion; provided that upon the termination of the ASB Bank Facility Agreement between ASB Bank Limited and Prestige Marketing Limited, a New Zealand corporation and a subsidiary of Borrower ("Prestige") or any extension thereof, and the satisfaction of Prestige's obligations thereunder, Prestige shall guaranty the Obligations and execute a guaranty in form and substance substantially identical to the guaranty executed as of the date hereof by certain of Borrower's other Subsidiaries. j. Waiver of Notice. Borrower and all other Loan Parties, and their successors and assigns, hereby waive presentment, demand, protest and notice thereof or of dishonor, and agree that they shall remain liable for all amounts due hereunder notwithstanding any extension of time or change in the terms of payment of this Note granted by Lender, any change, alteration or release of any property now or hereafter securing the payment hereof or any delay or failure by Lender to exercise any rights under this Note. 11 12 k. Amendments and Waivers. No amendment or waiver of any provision of this Note or any other Loan Document shall be effective, unless in writing and signed by Borrower and Lender. In no event shall any of the provisions hereof, and none of Lender's rights or remedies hereunder on account of any past or future Events of Default, be deemed to have been waived by Lender's acceptance of any past due installments or by any indulgence or waiver granted by Lender of Borrower. l. Severability; Termination of Merger Agreement. In case any provision in or obligation under this Note or any other Loan Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations shall not in any way be affected or impaired thereby. Termination of the Merger Agreement shall not affect any of Borrower's obligations hereunder. m. Maximum Rate. Notwithstanding anything to the contrary contained elsewhere in this Note or in any other Loan Document, Borrower agrees that all agreements among Borrower and Lender, this Note and the other Loan Documents, whether now existing or hereafter arising and whether written or oral, are expressly limited so that in no contingency or event whatsoever shall the amount paid, or agreed to be paid, to Lender for the use, forbearance, or detention of the money loaned to Borrower and evidenced hereby or thereby or for the performance or payment of any covenant or obligation contained herein or therein, exceed the Highest Lawful Rate (as defined below). If due to any circumstance whatsoever, fulfillment of any provisions of this Note or any of the other Loan Documents at the time performance of such provision shall be due shall exceed the Highest Lawful Rate, then, automatically, the obligation to be fulfilled shall be modified or reduced to the extent necessary to limit such interest to the Highest Lawful Rate, and if from any such circumstance Lender should ever receive anything of value deemed interest by applicable law which would exceed the Highest Lawful Rate, such excessive interest shall be applied to the reduction of the principal amount then outstanding hereunder or on account of any other then outstanding obligations hereunder and not to the payment of interest, or if such excessive interest exceeds the principal unpaid balance then outstanding hereunder and such other then outstanding obligations, such excess shall be refunded to Borrower. All sums paid or agreed to be paid Lender for the use, forbearance, or detention of the obligations and other Indebtedness of Borrower to Lender, to the extent permitted by applicable law, shall be amortized, prorated, allocated and spread throughout the full term of such Indebtedness, until payment in full thereof, so that the actual rate of interest on account of all such Indebtedness does not exceed the Highest Lawful Rate throughout the entire term of such Indebtedness. The terms and provisions of this section shall control every other provision of this Note and all agreements among Borrower and Lender. "Highest Lawful Rate" shall mean, at any given time during which any obligations shall be outstanding hereunder, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the obligations, under the laws of the State of Minnesota (or the law of any other jurisdiction whose laws may be mandatorily applicable notwithstanding other provisions of this Note and the other Loan Documents), or under applicable federal laws which may presently or hereafter be in effect and which allow a higher maximum nonusurious interest rate than under Minnesota (or such other jurisdiction's) law, in any case after taking into account, to the extent permitted by applicable 12 13 law, any and all relevant payments or charges under this Note and any other Loan Documents executed in connection herewith, and any available exemptions, exceptions and exclusions. n. Set-Offs. Subject to Section 7(e), Borrower shall not have the right to appropriate and apply to the payment of the Obligations any obligations then or thereafter owing by Lender (or any affiliate thereof) to Borrower. o. Entire Agreement; Successors and Assigns. This Note and the other Loan Documents constitute the entire agreement among Borrower and Lender, supersedes any prior agreements among them, and shall bind and benefit Borrower and Lender, and their respective successors and assigns. Notwithstanding the foregoing, (i) Borrower shall not assign this Note or any rights or obligations hereunder, without the prior written consent of Lender, and (ii) Lender may assign any or all of its rights or obligations hereunder to (a) any bank, savings and loan association, insurance company or other financial institution; or (b) any other Person, subject to the prior written consent of Borrower and CoreStates Bank, N.A., a national banking association, which consent, in either case, shall not be unreasonably withheld; provided, however, that if such Person's principal business activity is in the infomercial industry in any domestic or international market in which Borrower currently operates, any such assignment shall be subject to the prior consent of Borrower, in its sole discretion. Notwithstanding the foregoing sentence, if a proposed assignment is for an aggregate consideration that is less than the then outstanding principal amount (together with any interest thereon) under this Note, in the reasonable determination of Lender, Borrower shall have a right of first refusal with respect to such proposed assignment (on exactly the same terms and conditions as proposed to such other Person) for a ten-day period commencing from the date Lender gives notice to Borrower of such proposed assignment. If Borrower has not accepted in writing such proposed assignment for itself and tendered the requisite consideration prior to the expiration of such ten-day period, Lender may make such proposed assignment to other Persons, subject to any rights Borrower may have to consent to such assignment as set forth in the immediately preceding sentence. "Person" shall mean any individual, corporation, partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity. 13 14 IN WITNESS WHEREOF, this Demand Promissory Note shall be deemed to be executed and delivered in Minnesota by proper and duly authorized officers as of the date set forth above. NATIONAL MEDIA CORPORATION, a Delaware corporation By: /s/Robert N. Verratti ------------------------- Name: Robert N. Verratti Title: President and Chief Executive Officer S-1 15 SCHEDULE A FORM OF OPINIONS OF COUNSEL 1. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary corporate action of each Loan Party(1) that is party thereto, and the Loan Documents have been duly executed and delivered by such Loan Party. 2. The execution, delivery and performance of the Loan Documents by each Loan Party that is party thereto and the incurrence of the indebtedness under the Loan Documents do not (i) conflict with or violate any federal or Pennyslvania statute, rule or regulation applicable to National Media Corporation, (ii) conflict with or violate any of the provisions of the charter, bylaws or other corporate governance documents,(1) (iii) result in a conflict with, breach of or default under any of the Debt Documents or Material Agreements, or (iv) require any consents, approvals, authorizations, registrations, declarations or filings by National Media Corporation under any applicable federal or Pennsylvania statute, rule or regulation. - -------- 1 The preceding portion of Opinion No. 1 and clause (ii) opinion No. 2 will be made only with respect to all domestic Loan Parties. EX-10.6 7 EX-10.6 1 EXHIBIT 10.6 SUBSIDIARY GUARANTY THIS SUBSIDIARY GUARANTY, dated as of January 5, 1998, is made and entered into by Quantum North America, Inc., a Delaware corporation, Quantum International Limited, a United Kingdom corporation, Quantum Far East Ltd., a New Zealand corporation, Quantum Marketing International, Inc., a Delaware corporation, Quantum International Japan Company Ltd., a Japan corporation, DirectAmerica Corporation, a Delaware corporation, Positive Response Television Inc., a Delaware corporation, Quantum Productions AG, a Switzerland corporation, Suzanne Paul (Australia) Pty Limited, an Australia corporation, and National Media Holdings, Inc., a Delaware corporation (each a "Guarantor" and collectively "Guarantors"), for the benefit of ValueVision International, Inc., a Minnesota corporation ("Lender"). RECITALS A. National Media Corporation, a Delaware corporation ("Borrower"), has executed for the benefit of Lender, a Note dated as of even date herewith (as the same may hereafter be amended, restated, or otherwise modified from time to time, the "Note"), pursuant to which Lender has agreed, subject to the conditions therein, to make loans to Borrower in the original principal amount of Ten Million Dollars ($10,000,000) (the "Loan"). B. It is a condition precedent to the obligation of Lender to advance funds pursuant to the terms of the Note that this Guaranty be executed and delivered by Guarantors. C. Each Guarantor is a direct or indirect wholly owned subsidiary of Borrower. D. Borrower agrees to apply the proceeds of the advances under the Note for working capital and other general corporate purposes, to the extent permitted by the Agreement and Plan of Reorganization and Merger dated as of the date hereof between Borrower and Lender (the "Merger Agreement"); provided, however, that such proceeds shall not be applied to the costs and expenses of the consummation of the transactions contemplated by the Merger Agreement. E. Guarantors expect to derive benefits from the loan to Borrower and find it advantageous, desirable and in the best interests of Guarantors to comply with the requirement that the Guarantors enter into and be bound by this Guaranty. NOW, THEREFORE, in exchange for good, adequate and valuable consideration, the receipt of which Guarantors acknowledge, Guarantors agree as follows: Section 1. Defined Terms. 1(a) As used in this Guaranty, the following terms shall have the meanings indicated: 2 "Co-Guarantor" means, as to each Guarantor, any person (other than Borrower and such Guarantor) who guaranties the Loan, whether by executing this Guaranty or by executing any other guaranty of the Loan, or by otherwise assuming personal liability for the Guaranteed Obligations (as defined below) or any part thereof. "Guaranteed Obligations" shall mean (a) any and all liabilities and obligations (including the Obligations) of Borrower to Lender of every kind, nature and description, whether direct or indirect, arising under any of the Loan Documents, and (b) all liabilities of Guarantors under this Guaranty, and in all of the foregoing cases whether due or to become due, and whether now existing or hereafter arising or incurred. "Person" shall mean any individual, corporation, partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity. 1(b) Undefined Terms Herein. All capitalized terms used in this Guaranty that are not specifically defined herein shall have the meaning ascribed to them in the Note. 1(c) Singular/Plural, Etc. Unless the context of this Guaranty otherwise clearly requires, references to the plural include the singular and the plural (for example, references to "Guarantors" include each and every Guarantor, jointly and severally) and "or" has the inclusive meaning represented by the phrase "and/or." The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "hereof," "herein," "hereunder," and similar terms in this Guaranty refer to this Guaranty as a whole and not to any particular provision of this Guaranty. References to Sections are references to Sections in this Guaranty unless otherwise provided. Section 2. Guaranty of Payment and Performance. Guarantors, jointly and severally, hereby absolutely and unconditionally guarantee to Lender the payment when due (whether at a stated maturity or earlier by reason of acceleration or otherwise) in full in cash and performance of the Guaranteed Obligations. This Guaranty is an absolute, unconditional, complete and continuing guaranty of payment and performance of the Guaranteed Obligations (and not a guaranty of collection or collectibility), and none of the obligations of Guarantors hereunder shall be released, in whole or in part, by any action or thing which might, but for this provision, be deemed a legal or equitable discharge of a surety or guarantor, other than irrevocable payment and performance in full of the Guaranteed Obligations or as otherwise provided by the Note, it being the purpose and intent of this Guaranty that the Guaranteed Obligations constitute the direct and primary obligations of Guarantors hereunder be absolute, unconditional and irrevocable. No notice of the Guaranteed Obligations to which this Guaranty may apply or of any renewal or extension thereof need be given to any of Guarantors. Nothing herein shall preclude a proper party in interest from seeking and obtaining specific performance against any of Guarantors for any failure to comply with any term, condition, covenant or Guaranty herein. This section shall not be construed to release or impair the indebtedness or any obligations of Borrower to Lender. 2 3 Section 3. Changes in Loan Documents. Without notice to, or consent by, any of Guarantors, and in Lender's sole and absolute discretion and without prejudice to Lender or in any way limiting or reducing any of Guarantors' liability under this Guaranty, Lender may: (a) grant extensions of time, renewals or other indulgences or modifications to Borrower, any Co-Guarantor or any other party under any of the Loan Documents, (b) change the rate of interest under the Note, (c) change, amend or modify any Loan Documents, (d) discharge or release any party or parties liable under the Loan Documents or any collateral that secures any of the Guaranteed Obligations, (e) accept or make compositions or other arrangements or file or refrain from filing a claim in any Insolvency Event, (f) make other or additional loans to Borrower in such amounts and at such times as Lender may determine in its sole discretion, (g) credit payments in such manner and order of priority to principal, interest or other obligations as Lender may determine in its discretion, and (h) otherwise deal with Borrower and any Co-Guarantor and any other party related to the Loan as Lender may determine in its sole and absolute discretion. Without limiting the generality of the foregoing, Guarantors' liability under this Guaranty shall continue even if Lender alters any obligations under the Loan Documents in any respect or Lender's or Guarantors' remedies or rights against Borrower are in any way impaired or suspended without Guarantors' consent. If Lender performs any of the actions described in this paragraph, then each of Guarantors' liability shall continue in full force and effect even if Lender's actions impair, diminish or eliminate Guarantors' subrogation, contribution or reimbursement rights (if any) against Borrower or any Co-Guarantor, or otherwise adversely affect any of Guarantors or expand any of Guarantors' liability hereunder. Section 4. Nature of Guaranty. Guarantors' liability under this Guaranty is a guaranty of payment of the Note and the Loan, and is not a Guaranty of collection or collectibility. Guarantors' liability under this Guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of any of the Loan Documents. Guarantors' liability under this Guaranty is a continuing, absolute, and unconditional obligation under any and all circumstances whatsoever (except as expressly stated, if at all, in this Guaranty), without regard to the validity, regularity or enforceability of any of the Guaranteed Obligations. Guarantors acknowledge that they are fully obligated under this Guaranty even if Borrower had no liability at the time of execution of the Loan Documents or later ceases to be liable under any Loan Document, whether pursuant to Insolvency Events or otherwise. Guarantors shall not be entitled to claim, and irrevocably covenant not to raise or assert, any defenses against the Guaranteed Obligations that would or might be available to Borrower, other than actual payment and performance of all Obligations in full in accordance with their terms. Guarantors waive any right to compel Lender to proceed first against Borrower before proceeding against any of Guarantors. Guarantors agree that if any of the Obligations are or become void or unenforceable (because of inadequate consideration, lack of capacity, Insolvency Events, or for any other reason), then each of Guarantors' liability under this Guaranty shall continue in full force with respect to all Obligations as if they were and continued to be legally enforceable. Guarantors also recognize and acknowledge that their respective liability under this Guaranty may be more extensive in amount and more burdensome than that of Borrower. Guarantors waive any defenses to this Guaranty arising or purportedly arising from the manner in which Lender disburses the Loan to Borrower or otherwise, or any waiver of the terms of any Loan Document by Lender or other failure of Lender to require full compliance with the Loan Documents. 3 4 Guarantors' liability under this Guaranty shall continue until all sums due under the Loan Documents have been paid in full and all other performance required under the Loan Documents shall have been rendered in full, except as expressly provided otherwise in this Guaranty. Section 5. Full Knowledge. Guarantors acknowledge, represent and warrant that each of Guarantors have had a full and adequate opportunity to review the Loan Documents, the transaction contemplated by the Loan Documents and all underlying facts relating to such transaction. Guarantors represent and warrant that Guarantors fully understand: (a) the remedies Lender may pursue against Borrower in the event of a default under the Loan Documents, and (b) Borrower's financial condition and ability to perform under the Loan Documents. Guarantors agree to keep themselves fully informed regarding all aspects of Borrower's financial condition and the performance of Borrower's obligations to Lender. Guarantors agree that Lender has no duty, whether now or in the future, to disclose to any of Guarantors any information pertaining to Borrower. Section 6. Claims in Insolvency Event. No Guarantor shall file any claim in any Insolvency Event affecting Borrower unless such Guarantor simultaneously assigns and transfers such claim to Lender, without additional consideration at the time of such assignment, pursuant to documentation satisfactory to Lender. Guarantors shall automatically be deemed to have assigned and transferred such claim to Lender whether or not Guarantors execute documentation to such effect, and by executing this Guaranty hereby authorizes Lender to execute and file such assignment and transfer documentation on Guarantors' behalf. Lender shall have the sole right to vote, receive distributions, and exercise all other rights with respect to any such claim, provided, however, that if and when the Obligations have been paid in full Lender shall release to Guarantors any further payments received on account of any such claim. Section 7. Lender Appointed Attorney-in-Fact. If Guarantors at any time fail to perform or observe any of the agreements set forth in this Guaranty or otherwise in connection with Section 6 above, each of Guarantors hereby appoint Lender Guarantors' attorney-in-fact, coupled with an interest, and hence irrevocable, with full authority in the place and stead of such Guarantors and in the name of such Guarantors or otherwise, from time to time in Lender's good-faith discretion, to take any action and to execute any instrument that Lender may reasonably believe necessary or advisable to cure or correct such failure or to perform, or cause performance of, any such Guaranty, in a manner consistent with the terms hereof. In such case the reasonable expenses of Lender incurred in connection therewith shall be payable by each of Guarantors, jointly and severally, as a Guaranteed Obligation hereunder. Section 8. Costs and Expenses; Indemnity. Guarantors, jointly and severally, shall pay or reimburse Lender within five days following demand for all out-of-pocket expenses (including in each case all filing and recording fees and taxes and all reasonable fees and expenses of counsel and of any experts and agents) incurred by Lender in connection with the preparation, administration, continuance, amendment or enforcement of this Guaranty. Each of Guarantors, jointly and severally, shall indemnify and hold Lender harmless from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) growing out of or resulting from this Guaranty (including enforcement of this Guaranty) or Lender's actions 4 5 pursuant hereto, except claims, losses or liabilities resulting from Lender's gross negligence or willful misconduct as determined by a final nonappealable judicial order. Any liability of any of Guarantors to indemnify and hold Lender harmless pursuant to the preceding sentence shall be part of the Guaranteed Obligations. The obligations of Guarantors under this Section shall survive any termination of this Guaranty. Section 9. Waivers and Amendments; Remedies. This Guaranty can be waived, modified, amended, terminated or discharged only explicitly in a writing signed by Lender. A waiver so signed shall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any rights and remedies available to Lender. All rights and remedies of Lender shall be cumulative and may be exercised singly in any order or sequence, or concurrently, at Lender's option, and the exercise or enforcement of any such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. Section 10. Other Waiver of Defenses. Guarantors waive the benefit of any and all defenses and discharges available to a guarantor, surety, endorser or accommodation party, dependent on its character as such. Without limiting the generality of the foregoing, each of Guarantors (in such capacity) waives presentment, demand for payment, and notice of nonpayment or protest of the Note or any other instrument evidencing any of the Guaranteed Obligations. Lender shall not be required, before exercising its rights under this Guaranty, to first resort for payment of any of the Guaranteed Obligations to Borrower or any other Persons, its or their properties or estates, or any collateral, property, liens, charges, encumbrances or other rights or remedies whatsoever. Until the date that is 1 year and 1 day following the date on which all of the Guaranteed Obligations have been paid in full, Guarantors hereby waive any right of contribution, recourse, subrogation or reimbursement available to any of Guarantors against Borrower or any other Person or property. Guarantors hereby waive any rights Guarantors may have at equity or in law to require Lender to apply any rights of marshaling or other equitable doctrines in the circumstances. Each of Guarantors expects to derive benefits from the transactions resulting in the creation of the Guaranteed Obligations. Lender may rely conclusively on the continuing warranty, hereby made, that each of Guarantors continues to be benefited by Lender's extension of credit accommodations to Borrower and Lender shall have no duty to inquire into or confirm the receipt of any such benefits, and this Guaranty shall be effective and enforceable by Lender without regard to the receipt, nature or value of any such benefits. Section 11. Representations and Warranties. Guarantors hereby represent and warrant to Lender that: 11(a) Each Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power to own, lease and operate its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would 5 6 have a material adverse effect on the business, properties, financial condition or results of operations of the Guarantors, taken as a whole. 11(b) Each Guarantor has all requisite corporate power and authority to enter into and perform its obligations under this Guaranty. The execution, delivery and performance of this Guaranty have been duly authorized by all necessary corporate action by such Guarantor. 11(c) This Guaranty has been duly executed and delivered by each Guarantor and constitutes the valid and binding obligation of each Guarantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equitable principles. 11(d) The execution, delivery and performance of this Guaranty will not (i) conflict with, or result in any violation or breach of, any provision of the certificate of incorporation, articles of incorporation, bylaws or other corporate governance documents of any of Guarantors, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation, or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms conditions or provisions of any note, bond, mortgage, indenture (collectively, the "Debt Documents"), lease, contract or other agreement, instrument or obligation to which such Loan Party is a party or by which any of its properties or assets may be bound,, or (iii) conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to any of the Guarantors or any of their respective properties or assets, except in the case of (ii) (other than Debt Documents), and (iii) any such conflicts, violations, defaults, terminations or cancellations which are not, individually or in the aggregate, reasonably likely to have a material adverse effect on the business, properties, financial condition or results of operations on the Borrower and the Guarantors, taken as a whole, or prevent or materially delay or impair any Guarantor's ability to perform its obligations hereunder or Lender's ability to enforce its rights hereunder (a "Material Adverse Effect"). 11(e) No consent, approval, order or authorization of, or registration, declaration or filing with, or exemption by, any court, administrative agency or commission or other governmental authority or instrumentality is required by or with respect to any of Guarantors to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, this Guaranty, except such consents, approvals, orders authorizations, registrations, declarations and filings as have already been made or which, if not obtained or made, would not be reasonably likely to have a Material Adverse Effect. 11(f) Except as described in forms, reports and documents filed or required to be filed by Borrower with the Securities and Exchange Commission since January 1, 1995, or in Disclosure Schedule 4.11 to the Merger Agreement, there are no actions, suits or proceedings pending or, to the knowledge of Guarantors, threatened against or affecting any of Guarantors or 6 7 any of its properties before any court or arbitrator, or any governmental department, board, agency or other instrumentality which, if determined adversely to any of Guarantors, would have a Material Adverse Effect. Section 12. Reinstatement. Guarantors agree that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of any of the Obligations, or any part thereof, is avoided, rescinded or waived and must otherwise be restored, disgorged, reimbursed or repaid by Lender upon the bankruptcy, insolvency or reorganization of Borrower or otherwise and shall continue in full force and effect as long as there exists a possibility that any payment or performance of any of the Obligations may be avoided, rescinded or waived and so restored, disgorged, reimbursed or repaid. Section 13. Covenants. From the date hereof and so long as any Note remains outstanding, Guarantors agree to comply with all provisions in the Note applicable to any of Guarantors. Section 14. Guarantors Acknowledgments. Guarantors hereby acknowledge that (a) Guarantors have been advised by counsel in the negotiation, execution and delivery of this Guaranty, (b) Lender has no fiduciary relationship to any Guarantor, the relationship being solely that of debtor and creditor, and (c) no joint venture exists between any Guarantor and Lender. Section 15. Assignability. Lender may assign this Guaranty together with any one or more of the Loan Documents, without in any way affecting any Guarantor's or Borrower's liability. Upon request in connection with any such assignment, Guarantors shall deliver a Confirmation Certificate to the transferee in a form reasonably satisfactory to such transferee. Lender may from time to time designate any Affiliate as a successor or assignee of any or all of Lender's rights and remedies under this Guaranty. Lender may assign any or all of its rights or obligations hereunder on the same terms and conditions that Lender may assign the Note, as set forth in Section 7(o) of the Note. SECTION 16. GOVERNING LAW AND CONSTRUCTION. THIS GUARANTY, AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION THEREWITH, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF MINNESOTA. Whenever possible, each provision of this Guaranty and any other statement, instrument or transaction contemplated hereby or relating hereto shall be interpreted in such manner as to be effective and valid under such applicable law, but, if any provision of this Guaranty or any other statement, instrument or transaction contemplated hereby or relating hereto shall be held to be prohibited or invalid under such applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty or any other statement, instrument or transaction contemplated hereby or relating hereto. SECTION 17. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN ANY GUARANTOR AND LENDER SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN MINNESOTA, AND THE COURTS 7 8 TO WHICH AN APPEAL THEREFROM MAY BE TAKEN. EACH OF GUARANTORS AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS, OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY LENDER. EACH OF GUARANTORS WAIVE ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS. SECTION 18. WAIVER OF JURY TRIAL. ANY DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS SHALL BE RESOLVED IN A BENCH TRIAL. ANY RIGHT TO A JURY TRIAL IS WAIVED. Section 19. Notices. Except as otherwise provided for herein, all notices and correspondences hereunder shall be in writing and sent by certified or registered mail, return receipt requested, or by telex or facsimile transmission or by overnight delivery service, with all charges prepaid, if to Lender then to Chief Executive Officer, ValueVision International, Inc., 6740 Shady Oak Road, Eden Prairie, MN 55344-3433, and if to Guarantors, then to Chief Executive Officer, National Media Corporation, Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, PA 19103 or by facsimile transmission, promptly confirmed in writing sent by first class mail, if to Lender, at (612) 947-0141, and if to Guarantors, at (215) 988-4900. All such notices and correspondence shall be deemed given (i) if sent by certified or registered mail, three Business Days after being postmarked, (ii) if sent by overnight delivery service, when received at the above stated addresses or when delivery is refused, and (iii) if sent by telex or facsimile transmission, when receipt of such transmission is acknowledged. Section 20. Joint and Several Liability. Each of Guarantors shall be jointly and severally liable for the Guaranteed Obligations. Section 21. Severability. The provisions of this Guaranty are severable, and if any clause or provision shall be held invalid or unenforceable (including, without limitation, as a result of a finding of fraudulent transfer or conveyance) in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Guaranty in any jurisdiction. The amount of the Guaranteed Obligations of an applicable Guarantor shall be reduced to the extent a court of competent jurisdiction has determined that the amount of the Guaranteed Obligations for such Guarantor would otherwise make this Guaranty unenforceable; provided, however, that the amount of the Guaranteed Obligations for such Guarantor shall subsequently increase to the extent permitted by law. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 8 9 IN WITNESS WHEREOF, each of Guarantors have caused this Subsidiary Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. Quantum North America, Inc., Quantum International Limited, a Delaware corporation a United Kingdom corporation By: /s/ Brian J. Sisko By: /s/ Jack Sullivan ------------------------------------- ---------------------------------- Title: Senior Vice President Title: Director ---------------------------------- ------------------------------- Quantum Far East Ltd., Quantum Marketing International, Inc., a New Zealand corporation a Delaware corporation By: /s/ Brian J. Sisko By: /s/ Brian J. Sisko ------------------------------------- ---------------------------------- Title: Senior Vice President Title: Senior Vice President ---------------------------------- ------------------------------- Quantum International Japan Company DirectAmerica Corporation, Ltd., a Japan corporation a Delaware corporation By: /s/ Brian J. Sisko By: /s/ Brian J. Sisko ------------------------------------- ---------------------------------- Title: Senior Vice President Title: Senior Vice President ---------------------------------- ------------------------------- S-1 10 Positive Response Television, Inc., Quantum Productions AG, a Delaware corporation a Switzerland corporation By: /s/ Brian J. Sisko By: /s/ Brian J. Sisko ------------------------------------- ---------------------------------- Title: Senior Vice President Title: Senior Vice President ---------------------------------- ------------------------------- National Media Holdings, Inc. Suzanne Paul (Australia) Pty Limited, a Delaware corporation an Australia corporation By: /s/ Brian J. Sisko By: /s/ Brian J. Sisko ------------------------------------- ---------------------------------- Title: Senior Vice President Title: Senior Vice President ---------------------------------- ------------------------------- SIGNATURE PAGE TO GUARANTY S-2 EX-10.7 8 EX-10.7 1 EXHIBIT 10.7 ================================================================================ WARRANT AGREEMENT BY AND BETWEEN NATIONAL MEDIA CORPORATION AND VALUEVISION INTERNATIONAL, INC. DATED AS OF JANUARY 5, 1998 ================================================================================ 2 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...................................................... 4 SECTION 7. Mutilated or Missing Warrant Certificates............................. 4 SECTION 8. Reservation of Warrant Shares; Rights................................. 4 SECTION 9. Obtaining Stock Exchange Listings ................................... 5 SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable.... 5 (a) Adjustment for Change in Capital Stock................................ 5 (b) Adjustment for Rights Issue........................................... 6 (c) Adjustment for Other Distributions.................................... 7 (d) Adjustment for Below Market Issuances of Common Stock................. 8 (e) Adjustment for Below Market Issuances of Convertible or Exchangeable Securities............................................... 9 (g) Consideration Received................................................ 11 (h) When De Minimis Adjustment May Be Deferred............................ 12 (i) When No Adjustment Required........................................... 12 (j) Notice of Adjustment.................................................. 12 (k) Voluntary Reduction................................................... 12 (l) Notice of Certain Transactions........................................ 13 (m) Reorganization of Company............................................. 13 (n) [Intentionally Omitted]............................................... 14 (o) When Issuance or Payment May Be Deferred.............................. 14 (p) Adjustment in Number of Shares........................................ 14 (q) Form of Warrants...................................................... 15 SECTION 11. Fractional Interests.................................................. 15 SECTION 12. Notices to Warrant holders............................................ 15 SECTION 13. Notices to Company and ValueVision.................................... 16
i 3
PAGE ---- SECTION 14. Supplements and Amendments............................................ 17 SECTION 15. Successors............................................................ 17 SECTION 16. Governing Law......................................................... 17 SECTION 17. Benefits of This Agreement............................................ 17 SECTION 18. Counterparts.......................................................... 17 EXHIBIT A.......................................................................... 19
ii 4 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 1 5 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. 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 the earlier to occur of (1) the 75th day after termination of the Agreement and Plan of Reorganization and Merger dated as of the date hereof by and among ValueVision, the Company and V-L Holdings Corp. (the "Merger Agreement") and (2) a default under the $10.0 million Demand Promissory Note between ValueVision and the Company dated as of the date hereof (the "Demand Note"), 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 the earlier of (i) 5:00 p.m., New York City time, on January 5, 2003 and (ii) the occurrence of a Termination Event (as defined below) (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 the earlier of (i) 5:00 p.m., New York City time, on January 5, 2003 and (ii) the occurrence of a Termination Event, shall become null and void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. 2 6 For purposes of this Agreement, "Termination Event" shall mean (i) the consummation of the transactions contemplated by the Merger Agreement or (ii) the termination by the Company of the Merger Agreement, if such termination results from a breach of any covenant thereunder by ValueVision or in the event the shareholders of ValueVision do not approve the terms of the proposed merger as contemplated under the Merger Agreement; provided, however, that if (x) within seventy-five days after the occurrence of the Termination Event, the Company has not paid in full in cash all of its obligations (including any interest thereon) under the Demand Note or (y) a default by the Company occurs under the Demand Note during such seventy-five day period, no Termination Event shall be deemed to have occurred. (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 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. 3 7 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. 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 4 8 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 (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: Where: 5 9 O E' = E x - A 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 6 10 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. 7 11 M = the Current Market Price per share of Common Stock on the record date mentioned below. 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. 8 12 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 (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. 9 13 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 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 10 14 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. (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). 11 15 (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. (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. 12 16 (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 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. 13 17 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: 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. 14 18 (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 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 15 19 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: 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 16 20 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] 17 21 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: /s/ Robert N. Verratti ---------------------------------- Title: President and Chief Executive Officer VALUEVISION INTERNATIONAL, INC. (OR ITS DESIGNEE) By: /s/ Robert L. Johander ---------------------------------- Title: Chairman and Chief Executive Officer S-1 22 EXHIBIT A [Form of Warrant Certificate] [Face] 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 the earlier of (i) January 5, 2003 or (ii) the occurrence of the Termination Event (as defined below) (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 the earlier of (i) 5:00 p.m. New York City Time on January 5, 2003 or (ii) the occurrence of the Termination Event, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") equal to the average of the Quoted Prices of the Common Stock reported on the New York Stock Exchange Composite Tape for the twenty (20) consecutive trading days immediately succeeding the date of the first advance by ValueVision to the Company under the $10 million Demand Promissory Note between ValueVision and the Company dated as of the date hereof (the "Demand Note"), 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 the earlier of (i) 5:00 p.m., New York Time on January 5, 2003 or (ii) the occurrence of the Termination Event, and to the extent not exercised by such time such Warrants shall become null and void. A-1 23 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: NATIONAL MEDIA CORPORATION By: -------------------------- President By: -------------------------- Secretary A-2 24 [Form of Warrant Certificate] [Continued] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the earlier of (i) January 5, 2003 and (ii) the occurrence of the Termination Event. 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 (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 the earlier to occur of (1) the 75th day after termination of the Merger Agreement and (2) a default under the Demand Note and before the earlier to occur of (i) January 5, 2003 and (ii) the occurrence of the Termination Event. 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. For purposes of this Agreement, "Termination Event" shall mean (i) the consummation of the transactions contemplated by the Merger Agreement or (ii) the termination by the Company of the Agreement and Plan of Reorganization and Merger dated as of the date hereof by and among ValueVision, the Company and V-L Holdings Corp. (the "Merger Agreement"), if such termination results from a breach of any covenant thereunder by ValueVision or in the event the shareholders of ValueVision do not approve the terms of the proposed merger as contemplated under the Merger Agreement; provided, however, that if (x) within seventy-five (75) days after the occurrence of the Termination Event, the Company has not paid in full in cash all of its obligations under the Demand Note or (y) a default by the Company occurs under the Demand Note during such seventy-five day period, no Termination Event shall be deemed to have occurred. 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-3 25 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. A copy of the Registration Rights Agreement 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. A-4 EX-10.8 9 EX-10.8 1 EXHIBIT 10.8 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 the earlier of (i) January 5, 2003 or (ii) the occurrence of the Termination Event (as defined below) (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 the earlier of (i) 5:00 p.m. New York City Time on January 5, 2003 or (ii) the occurrence of the Termination Event, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") equal to the average of the Quoted Prices of the Common Stock reported on the New York Stock Exchange Composite Tape for the twenty (20) consecutive trading days immediately succeeding the date of the first advance by ValueVision to the Company under the $10 million Demand Promissory Note between ValueVision and the Company dated as of the date hereof (the "Demand Note"), 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 the earlier of (i) 5:00 p.m., New York Time on January 5, 2003 or (ii) the occurrence of the Termination Event, 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. 2 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: /s/ Robert N. Verratti ------------------------- President By: /s/ Brian J. Sisko ------------------------- Secretary 3 [Continued] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring on the earlier of (i) January 5, 2003 and (ii) the occurrence of the Termination Event. 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 (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 the earlier to occur of (1) the 75th day after termination of the Merger Agreement and (2) a default under the Demand Note and before the earlier to occur of (i) January 5, 2003 and (ii) the occurrence of the Termination Event. 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. For purposes of this Agreement, "Termination Event" shall mean (i) the consummation of the transactions contemplated by the Merger Agreement or (ii) the termination by the Company of the Agreement and Plan of Reorganization and Merger dated as of the date hereof by and among ValueVision, the Company and V-L Holdings Corp. (the "Merger Agreement"), if such termination results from a breach of any covenant thereunder by ValueVision or in the event the shareholders of ValueVision do not approve the terms of the proposed merger as contemplated under the Merger Agreement; provided, however, that if (x) within seventy-five (75) days after the occurrence of the Termination Event, the Company has not paid in full in cash all of its obligations under the Demand Note or (y) a default by the Company occurs under the Demand Note during such seventy-five day period, no Termination Event shall be deemed to have occurred. 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, 4 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. A copy of the Registration Rights Agreement 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. 5 [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-10.9 10 EX-10.9 1 EXHIBIT 10.9 ================================================================================ REGISTRATION RIGHTS AGREEMENT BY AND BETWEEN NATIONAL MEDIA CORPORATION and VALUEVISION INTERNATIONAL, INC. Dated as of January 5, 1998 ================================================================================ 2 TABLE OF CONTENTS*
PAGE ---- SECTION 1. Definitions................................................. 1 SECTION 2. Securities Subject to this Agreement........................ 3 (a) Registrable Securities...................................... 3 (b) Holders of Registrable Securities........................... 3 SECTION 3. Demand Registrations........................................ 3 (a) Demand by Holders........................................... 3 (b) Effective Registration...................................... 4 (c) Registration Statement Form................................. 5 (d) Selection of Underwriters................................... 5 (e) Registration of Other Securities............................ 6 (f) Priority in Requested Registration.......................... 6 SECTION 4. Piggyback Registrations..................................... 6 (a) Participation............................................... 6 (b) Underwriter's Cutback....................................... 7 (c) No Effect on Demand Registrations........................... 8 SECTION 5. Hold-Back Agreements........................................ 8 (a) Restrictions on Public Sale by Holder of Registrable Securities................................................ 8 (b) Restrictions on Public Sale by the Company and Others....... 9 SECTION 6. Registration Procedures..................................... 9 SECTION 7. Registration Expenses....................................... 16 SECTION 8. Indemnification............................................. 18 (a) Indemnification by the Company.............................. 18 (b) Indemnification by Holder of Registrable Securities......... 20 (c) Contribution................................................ 20 SECTION 9. Rule 144.................................................... 21 SECTION 10. Participation in Underwritten Registrations................. 22
- --------------- * This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. i 3
PAGE ---- SECTION 11. Miscellaneous.............................................. 22 (a) Remedies..................................................... 22 (b) No Inconsistent Agreements................................... 22 (c) Adjustments Affecting Registrable Securities................. 22 (d) Amendments and Waivers....................................... 22 (e) Notices...................................................... 23 (f) Successors and Assigns....................................... 23 (g) Counterparts................................................. 23 (h) Headings..................................................... 24 (i) Governing Law................................................ 24 (j) Severability................................................. 24 (k) Entire Agreement............................................. 24
ii 4 THIS REGISTRATION RIGHTS 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 (the "Investor"). This Agreement is made pursuant to the Demand Note (as defined below). In order to induce Victory to issue the loan evidenced by the Demand Note, the Company has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the issuance of the Demand Note. The parties hereby agree as follows: SECTION 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: Agent: Any Person authorized to act and who acts on behalf of the Investor with respect to the transactions contemplated by this Agreement. Common Stock: The common stock, $0.01 par value, of the Company. Convertible Note Shares: The shares of Common Stock issuable in certain circumstances pursuant to the Demand Note. Demand Note: The $10,000,000 Demand Promissory Note dated the date hereof issued by the Company in favor of the Investor. Exchange Act: The Securities Exchange Act of 1934, as amended from time to time. NASD: National Association of Securities Dealers, Inc. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. 5 Registrable Securities: (i) the Warrant Shares and (ii) the Convertible Note Shares. Registrable Securities shall also include any securities which may be issued or distributed with respect to, or in exchange for, such Registrable Securities pursuant to a stock dividend, stock split or other distribution, merger, consolidation, recapitalization or reclassification or similar transaction; provided, however, that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such Registrable Securities has been declared effective under the Securities Act and such Registrable Securities have been disposed of in accordance with the plan of distribution set forth in such Registration Statement, (ii) such Registrable Securities may be distributed pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, or (iii) such Registrable Securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting transfer under the Securities Act shall have been delivered by the Company and they may be publicly resold without subsequent registration under the Securities Act or in compliance with Rule 144 thereunder; provided, further, however, that any securities that have ceased to be Registrable Securities cannot thereafter become Registrable Securities, and any securities that are issued or distributed in respect of securities that have ceased to be Registrable Securities are not Registrable Securities. Registration: A Demand Registration (as defined in Section 3) or a Piggyback Registration (as defined in Section 4) of the Company's securities for sale to the public under a Registration Statement. Registration Expenses: See Section 7 hereof. Registration Statement: Any registration statement of the Company filed with the Securities and Exchange Commission under the rules and regulations promulgated under the Securities Act which covers Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such Registration Statement. Securities Act: The Securities Act of 1933, as amended from time to time. SEC: The Securities and Exchange Commission. Underwritten Registration or Underwritten Offering: A Registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2 6 1995 Warrants: The Warrants to purchase 500,000 shares of Common Stock (subject to customary anti-dilution adjustments) issued by the Company to the Investor pursuant to a Telemarketing, Production and Post-Production Agreement dated November 24, 1995 (the "Telemarketing Agreement") by and between the Company and the Investor. 1997 Warrants: The Warrants to purchase 250,000 shares of Common Stock (subject to customary anti-dilution adjustments) issued pursuant to the Warrant Agreement (as defined below). Warrant Agreement: The Warrant Agreement dated the date hereof by and between the Company and the Investor. Warrant Shares: Any shares of Common Stock issued or issuable upon exercise of the 1995 Warrants or the 1997 Warrants. SECTION 2. Securities Subject to this Agreement. (a) Registrable Securities. The securities entitled to the benefits of this Agreement are the Registrable Securities. (b) Holders of Registrable Securities. A Person is deemed to be a holder of Registrable Securities whenever such Person owns Registrable Securities or has the right to acquire such Registrable Securities, whether or not such ownership or right was acquired pursuant to the Telemarketing Agreement, the Warrant Agreement or the Demand Note, and whether or not such acquisition has actually been effected and disregarding any legal restrictions upon the exercise of such right. SECTION 3. Demand Registrations. (a) Demand by Holders. The majority of the holders of Registrable Securities, at any time from and after the date hereof, may make, in the aggregate, one written request to the Company for Registration under and in accordance with the provisions of the Securities Act of all or part of the Registrable Securities. Any such Registration requested shall hereinafter be referred to as a "Demand Registration." Such request for a Demand Registration shall specify the kind and aggregate amount of Registrable Securities to be registered and the intended methods of disposition thereof. Upon such request for a Demand Registration, the Company shall use its best efforts to effect the Registration of such Registrable Securities under (i) the Securities Act, and (ii) 3 7 the blue sky laws of such jurisdictions as any holder of such Registrable Securities requesting such Registration or any underwriter, if any, may reasonably request; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(a). The Company shall also use its best efforts to have all such Registrable Securities registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the holders of a majority of such Registrable Securities to consummate the disposition of such Registrable Securities. (b) Effective Registration. The Company shall be deemed to have effected a Demand Registration if the Registration Statement relating to such Demand Registration is declared effective by the SEC and remains effective at all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold and (ii) the date on which all of the Registrable Securities may be immediately sold to the public without registration under Rule 144(k) under the Securities Act (the "Registration Period"); provided, however, that no Demand Registration shall be deemed to have been effected if (i) such registration, after it has become effective, is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason not attributable to the selling holders of Registrable Securities, or (ii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of a failure on the part of the selling holders of Registrable Securities and other than by reasons of a failure on the part of an underwriter selected by the selling holders of Registrable Securities. Notwithstanding the foregoing, if at any time prior to the expiration of the Registration Period, in the good faith reasonable judgment of the Company's Board of Directors, the disposition of Registrable Securities would require the premature disclosure of material non-public information which may reasonably be expected to have an adverse effect on the Company, then the Company shall not be required to maintain the effectiveness of or amend or supplement such Registration Statement for a period (a "Disclosure Delay Period") expiring upon the earlier to occur of (i) the date on which such material information is disclosed to the public or ceases to be material or (ii) subject to the following paragraph, up to 30 calendar days after the date on which the Company provides a notice to the holders of Registrable Securities stating that the failure to disclose such non-public information causes the prospectus included in the Registration Statement, as then in effect, to include an untrue statement of a material fact or to omit to state a 4 8 material fact required to be stated therein or necessary to make the statements therein not misleading. In no event shall a Disclosure Delay Period exceed 30 calendar days. The Company will give prompt written notice to the holders of Registrable Securities, in the manner prescribed by Section 11(e) hereof, of each Disclosure Delay Period. Advance notice of the Disclosure Delay Period shall be given to the extent practicable. If practicable, such notice shall estimate the duration of such Disclosure Delay Period. Each holder of Registrable Securities, by accepting such Registrable Securities, agrees that, upon receipt of such notice prior to such holder's disposition of all such Registrable Securities, such holder will forthwith discontinue disposition of such Registrable Securities pursuant to the Registration Statement and will not deliver any prospectus forming a part thereof in connection with any sale of such Registrable Securities until the expiration of such Disclosure Delay Period. Notwithstanding anything in this Section 3(b) to the contrary, there shall not be more than an aggregate of 30 calendar days in any 12 month period during which the Company is in a Disclosure Delay Period, nor more than an aggregate of 30 calendar days in any 90 calendar day period during which the Company is in a Disclosure Delay Period, nor more than an aggregate of 60 calendar days during the Registration Period during which the Company is in a Disclosure Delay Period. (c) Registration Statement Form. Registrations under this Section 3 shall be on such appropriate registration form of the SEC (i) as shall be selected by the Company and as shall be reasonably satisfactory to the holders of a majority of the Registrable Securities requesting a Demand Registration and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in such holders' requests for such Registration. If, in connection with any Registration under this Section 3 which is proposed by the Company to be on Form S-3 or any successor form to such Form, the managing underwriter (if any) or holders of a majority of the Registrable Securities requesting a Demand Registration shall advise the Company in writing that in its reasonable opinion the use of another permitted form is of material importance to the success of the offering, then such Registration shall be on such other permitted form. (d) Selection of Underwriters. If at any time or from time to time a majority of the holders of Registrable Securities covered by a Registration Statement desire to sell Registrable Securities in an Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the holders of a majority of the Registrable Securities included in such offering. 5 9 (e) Registration of Other Securities. Whenever the Company shall effect a Registration pursuant to this Section 3 in connection with an Underwritten Offering by one or more holders of Registrable Securities, no securities other than Registrable Securities shall be included among the securities covered by such Registration unless (a) the managing underwriter of such offering shall have advised each selling holder of Registrable Securities to be covered by such Registration in writing that the inclusion of such other securities would not adversely affect such offering or (b) the selling holders of a majority of all Registrable Securities to be covered by such Registration shall have consented in writing to the inclusion of such other securities. (f) Priority in Requested Registration. If the Company shall effect a Registration pursuant to this Section 3 in connection with an Underwritten Offering by one or more holders of Registrable Securities, and if the managing underwriter of such offering shall advise the Company in writing (with a copy to each selling holder of Registrable Securities requesting Registration) that, in its opinion, the number of securities requested to be included in such Registration exceeds the number which can be sold in such offering within a price range acceptable to the selling holders of a majority of the Registrable Securities requested to be included in such Registration, the Company will include in such Registration, to the extent of the number which the Company is so advised can be sold in such offering, Registrable Securities requested to be included in such Registration, selected pro rata from the Registrable Securities of the selling holders requesting such Registration on the basis of the percentage of the total amount of the Registrable Securities which such selling holders requested to be so registered. In connection with any such Registration to which this Section 3(f) is applicable, no securities other than Registrable Securities shall be covered by such Registration. SECTION 4. Piggyback Registrations. (a) Participation. Subject to Section 4(b) hereof, if at any time from and after the date hereof, the Company proposes to file a Registration Statement under the Securities Act with respect to any offering of any of its securities, whether or not for its own account (other than (i) a registration on Form S-4 or S-8 or any successor form to such Forms, (ii) any registration of securities as it relates to an offering and sale to employees, officers or directors of the Company pursuant to any employee stock plan or other employee benefit plan arrangement or (iii) any Registration Statement filed at the demand or request of a holder of the Company's Series C Convertible Preferred Stock, or securities issued in exchange for such Series C Convertible Preferred Stock), then, as promptly as practicable, the Company shall give written notice of such proposed filing to each holder of Registrable 6 10 Securities and such notice shall offer the holders of Registrable Securities the opportunity to register such number of Registrable Securities as each such holder may request (a "Piggyback Registration"). Subject to Section 4(b), the Company shall include in such Registration Statement all Registrable Securities requested within 15 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder) to be included in the Registration for such offering pursuant to a Piggyback Registration. Each holder of Registrable Securities shall be permitted to withdraw all or part of such holder's Registrable Securities from a Piggyback Registration at any time prior to the effective date thereof. (b) Underwriter's Cutback. The Company shall use its best efforts to cause the managing underwriter or underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested to be included in the Registration for such offering under Section 4(a) or pursuant to other piggyback registration rights granted by the Company, if any (the "Piggyback Securities"), to be included on the same terms and conditions as any similar securities included therein. Notwithstanding the foregoing, if the managing underwriter or underwriters of any such proposed Underwritten Offering informs the Company and the holders of such Piggyback Securities in writing that the total amount or kind of securities, including Piggyback Securities, which such holders and any other persons or entities intend to include in such offering would be reasonably likely to adversely affect the price or distribution of the securities offered in such offering or the timing thereof, then the securities to be included in such Registration shall be the number of securities that, in the opinion of such underwriter or underwriters, can be sold without an adverse effect on the price, timing or distribution of the securities to be included, selected (i) first, from the securities originally proposed by the Company to be included in the Registration for such offering, (ii) second, and only if all the securities originally proposed by the Company to be included in such Registration have been so included, from the Piggyback Securities requested for inclusion in such Registration, provided that if less than 100% of such Piggyback Securities is to be included in such Registration, the Piggyback Securities to be so included shall be selected pro rata from the Piggyback Securities of the selling holders requesting such Piggyback Registration on the basis of the percentage of the total amount of the Piggyback Securities which such selling holders requested to be so registered, and (iii) third, and only if all of the Piggyback Securities requested for inclusion in such Registration have been so included, from any other securities eligible for inclusion in such Registration. Notwithstanding the foregoing, in the case of a registration statement registering securities pursuant to the Registration Rights Agreement, dated as of December 19, 1994, by and among the Company and the other signatories thereto (the "December 1994 Agreement"), the holders of a majority of the securities to be registered pursuant to 7 11 such agreement have in good faith determined that the inclusion of Registrable Securities would be detrimental to the offering of such securities, then in each case the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which a holder of Registrable Securities has requested inclusion hereunder as the underwriter or such other holders, respectively, shall permit. Any exclusion of Registrable Securities shall be made pro rata among the holders of Registrable Securities seeking to include Registrable Securities, in proportion to the number of Registrable Securities sought to be included by such holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in the Registration Statement other than holders of securities entitled to inclusion of their securities in such Registration Statement by reason of demand registration rights and provided that any reduction of securities to be registered pursuant to the December 1994 Agreement or the Securities Purchase Agreement, dated as of September 30, 1994, as amended as of December 19, 1994, by and among the Company and the other signatories thereto or the Option Agreement dated as of January 13, 1995, between the Company and Buckeye Communications, Inc., or the 1995 Warrants shall be allocated among the parties hereto as provided therein. No right to registration of Registrable Securities under this Section 4(b) shall be construed to limit any registration required under Section 3(a) hereof. If an offering in connection with which a holder of Registrable Securities is entitled to registration under this Section 4(b) is an underwritten offering, then each holder of Registrable Securities whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering. (c) No Effect on Demand Registrations. No Registration of Registrable Securities effected pursuant to a request under this Section 4 shall be deemed to have been effected pursuant to Section 3 hereof or shall relieve the Company of its obligation to effect any Registration upon request under Section 3 hereof. SECTION 5. Hold-Back Agreements. 8 12 (a) Restrictions on Public Sale by Holder of Registrable Securities. Each holder of Registrable Securities agrees, if requested by (i) the managing underwriters in an Underwritten Offering, or (ii) the holders of a majority of the Registrable Securities included pursuant to Section 3 hereof in a Demand Registration not being underwritten, not to effect any public sale or distribution of securities of the Company the same as or similar to those being registered, or any securities convertible into or exchangeable or exercisable for such securities, in such Registration Statement, including a sale pursuant to Rule 144 under the Securities Act (except as part of such Underwritten Registration), during the 10-day period prior to, and during the 90-day period (or, with respect to a Piggyback Registration, such longer period of up to 180 days as may be required by such underwriter) beginning on, the effective date of any Registration Statement in which holders of Registrable Securities are participating (except as part of such registration) or the commencement of the public distribution of securities, to the extent timely notified in writing by the Company or the managing underwriters (or the holders, as the case may be). The foregoing provisions shall not apply to any holder of Registrable Securities if such holder is prevented by applicable statute or regulation from entering any such agreement; provided that any such holder shall undertake, in its request to participate in any such Underwritten Offering, not to effect any public sale or distribution of the applicable class of Registrable Securities commencing on the date of sale of such applicable class of Registrable Securities unless it has provided 45 days' prior written notice of such sale or distribution to the underwriter or underwriters. (b) Restrictions on Public Sale by the Company and Others. The Company agrees that if, after the date hereof, any "holdback" or any other similar right relating to restrictions on the public or private sale of the Company's equity securities is granted by the Company or any other holders of the Company's equity securities with respect to any of the Company's equity securities, then the Company shall immediately amend this Agreement to provide for at least as favorable of a holdback or other similar right for the benefit of the holders of the Registrable Securities. SECTION 6. Registration Procedures. In connection with the Company's registration obligations pursuant to Sections 3 and 4 hereof, the Company will use its best efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company will as expeditiously as possible: 9 13 (a) before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the holders of the Registrable Securities covered by such Registration Statement and the underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the review of such holders and underwriters (it being understood that, with respect to the holders of the Registrable Securities, such review shall be completed as expeditiously as possible), and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto to which the holders of a majority of the Registrable Securities covered by such Registration Statement or the underwriters, if any, shall reasonably object; (b) prepare and file with the SEC a Registration Statement or Registration Statements relating to the applicable Demand Registration or Piggyback Registration including all exhibits and financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective under the Securities Act; and prepare and file with the SEC such amendments and post-effective amendments to such Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by any holder of Registrable Securities or any underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act or rules and regulations otherwise necessary to keep the Registration Statement effective for a period of not less than 90 days (or such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold or withdrawn) with respect to a Piggyback Registration, and for a period continuing during the Registration Period with respect to a Demand Registration, or, if such Registration Statement relates to an Underwritten Offering, such longer period as in the opinion of counsel for the underwriters a Prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer; and cause the Prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (c) notify the selling holders of Registrable Securities and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such advice in writing, 10 14 (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) if at any time the representations and warranties of the Company contemplated by paragraph (o) below cease to be true and correct, (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and (6) of the existence of any fact which results in the Registration Statement, the Prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; (e) if requested by the managing underwriter or underwriters or a holder of Registrable Securities being sold in connection with an Underwritten Offering, immediately incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters and the holders of a majority of the Registrable Securities being sold agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, including, without limitation, information with respect to the amount of Registrable Securities being 11 15 sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (f) furnish to each selling holder of Registrable Securities and each managing underwriter, without charge, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including, if requested, those incorporated by reference); (g) deliver to each selling holder of Registrable Securities and the underwriters, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request (it being understood that the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto) and such other documents as such selling holder may reasonably request in order to facilitate the disposition of the Registrable Securities by such holder and underwriters, if any; (h) prior to any public offering of Registrable Securities, register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any selling holder of Registrable Securities or any underwriter reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (i) cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any 12 16 restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters; (j) use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities; (k) if any fact contemplated by paragraph (c)(6) above shall exist, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (l) cause all Registrable Securities covered by the Registration Statement to be listed on the New York Stock Exchange (the "NYSE") or, if not listed on the NYSE, (i) to be listed on each securities exchange on which similar securities issued by the Company are then listed or (ii) to be quoted on the Nasdaq National Market, if requested by the holders of a majority of such Registrable Securities or the managing underwriters, if any; (m) cause the Registrable Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the holders of a majority of such Registrable Securities or the managing underwriters, if any; (n) not later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities and provide the applicable transfer agent with printed certificates for the Registerable Securities which are in a form eligible for deposit with Depositary Trust Company; (o) enter into agreements (including underwriting agreements) and take all other appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, whether or not an underwriting 13 17 agreement is entered into and whether or not the registration is an Underwritten Registration, deliver such documents and certificates as may be requested by the holders of a majority of the Registrable Securities being sold and the managing underwriters, if any, to evidence compliance with paragraph (k) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company, and if an underwriting agreement is entered into or if the registration is an Underwritten Registration: (1) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary Underwritten Offerings and covering matters including, but not limited to, those set forth in the Agreement and Plan of Reorganization and Merger dated as of the date hereof by and among the Investor, the Company and V-L Holdings Corp.; (2) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority of the Registrable Securities being sold) addressed to each selling holder and the underwriters, if any, covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by such holders and underwriters; (3) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the selling holders of Registrable Securities and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters by underwriters in connection with primary Underwritten Offerings; and (4) if an underwriting agreement is entered into, cause the same to set forth in full the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section. The above shall be done at the effectiveness of such Registration Statement, each closing under any underwriting or similar agreement as and to the extent required 14 18 thereunder and from time to time as may be requested by any selling holder in connection with the disposition of Registrable Securities pursuant to such Registration Statement; (p) make available for inspection by a representative of the holders of a majority of the Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by the sellers or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with the registration; provided that any records, information or documents that are designated by the Company in writing as confidential shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order; (q) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, earnings statements satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of any 12-month period (or 90 days, if such period is a fiscal year) (1) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in an Underwritten Offering, or, if not sold to underwriters in such an offering and (2) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statements shall cover said 12-month periods; (r) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and (s) promptly prior to the filing of any document which is to be incorporated by reference into the Registration Statement or the Prospectus (after initial filing of the Registration Statement), provide copies of such document to counsel to the selling holders of Registrable Securities and to the managing underwriters, if any, make the Company's representatives available for discussion of such document and make such changes in such document prior to the filing thereof as counsel for such selling holders or underwriters may reasonably request; it being understood that any document filed pursuant to the Exchange Act will be 15 19 provided concurrently with such filing and will not be subject to prior review before filing. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(k) hereof, such holder will forthwith discontinue disposition of Registrable Securities until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(k) hereof, or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the time periods during which such Registration Statement shall be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended prospectus contemplated by Section 6(k) hereof or is advised in writing by the Company that the use of the Prospectus may be resumed. On or before the tenth (10th) day of each month immediately following a month in which the Investor sells Registrable Securities on the NYSE or otherwise, the Investor shall deliver a notice to the Company setting forth the number of Registrable Securities sold by the Investor during such month and the number of Registrable Securities held by the Investor as of the end of such month. SECTION 7. Registration Expenses. (a) All expenses incident to the Company's performance of or compliance with this Agreement will be paid by the Company, regardless of whether the Registration Statement becomes effective, including without limitation: 16 20 (1) all registration and filing fees (including with respect to filings required to be made with the SEC, the NYSE and the NASD); (2) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters or selling holders in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or holders of a majority of the Registrable Securities being sold may designate); (3) printing (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with the Depositary Trust Company and of printing prospectuses), messenger, telephone and delivery expenses; (4) fees and disbursements of counsel for (i) the Company, (ii) subject to the last paragraph of this Section 7(a), the underwriters and (iii) subject to the last paragraph of this Section 7(a), the sellers of the Registrable Securities (subject to the provisions of Section 7(b) hereof); (5) fees and disbursements of all independent certified public accountants of the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (6) subject to the last paragraph of this Section 7(a), fees and disbursements of underwriters (excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities and legal expenses of any Person other than the Company, the underwriters and the selling holders); (7) fees and expenses of other Persons retained by the Company; and (8) fees and expenses associated with any NASD filing required to be made in connection with the Registration Statement, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained in accordance with the rules and regulations of the NASD (all such expenses being herein called "Registration Expenses"). 17 21 The Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed, rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company. The Company shall not be required to pay more than $25,000 for the fees and expenses referred to in Section 7(a)(4)(ii) and (iii) and Section 7(a)(6) above. (b) In connection with each Registration Statement required hereunder, the Company will reimburse the holders of Registrable Securities being registered pursuant to such Registration Statement for the reasonable fees and disbursements of not more than one counsel (or more than one counsel if a conflict exists among such selling holders in the exercise of the reasonable judgment of counsel for the selling holders and counsel for the Company) chosen by the holders of a majority of such Registrable Securities. SECTION 8. Indemnification. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each holder of Registrable Securities, its officers, directors, employees and Agents and each Person who controls such holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes hereinafter referred to as an "Indemnified Holder") from and against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any such untrue statement or omission or allegation thereof based upon information furnished in writing to the Company by such holder expressly for use therein; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in any Prospectus or preliminary prospectus, if such untrue statement or alleged untrue statement, omission or alleged omission is completely corrected in an amendment or supplement to the Prospectus or preliminary prospectus and if, having previously been furnished by or on behalf of the 18 22 Company with copies of the Prospectus or preliminary prospectus as so amended or supplemented, such holder thereafter fails to deliver such Prospectus or preliminary prospectus as so amended or supplemented, prior to or concurrently with the sale of a Registrable Security to the person asserting such loss, claim, damage, liability or expense who purchased such Registrable Security which is the subject thereof from such holder. This indemnity will be in addition to any liability which the Company may otherwise have. The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Indemnified Holders of Registrable Securities. If any action or proceeding (including any governmental investigation or inquiry) shall be brought or asserted against an Indemnified Holder in respect of which indemnity may be sought from the Company, such Indemnified Holder shall promptly notify the Company in writing, and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Holder and the payment of all expenses. Such Indemnified Holder shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Holder unless (a) the Company has agreed to pay such fees and expenses or (b) the Company shall have failed to assume the defense of such action or proceeding and has failed to employ counsel satisfactory to such Indemnified Holder in any such action or proceeding or (c) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnified Holder and the Company, and such Indemnified Holder shall have been advised by counsel that there may be one or more legal defenses available to such Indemnified holder which are different from or additional to those available to the Company (in which case, if such Indemnified Holder notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Holder, it being understood, however, that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for such Indemnified Holder and any other Indemnified Holders, which firm shall be designated in writing by such Indemnified Holders). The Company shall not be liable for any settlement of any such action or proceeding effected without its written consent, but if settled with its written consent, or 19 23 if there be a final judgment for the plaintiff in any such action or proceeding, the Company agrees to indemnify and hold harmless such Indemnified Holders from and against any loss or liability by reason of such settlement or judgment. (b) Indemnification by Holder of Registrable Securities. Each holder of Registrable Securities agrees to indemnify and hold harmless the Company, its officers, directors, employees and Agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such holder, but only with respect to information relating to such holder furnished in writing by such holder expressly for use in any Registration Statement or Prospectus, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its directors or officers or any such controlling person, in respect of which indemnity may be sought against a holder of Registrable Securities, such holder shall have the rights and duties given the Company and the Company or its officers, directors, employees and Agents or such controlling person shall have the rights and duties given to each holder by the preceding paragraph. In no event shall the liability of any selling holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement or any amendment or supplement thereto, or any preliminary prospectus. (c) Contribution. If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Indemnified Holder on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnified Holder on the other shall be determined 20 24 by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company and each holder of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 8(c), an Indemnified Holder shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by such Indemnified Holder or its affiliated Indemnified Holders and distributed to the public were offered to the public exceeds the amount of any damages which such Indemnified Holder, or its affiliated Indemnified Holder, has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. SECTION 9. Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any holder of Registrable Securities made after the first anniversary of the date hereof, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such information and requirements. 21 25 SECTION 10. Participation in Underwritten Registrations. No Person may participate in any Underwritten Registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 11. Miscellaneous. (a) Remedies. Each holder of Registrable Securities, in addition to being entitled to exercise all rights provided herein, in the Warrant Agreement, the Telemarketing Agreement and the Demand Note and granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities which is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The Company represents and warrants that the rights granted to the holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting Registrable Securities. The Company will not take any action, or permit any change to occur, with respect to the Registrable Securities which would adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement. (d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of holders of at least a majority of the outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of holders of 22 26 Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by the holders of a majority of the Registrable Securities being sold. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a holder of Registrable Securities, at the most current address given by such holder to the Company in accordance with the provisions of this Section 11(e), which address initially is, with respect to the Investor, 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: General Counsel, with a copy to Latham & Watkins, 633 West Fifth Street, Los Angeles, California 90071, Attention: Michael Sturrock, Esq.; and (ii) if to the Company, initially at Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, Pennsylvania, Attention: General Counsel and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 11(e), with a copy to Klehr, Harrison, Harvey, Branzburg & Ellers LLP, 1401 Walnut Street, Philadelphia, Pennsylvania 19102, Attention: Stephen T. Burdumy, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent holders of Registrable Securities; provided, however, that after the date hereof this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a holder of Registrable Securities unless and to the extent such successor or assign acquired Registrable Securities from such holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so 23 27 executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the securities issued pursuant to the Warrant Agreement or the Demand Note. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature Page to Follow] 24 28 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NATIONAL MEDIA CORPORATION By: /s/ Robert N. Verratti ----------------------------- Name: Robert N. Verratti Title: President and Chief Executive Officer VALUEVISION INTERNATIONAL, INC. By: /s/ Robert L. Johander ------------------------------ Name: Robert L. Johander Title: Chairman and Chief Executive Officer S-1 EX-99.1 11 EXHIBIT 99.1 1 FOR IMMEDIATE RELEASE JANUARY 5, 1998 EXHIBIT 99.1 VALUEVISION INTERNATIONAL, INC. AND NATIONAL MEDIA CORPORATION TO MERGE BY FORMING NEW CORPORATION Merger to Create New Television Infomercial/Shopping, Mail Order, and Internet Direct Marketing Company With Global Sales in Excess of $500 Million Merged Company to Use Quantum Television Name on ValueVision's U.S. Shopping Channel, Accelerate Addition of TV Shopping to Quantum International Infomercial Business MINNEAPOLIS, MN and PHILADELPHIA, PA, January 5, 1998--ValueVision International, Inc. (Nasdaq: VVTV) and National Media Corporation (NYSE: NM) today announced that their respective boards of directors have agreed to merge their respective companies into a holding company, creating an integrated worldwide marketer of consumer merchandise through infomercials, television home shopping, mail order, Internet and retail channels. Upon closing of the transaction, National Media shareholders will receive 1 share in a new holding company for each share held in National Media and ValueVision shareholders will receive 1.19 shares in the new enterprise for each ValueVision share held. No cash is included in the merger consideration. The transaction is intended to be accounted for as a purchase and is expected to be tax-free. As a result of the transaction, it is anticipated that ValueVision shareholders will own approximately 55 percent of the new company with National Media shareholders owning the remainder. "This merger creates compelling synergies, as ValueVision aligns its powerful balance sheet and streamlined operations with National Media's sales strength and international merketing -more- 2 VALUEVISION AND NATIONAL MEDIA ADD -1- opportunities," said Robert L. Johander, chairman and chief executive officer of ValueVision. "We're exhilarated at the near- and long-term prospects for this new enterprise." The merger is expected to provide National Media with the necessary financial strength to support its steadily improving worldwide TV merchandising activity and successful recent product launches. National Media also plans to take advantage of excess capacity in ValueVision's existing telemarketing and order fulfillment facilities to streamline National Media's U.S. operations and make use of ValueVision's 24-hour-per-day home shopping channel as a new outlet for certain products. For ValueVision, the merger matches its operational and financial resources with significant new growth opportunities through international expansion, media cost efficiencies applied to the combined organization's $100-million-plus annual TV budget, and significant merchandising leverage to improve product sourcing and costs. "The international infrastructure that National Media has created with its Quantum Television business will prove a valuable platform for ValueVision's TV shopping and mail order businesses as we explore international expansion," said Robert N. Verratti, president and chief executive officer of National Media. "In addition, because both companies' stock-in-trade is TV selling, the combined facilities, media buying power, creative, production, and distribution skills we can marshal will allow us to realize significant cost efficiencies and create a formidable competitive force in bringing products from the initial concept stage to ultimate mass retail distribution." NEW COMPANY EXPECTED TO GENERATE MORE THAN $500 MILLION IN ANNUAL SALES The new, yet-to-be-named company will be publicly traded and will exploit and expand the world-wide use of National Media's Quantum Television brand name for electronic retailing. Annual sales of the combined entities are expected to exceed $500 million, including domestic TV shopping and infomercials, U.S. mail order catalog sales, and international infomercial merchandise sales. The merger will include the renaming of ValueVision's 24-hour-per-day U.S. television home shopping channel to include the Quantum Television name. The companies also expect to expand Quantum Television international activities to include television home shopping in a number of the more than 70 countries in which Quantum Television currently conducts long-form infomercial business. The companies will also combine U.S. telemarketing and outsourced services management, warehousing, fulfillment, customer service, and a variety of general and administrative functions to streamline and improve operational efficiencies for both. MANAGEMENT TEAMS WILL PROVIDE FOR A SMOOTH TRANSITION Mr. Johander will serve as interim CEO of the new company. It is the intention of the new company's board of directors to conduct a world-wide search for a permanent chief executive -more- 3 ValueVision and National Media Add -2- officer. Mr. Verratti, will reduce his operational responsibilities upon completion of the merger while remaining a member of the new company's board of directors and serving on its executive committee. Frederick S. Hammer, chairman of National Media's board of directors, and Mr. Johander will serve as co-chairmen of the board of the combined company. Nicholas M. Jaksich, ValueVision's chief operating officer, will serve as president and chief operating officer of the combined company. Constantinos I. Costalas, National Media's vice-chairman of the board and chief operating officer, will remain chief operating officer of National Media, and ValueVision's chief financial officer, Stuart R. Romenesko, will become chief financial officer of the merged company. ValueVision to extend interim working capital loan to National Media Under the agreement, ValueVision has extended to National Media a working capital loan commitment of up to $10 Million for various purposes, including funding of inventory and related rollout expenses for several of National Media's successful new product launches including the Cyclone cross-trainer and several homeware products. The loan will bear interest at prime rate plus 1.5 percent and would be due on January 1, 1999 or upon termination of the merger agreement in certain circumstances, including lack of National Media shareholder approval. In the event National Media is unable to pay the loan when due, ValueVision may elect to receive repayment in shares of National Media common stock at its then market value. In consideration of providing the loan, ValueVision is receiving a warrant to acquire 250,000 shares of national Media common stock and registration rights for the shares issuable upon conversion of the notes and exercise of the warrant. Conditions to closing and post-merger matters In addition to approval of the transaction by the shareholders of both companies, the merger is conditioned on redemption of National Media's Series C Convertible Preferred Stock for approximately $23.5 million (pursuant to a binding agreement under which holders of the Series C Convertible Preferred Stock were issued warrants to acquire 500,000 shares of National Media common stock at $6.82 per share), closing by ValueVision on the repurchase from Montgomery Ward of 1,280,000 shares of ValueVision common stock and cancellation of warrants previously issued to Montgomery Ward to acquire approximately 3.8 million shares of ValueVision common stock (which transactions were approved by the United States Bankruptcy Court in Delaware on December 30, 1997). Furthermore, the merger is subject to customary regulatory filings, reviews and approvals, including those with the Securities and Exchange Commission, the Federal Trade Commission and the Federal Communications Commission. The merger agreement provides for a break-up fee of $5 million to be payable to either company under certain circumstances. In addition each company has granted the other an option to acquire 19.9 percent of its common stock under -more- 4 VALUEVISON AND NATIONAL MEDIA ADD -3- certain limited conditions. The merger is expected to be completed during the second calender quarter of 1998. The merger agreement calls for the new company - to be incorporated in Delaware - - to initially form a 10-member board of directors, comprised of five directors nominated by the current National Media board and five directors nominated by the ValueVision board. Certain corporate governance matters will require a "super-majority" vote for passage. An eleventh board seat will be held open and filled by the chief executive officer upon successful completion of the proposed search. Upon completion of the merger, based on currently outstanding shares of stock of the companies, the new company will have approximately 58 million shares of common stock outstanding. If exercised, various additional warrants and stock options would raise approximately $100 million and result in the issuance of approximately 17 million shares. The new company will consolidate key administrative functions at its respective facilities in the Philadelphia, Minneapolis and Los Angeles areas and will integrate its U.S. telemarketing, customer service, warehousing and fulfillment operations currently centered in Boston, Eden Prairie (Minnesota), Bowling Green (Kentucky) and Phoenix. National Media Corporation (NYSE: NM) is the world's largest publicly held infomercial company. It broadcasts more than 3,000 half-hours of programming each week, reaches 90 percent of television homes in the United States, and brings its programming to more than 370 million television households in more than 70 countries worldwide. ValueVision International, Inc. (Nasdaq: VVTC) is an integrated electronic and print media direct marketing company and the third-largest television home shopping network in the United States. Bear Stearns & Co., Inc. served as financial advisor to ValueVision; Lehman Brothers served as financial advisor to National Media. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made or to be made by the company) contains statements that are forward-looking, such as statements relating to consummation of the merger, anticipated future revenues of the merged companies, cost savings and other synergies resulting from the merger, success of current product offerings, and recruitment of a new chief executive officer. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly,such results may differ materially from those expressed in any forward-looking statements made by or on behalf of the company. For a description of additional risks and uncertainties, please refer to the companies' filings with the Securities and Exchange Commissions, including Forms 10-K and 10-Q. -30- EX-99.2 12 EXHIBIT 99.2 1 EXHIBIT 99.2 CONSENT, WAIVER, AND AMENDMENT This Consent, Waiver, and Amendment, dated as of January 5, 1998 is made by and between CoreStates Bank, N.A., a national banking association ("Lender") and National Media Corporation, a Delaware corporation ("NMC"), Quantum North America, Inc., formerly known as Media Arts International, Ltd., Quantum International Limited, Positive Response Television, Inc. and DirectAmerica Corporation (collectively, with NMC, the "Loan Parties") in reference to the Amended and Restated Loan and Security Agreement dated as of June 26, 1996 between NMC, certain of the Loan Parties and Meridian Bank, as lender (the "Amended and Restated Loan Agreement"), the Secured Subordinated Notes issued by NMC and dated December 1, 1994 and April 1, 1995, respectively in the original principal amount of $5 million (the "Notes") and the Loan Modification Agreement dated as of September 18, 1997 by and among NMC, certain of the Loan Parties and Lender (the "Loan Modification Agreement"), and any other indebtedness, guaranties, collateral or other agreements between Lender and any of the Loan Parties existing as of the date hereof (collectively, with the Amended and Restated Loan Agreement, the Notes and the Loan Modification Agreement, the "Loan Documents"). In consideration of the premises contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective as of the date hereof, Lender hereby (i) consents to and approves the transactions described in the Agreement and Plan of Reorganization and Merger (the "Merger Agreement") dated as of the date hereof by and among NMC, ValueVision International, Inc., a Minnesota corporation ("ValueVision") and V-L Holdings Corp., a Delaware corporation, and the related documents attached as exhibits thereto (collectively, with the Merger Agreement, the "Merger Documents") (including, without limitation, the $10 Million Demand Promissory Note dated as of the date hereof between NMC and ValueVision (the "Demand Promissory Note")), which consent and approval is hereby deemed to constitute and satisfy any consents required under the Loan Documents as a result of and in connection with the transactions described in the Merger Documents, including any consents required under the Amended and Restated Loan Agreement with respect to the incurrence of any indebtedness under the Demand Promissory Note (Section 8.3); the issuance of any guaranties (Section 8.5); the entry into any mergers, consolidations or other acquisition transactions (Section 8.7); and any failure to comply with the financial covenants set forth in Article 9 to the extent such failure is attributable to the incurrence of indebtedness under the Demand Promissory Note, and/or any expenses or expenditures incurred or accrued in connection with or as a result of the execution or consummation of the transactions described in the Merger Documents in an aggregate amount up to, but not in excess of, $5.0 million, and/or foreign exchange translation adjustments since June 30, 1997 and/or deferred taxes; and any consents required under Section 13 of the Loan Modification Agreement to a person other than Robert Verratti acting as the President and/or Chief Executive Officer of NMC following the consummation of the merger contemplated in the Merger Agreement, and (ii) waives any provisions under the Loan Documents which would otherwise be violated as a result of or in connection with the transactions described in the 2 Merger Documents. Notwithstanding the foregoing, if NMC fails to comply with the provisions of Paragraphs 2-6 below or there is a failure to comply with Paragraphs 7 or 8, this Consent, Waiver, and Amendment shall terminate and shall be null and void and Lender shall be entitled to exercise all rights and remedies it may have under the Loan Documents or applicable law. 2. Effective as of the date hereof, the Accrued Interest (as defined in the Loan Modification Agreement) for the period from September 18, 1997 through December 31, 1997 shall be paid on the date hereof. As of and after the date hereof, interest shall be paid monthly in accordance with the Loan Modification Agreement but at a rate equal to the Prime Rate (as defined in the Loan Modification Agreement) plus the Contract Rate Margin (as defined in the Loan Modification Agreement). 3. NMC shall not make any voluntary pre-payment of the principal amounts outstanding under the Demand Promissory Note, without obtaining the prior consent of Lender, which consent shall not be unreasonably withheld. 4. The warrant certificate representing the right to acquire 125,000 shares of common stock of NMC which right was issued pursuant to the terms of the Loan Modification Agreement, shall be finalized in accordance with the Loan Modification Agreement and executed and delivered as of even date herewith. 5. Upon the termination of the ASB Bank Limited Facility Agreement between ASB Bank Limited and Prestige Marketing Limited, a New Zealand corporation and a subsidiary of NMC ("Prestige") or any extension thereof, and the satisfaction of Prestige's obligations thereunder, Prestige shall (at Lender's option) guaranty the Obligations (as defined below) or become a co-borrower under the Loan Documents and NMC and Prestige shall grant Lender a security interest in the collateral that secured such facility pursuant to substantially similar documentation, to the extent of NMC's obligations with respect to principal, interest, fees or expenses under the Loan Documents (collectively, the "Obligations"). 6. The proceeds of any fees received by NMC from ValueVision pursuant to Section 7.3(b) of the Merger Agreement shall be first applied to the satisfaction of any Obligations outstanding under the Loan Documents. 7. Contemporaneously with the consummation of the transactions contemplated by the Merger Agreement, Lender will receive a guaranty executed by V-L Holdings Corp., ValueVision and its operating subsidiaries of NMC's obligations under the Loan Documents, in substantially the form attached hereto. 8. During the period commencing on the date hereof and until the consummation of the transactions contemplated by the Merger Agreement, ValueVision will not (i) create, incur or permit to exist any mortgage, pledge, encumbrance, lien, security interest or charge of any kind (including liens or charges upon properties acquired or to be acquired under conditional sales agreements or other title retention devices) ("Liens") on its property or 2 3 assets, whether now owned or hereafter acquired or upon any income, profits or proceeds therefrom, except: (a) Liens existing on the date hereof (none of which cover ValueVision's inventory and/or receivables, as a whole, and to the extent that any such Liens exist, such Liens are not, in the aggregate, material with respect to the aggregate value of ValueVision's inventory and/or receivables), (b) Liens incurred or deposits made in the ordinary course of business, including (x) in connection with worker's compensation, unemployment insurance, social security and other like laws or (y) to secure the performance of statutory obligations, not incurred in connection with either the borrowing of money or the deferred purchase price of goods or inventory, or (c) encumbrances consisting of zoning restrictions, easements, restrictions on the use of real property or minor irregularities of title thereto, none of which impairs the use of such property by ValueVision in the operation of its business, (ii) merge into or consolidate with any person (other than any of its subsidiaries, parent company or any subsidiary of such parent company) or sell or otherwise dispose of more than 85% of ValueVision's total assets to any person (other than any of its subsidiaries, parent company or any subsidiary of such parent company), which percentage shall be measured by dividing the aggregate book value of the assets sold by the aggregate book value of the total assets of ValueVision as of the date of such transaction, or (iii) pay dividends or make other distributions on account of its capital stock. 9. The Loan Documents, as amended by this Consent, Waiver and Amendment, constitute the entire agreement between the parties pertaining to the subject matter hereof and fully supersedes any and all prior or contemporaneous agreements or understandings between the parties hereto pertaining to the subject matter hereof. 10. Except as expressly contemplated and modified in this Consent, Waiver, and Amendment, the Loan Documents shall remain in full force and effect. 11. This Consent, Waiver and Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 3 4 IN WITNESS WHEREOF, each of the undersigned have caused this Consent, Waiver and Amendment to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. CORESTATES BANK, N.A. /s/ Patricia A. Barfory ---------------------------- By: Patricia A. Barfory Its: Vice President NATIONAL MEDIA CORPORATION /s/ Robert N. Verratti ---------------------------- By: Robert N. Verratti Its: President and Chief Executive Officer QUANTUM NORTH AMERICA /s/ Brian J. Sisko ---------------------------- By: Brian J. Sisko Its: Sr. Vice President QUANTUM INTERNATIONAL LIMITED /s/ Jack Sullivan ---------------------------- By: Jack Sullivan Its: Director POSITIVE RESPONSE TELEVISION, INC. /s/ Brian J. Sisko ---------------------------- By: Brian J. Sisko Its: Sr. Vice President DIRECTAMERICA CORPORATION /s/ Brian J. Sisko ---------------------------- By: Brian J. Sisko Its: Sr. Vice President S-1 -----END PRIVACY-ENHANCED MESSAGE-----