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