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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) September 18, 1997
NATIONAL MEDIA CORPORATION
(Exact name of registrant as specified in charter)
Delaware I-6715 13-2658741
(State or Other Juris- (Commission File Number) (IRS Employer Identi-
diction of Incorporation) fication No.)
Eleven Penn Center, Ste. 1100, 1835 Market Street, Philadelphia, PA 19103
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code 215-988-4600
N/A
(Former name or former address, if changed since last report.)
____________________________________
Exhibit Index appears on Page 4 hereof.
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Item 5. Other Events.
On September 19, 1997, National Media Corporation (the "Company") announced
that it had completed a transaction pursuant to which two institutional
investors (the "Series C Investors") not formerly associated with the
Company purchased $20 million (the "Investment") of the Company's
newly-created Series C Convertible Preferred Stock, $.01 par value per
share (the "Series C Preferred Stock").
The Series C Preferred Stock is convertible into the number of shares of
the Company's common stock, par value $.01 per share ("Common Stock") as is
determined by dividing (i) the aggregate stated value of the shares of
Series C Preferred Stock being converted (plus a 6% per annum premium
accrued as of the date of conversion) by (ii) (x) if the conversion occurs
on or before March 17, 1998, a conversion price equal to $6.06 per share
(subject to adjustments in accordance with the Certificate of Designations,
Preferences and Rights of the Series C Preferred Stock), or (y) in the case
of conversions after March 18, 1998, a conversion price equal to the lower
of $6.06 per share and the lowest daily volume weighted average sale price
(as determined in accordance with the Certificate of Designations,
Preferences and Rights of the Series C Preferred Stock) during a specified
trading period immediately prior to such conversion (subject to adjustment
in accordance with the Certificate of Designations, Preferences and Rights
of the Series C Preferred Stock). In connection with the issuance of the
Series C Preferred Stock, the Company issued warrants to purchase an
aggregate of 989,413 shares of Common Stock to the Series C Investors.
Such warrants are exercisable until September 17, 2002 at an exercise price
of $6.82 per share of Common Stock (subject to adjustment in certain
circumstances).
The Company also announced that it has reached an agreement with its
principal lender for the extension (the "Extension") of its principal
credit facility through December 1998.
Copies of the Certificate of Designations, Preferences and Rights of the
Series C Preferred Stock, the form of Warrant, the Registration Rights
Agreement and the Securities Purchase Agreement executed in connection with
the Investment are attached hereto as Exhibits 4.1, 4.2, 4.3 and 4.4,
respectively, and are incorporated herein by reference. A copy of the
press release announcing the Investment and the Extension is attached
hereto as Exhibit 99 and is incorporated herein by reference.
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SIGNATURES
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 hereunto duly authorized.
NATIONAL MEDIA CORPORATION
(Registrant)
Date: September 24, 1997 By: /s/ Brian J. Sisko
-------------------------------------
Name: Brian J. Sisko
Title: Senior Vice President and General
Counsel
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EXHIBIT INDEX
No.
4.1 Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock.
4.2 Form of Warrant issued in connection with the Series C Convertible
Preferred Stock.
4.3 Form of Registration Rights Agreement by and among the Company and the
Series C Investors.
4.4 Securities Purchase Agreement, dated September 4, 1997, among the Company
and the Series C Investors.
99 Press Release, dated September 19, 1997.
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EXHIBIT 4.1
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EXHIBIT A
to Securities
Purchase
Agreement
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
NATIONAL MEDIA CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
National Media Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies that
the following resolutions were adopted by the Board of Directors of the
Corporation pursuant to authority of the Board of Directors as required by
Section 151 of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Certificate of
Incorporation and Bylaws, each as amended and restated through the date
hereof, the Board of Directors hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $.01 per share
(the "Preferred Stock"), and hereby states the designation and number of
shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
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1. DESIGNATION AND AMOUNT
The designation of this series, which consists of 20,000 shares of
Preferred Stock, is the Series C Convertible Preferred Stock (the "Series C
Preferred Stock") and the face amount shall be One Thousand U.S. Dollars
($1000.00) per share (the "Face Amount").
2. NO DIVIDENDS
The Series C Preferred Stock will bear no dividends, and the holders of
the Series C Preferred Stock shall not be entitled to receive dividends on
the Series C Preferred Stock.
3. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:
a. "Conversion Date" means, for any Optional Conversion, the date
specified in the notice of conversion in the form attached hereto (the
"Notice of Conversion"), so long as the copy of the Notice of Conversion is
faxed (or delivered by other means resulting in notice) to the Corporation
before 11:59 p.m., New York City time, on the Conversion Date indicated in
the Notice of Conversion. If the Notice of Conversion is not so faxed or
otherwise delivered before such time, then the Conversion Date shall be the
date the holder faxes or otherwise delivers the Notice of Conversion to the
Corporation. The Conversion Date for the Required Conversion at Maturity
shall be the Maturity Date (as such terms are defined in Paragraph D of
Article IV).
b. "Conversion Percentage" shall mean one hundred percent (100%),
subject to adjustment as provided herein.
c. "Conversion Price" means (i) with respect to any Conversion Date
occurring prior to the earliest of (a) the 180th day after the date of
execution of the Securities Purchase Agreement (as defined herein), (b) the
first Announcement Date (as defined in Article XI.C hereof) after the date of
execution of the Securities Purchase Agreement or (c) the delivery by the
Corporation of the notice specified in Section 4(j)(A) of the Securities
Purchase Agreement (such earliest date referred to herein as the "First
Variable Conversion Date"), the Fixed Conversion Price and (ii) with respect
to any Conversion Date on or after the First Variable Conversion Date, the
lower of the Fixed Conversion Price and the Variable Conversion Price, each
in effect as of such date and subject to adjustment as provided herein.
d. "Fixed Conversion Price" means $6.06, and shall be subject to
adjustment as provided herein.
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e. "Issuance Date" means the date of the closing under that certain
Securities Purchase Agreement by and among the Corporation and the purchasers
named therein with respect to the issuance of the Series C Preferred Stock
(the "Securities Purchase Agreement").
f. "N" means the number of days from, but excluding, the Issuance Date.
g. "Premium" means an amount equal to (.06)x(N/365)x(1,000).
h. "Variable Conversion Price" means, as of any date of determination,
the amount obtained by multiplying the Conversion Percentage then in effect
by the lowest Volume Weighted Average Sale Price for the Corporation's common
stock, par value $.01 per share ("Common Stock"), on any single trading day
during the five (5) consecutive trading days ending on the trading day
immediately preceding such date of determination (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or
similar events during such five (5) trading day period), and shall be subject
to adjustment as provided herein.
i. "Volume Weighted Average Sale Price" means, for any security as of
any date, the volume weighted average sale price of such security on such
date on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg Financial Markets
utilizing its "volume at price" function or a comparable reporting service of
national reputation selected by the Corporation and reasonably acceptable to
holders of a majority-in-interest of the then outstanding shares of Series C
Preferred Stock if Bloomberg Financial Markets is not then reporting volume
weighted average sale prices of such security (collectively, "Bloomberg"), or
if no volume weighted average sale price is reported for such security by
Bloomberg, the average of the bid prices of any market maker for such
security that is listed in the "pink sheets" published by the National
Quotation Bureau, Inc. If the Volume Weighted Average Sale Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Volume Weighted Average Sale Price of such security on such date shall be the
fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to holders of a
majority-in-interest of the then outstanding shares of Series C Preferred
Stock, with the costs of such appraisal to be borne by the Corporation.
4. CONVERSION
a. Conversion at the Option of the Holder. (i) Subject to the
limitations on conversions contained in Paragraph C of this Article IV, each
holder of shares of Series C Preferred Stock may, at any time and from time
to time, convert (an "Optional Conversion") each of its shares of Series C
Preferred Stock into a number of fully paid and nonassessable shares of
Common Stock determined in accordance with the following formula if the
Corporation timely redeems the Premium thereon in cash in accordance with
subparagraph (ii) below:
1,000
----------------
Conversion Price
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or in accordance with the following formula if the Corporation does not
timely redeem the Premium thereon in accordance with subparagraph (ii) below:
1,000 + the Premium
-------------------
Conversion Price
(ii) a. The Corporation shall have the right, in its sole
discretion, upon receipt of a Notice of Conversion or in the event of a
Required Conversion at Maturity, to redeem any portion of the Premium subject
to such conversion for a sum of cash equal to the amount of the Premium being
so redeemed. All cash redemption payments hereunder shall be paid in lawful
money of the United States of America at such address for the holder as
appears on the record books of the Corporation (or at such other address as
such holder shall hereafter give to the Corporation by written notice). In
the event the Corporation so elects to redeem all or any portion of the
Premium in cash and fails to pay such holder the applicable redemption amount
to which such holder is entitled by depositing a check in the U.S. Mail to
such holder within three (3) business days of receipt by the Corporation of a
Notice of Conversion (in the case of a redemption in connection with an
Optional Conversion) or the Maturity Date (in the case of a redemption in
connection with a Required Conversion at Maturity), the Corporation shall
thereafter forfeit its right to redeem such Premium in cash and such Premium
shall thereafter be converted into shares of Common Stock in accordance with
Article IV.A(i).
b. Each holder of Series C Preferred Stock shall have the
right to require the Corporation to provide advance notice to such holder
stating whether the Corporation will elect to redeem all or any portion of
the Premium in cash pursuant to the Corporation's redemption rights discussed
in subparagraph (a) of this Article IV.A(ii). A holder may exercise such
right from time to time by sending notice (an "Election Notice") to the
Corporation, by facsimile, requesting that the Corporation disclose to such
holder whether the Corporation would elect to redeem any portion of the
Premium for cash in lieu of issuing shares of Common Stock therefor if such
holder were to exercise its right of conversion pursuant to this Article
IV.A. The Corporation shall, no later than the close of business on the next
business day following receipt of an Election Notice, disclose to such holder
whether the Corporation would elect to redeem any portion of a Premium in
connection with a conversion pursuant to a Notice of Conversion delivered
over the subsequent five (5) business day period. If the Corporation does
not respond to such holder within such one (1) business day period via
facsimile, the Corporation shall, with respect to any conversion pursuant to
a Conversion Notice delivered within the subsequent five (5) business day
period, forfeit its right to redeem such Premium in accordance with
subparagraph (a) of this Article IV.A(ii) and shall be required to convert
such Premium into shares of Common Stock.
b. Mechanics of Conversion. In order to effect an Optional Conversion,
a holder shall: (x) fax (or otherwise deliver) a copy of the fully executed
Notice of Conversion to the Corporation or the transfer agent for the Common
Stock and (y) surrender or cause to be surrendered the original certificates
representing the Series C Preferred Stock being converted (the "Preferred Stock
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Certificates"), duly endorsed, along with a copy of the Notice of Conversion
as soon as practicable thereafter to the Corporation or the transfer agent.
Upon receipt by the Corporation of a facsimile copy of a Notice of Conversion
from a holder, the Corporation shall immediately send, via facsimile, a
confirmation to such holder stating that the Notice of Conversion has been
received, the date upon which the Corporation expects to deliver the Common
Stock issuable upon such conversion and the name and telephone number of a
contact person at the Corporation regarding the conversion. The Corporation
shall not be obligated to issue shares of Common Stock upon a conversion
unless either the Preferred Stock Certificates are delivered to the
Corporation or the transfer agent as provided above, or the holder notifies
the Corporation or the transfer agent that such certificates have been lost,
stolen or destroyed and delivers the documentation to the Company required by
Article XIV.B hereof.
(i) Delivery of Common Stock Upon Conversion. Upon the surrender
of Preferred Stock Certificates from a holder of Series C Preferred Stock
accompanied by a Notice of Conversion, the Corporation shall, no later than
the later of (a) the second business day following the Conversion Date and
(b) the business day following the date of such surrender (or, in the case of
lost, stolen or destroyed certificates, after provision of indemnity pursuant
to Article XIV.B) (the "Delivery Period"), issue and deliver to the holder or
its nominee (x) that number of shares of Common Stock issuable upon
conversion of such shares of Series C Preferred Stock being converted and (y)
a certificate representing the number of shares of Series C Preferred Stock
not being converted, if any. If the Corporation's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend and the holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Corporation shall
cause its transfer agent to electronically transmit the Common Stock issuable
upon conversion to the holder by crediting the account of the holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC
Transfer"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Corporation shall deliver to the holder physical certificates
representing the Common Stock issuable upon conversion. Further, a holder may
instruct the Corporation to deliver to the holder physical certificates
representing the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of the shares of
Common Stock upon the conversion of the Series C Preferred Stock.
(iii) No Fractional Shares. If any conversion of Series C
Preferred Stock would result in the issuance of a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon conversion of the Series C Preferred Stock shall be
the next higher whole number of shares.
(iv) Conversion Disputes. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed
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in accordance with subparagraph (i) above. If such dispute involves the
calculation of the Conversion Price, the Corporation shall submit the
disputed calculations to an independent outside accountant via facsimile
within two (2) business days of receipt of the Notice of Conversion. The
accountant, at the Corporation's sole expense, shall audit the calculations
and notify the Corporation and the holder of the results no later than two
(2) business days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error.
The Corporation shall then issue the appropriate number of shares of Common
Stock in accordance with subparagraph (i) above.
c. Limitation on Conversions. Unless a holder of shares of Series C
Preferred Stock delivers a waiver in accordance with the last sentence of
this Paragraph C, except in a Required Conversion at Maturity, in no event
shall a holder of shares of Series C Preferred Stock be entitled to receive
shares of Common Stock upon a conversion to the extent that the sum of (x)
the number of shares of Common Stock beneficially owned by the holder and its
affiliates (exclusive of shares issuable upon conversion of the unconverted
portion of the shares of Series C Preferred Stock or the unexercised or
unconverted portion of any other securities of the Corporation (including,
without limitation, the warrants (the "Warrants") issued pursuant to the
Securities Purchase Agreement) subject to a limitation on conversion or
exercise analogous to the limitations contained herein) and (y) the number of
shares of Common Stock issuable upon the conversion of the shares of Series C
Preferred Stock with respect to which the determination of this subparagraph
is being made, would result in beneficial ownership by the holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of this subparagraph, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13 D-G thereunder, except as otherwise provided in
clause (x) above. Except as provided in the immediately succeeding sentence,
the restriction contained in this Paragraph C shall not be altered, amended,
deleted or changed in any manner whatsoever unless the holders of a majority
of the outstanding shares of Common Stock of the Corporation and each holder
of outstanding shares of Series C Preferred Stock shall approve such
alteration, amendment, deletion or change. A holder of shares of Series C
Preferred Stock may waive the restriction set forth in this Paragraph C by
written notice to the Corporation upon not less than sixty one (61) days
prior notice (with such waiver taking effect only upon the expiration of such
sixty one (61) day notice period).
d. Required Conversion at Maturity. Provided all shares of Common
Stock issuable upon conversion of all outstanding shares of Series C
Preferred Stock are then (i) authorized and reserved for issuance, (ii)
registered under the Securities Act of 1933, as amended (the "Securities
Act") for resale by the holders of such shares of Series C Preferred Stock or
such shares may be immediately sold to the public without registration under
Rule 144(k) under the Securities Act and (iii) eligible to be traded on
either the NYSE, the American Stock Exchange or the Nasdaq National Market,
each share of Series C Preferred Stock issued and outstanding on the fourth
(4th) anniversary of the Issuance Date (the "Maturity Date"), automatically
shall be converted into shares of Common Stock on such date in accordance
with the conversion formulas set forth in Paragraph A of this Article IV (the
"Required Conversion at Maturity"). If the Required Conversion at Maturity
occurs, the Corporation and the holders of Series C Preferred Stock shall follow
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the applicable conversion procedures set forth in Paragraph B of this Article
IV; provided, however, that the holders of Series C Preferred Stock are not
required to deliver a Notice of Conversion to the Corporation or its transfer
agent. If the Required Conversion at Maturity does not occur, each holder of
Series C Preferred Stock shall thereafter have the option, exercisable in
whole or in part at any time and from time to time by delivery of a
Redemption Notice to the Corporation, to require the Corporation to purchase
for cash, at an amount per share equal to the Redemption Amount (as defined
in Article VIII.B), the holder's Series C Preferred Stock. If the
Corporation fails to redeem any of such shares within five (5) business days
after the day on which the Corporation receives such Redemption Notice (the
"Redemption Date"), then such holder shall be entitled to the remedies
provided in Article VIII.C.
5. RESERVATION OF SHARES OF COMMON STOCK
a. Reserved Amount. Upon the initial issuance of the shares of Series
C Preferred Stock, the Corporation shall reserve 10,000,000 shares of the
authorized but unissued shares of Common Stock for issuance upon conversion
of the Series C Preferred Stock and thereafter the number of authorized but
unissued shares of Common Stock so reserved (the "Reserved Amount") shall not
be decreased and shall at all times be sufficient to provide for the
conversion of the Series C Preferred Stock outstanding at the then current
Conversion Price thereof. The Reserved Amount shall be allocated to the
holders of Series C Preferred Stock as provided in Article XIV.C.
b. Increases to Reserved Amount. If the Reserved Amount for any three
(3) consecutive trading days (the last of such three (3) trading days being
the "Authorization Trigger Date") shall be less than 135% of the number of
shares of Common Stock issuable upon conversion of the Series C Preferred
Stock, the Corporation shall immediately notify the holders of Series C
Preferred Stock of such occurrence and shall take immediate action
(including, if necessary, seeking shareholder approval to authorize the
issuance of additional shares of Common Stock) to increase the Reserved
Amount to 200% of the number of shares of Common Stock then issuable upon
conversion of the outstanding Series C Preferred Stock. In the event the
Corporation fails to so increase the Reserved Amount within ninety (90) days
after an Authorization Trigger Date, each holder of Series C Preferred Stock
shall thereafter have the option, exercisable in whole or in part at any time
and from time to time by delivery of a Redemption Notice to the Corporation,
to require the Corporation to purchase for cash, at an amount per share equal
to the Redemption Amount (as defined in Article VIII.B), a portion of the
holder's Series C Preferred Stock such that, after giving effect to such
purchase, the holder's allocated portion of the Reserved Amount exceeds 135%
of the total number of shares of Common Stock issuable to such holder upon
conversion of its Series C Preferred Stock. If the Corporation fails to
redeem any of such shares within five (5) business days after such Redemption
Date, then such holder shall be entitled to the remedies provided in Article
VIII.C.
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6. FAILURE TO SATISFY CONVERSIONS
a. Conversion Default Payments. If, at any time, (x) a holder of
shares of Series C Preferred Stock submits a Notice of Conversion and the
Corporation fails for any reason (other than because such issuance would
exceed such holder's allocated portion of the Reserved Amount, for which
failure the holders shall have the remedies set forth in Article V) to
deliver, on or prior to the fourth (4th) business day following the
expiration of the Delivery Period for such conversion, such number of freely
tradeable shares of Common Stock to which such holder is entitled upon such
conversion, or (y) the Corporation provides notice to any holder of Series C
Preferred Stock at any time of its intention not to issue freely tradeable
shares of Common Stock upon exercise by any holder of its conversion rights
in accordance with the terms of this Certificate of Designation (other than
because such issuance would exceed such holder's allocated portion of the
Reserved Amount) (each of (x) and (y) being a "Conversion Default"), then the
Corporation shall pay to the affected holder, in the case of a Conversion
Default described in clause (x) above, and to all holders, in the case of a
Conversion Default described in clause (y) above, payments for the first ten
(10) business days following the expiration of the Delivery Period, in the
case of a Conversion Default described in clause (x), and for the first ten
(10) business days following a Conversion Default described in clause (y), an
amount equal to $500 per day. In the event any Conversion Default continues
beyond such ten (10) business day period, the Corporation shall pay to the
holder an additional amount equal to:
(.24) x (D/365) x (the Default Amount)
where:
"D" means the number of days after the expiration of the ten (10)
business day period described above through and including the Default Cure
Date;
"Default Amount" means (i) the total Face Amount of all shares of Series
C Preferred Stock held by such holder plus (ii) the total accrued Premium as
of the first day of the Conversion Default on all shares of Series C
Preferred Stock included in clause (i) of this definition; and
"Default Cure Date" means (i) with respect to a Conversion Default
described in clause (x) of its definition, the date the Corporation effects
the conversion of the full number of shares of Series C Preferred Stock and
(ii) with respect to a Conversion Default described in clause (y) of its
definition, the date the Corporation begins to issue freely tradeable shares
of Common Stock in satisfaction of all conversions of Series C Preferred
Stock in accordance with Article IV.A, and (iii) with respect to either type
of a Conversion Default, the date on which the Corporation redeems shares of
Series C Preferred Stock held by such holder pursuant to paragraph D of this
Article VI.
"Freely tradeable shares of Common Stock" means the shares of Common
Stock issuable upon conversion of the outstanding shares of Series C
Preferred Stock (a) which can be sold by the holders thereof (i) pursuant to
the registration statement filed by the Company under the Securities
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Act pursuant to the Registration Rights Agreement subject to the prospectus
delivery requirements of the Securities Act, or (ii) under Rule 144(k) of the
Securities Act and (b) which Shares are listed for trading on the NYSE, the
American Stock Exchange or the Nasdaq National Market.
The payments to which a holder shall be entitled pursuant to this
Paragraph A are referred to herein as "Conversion Default Payments." A
holder may elect to receive accrued Conversion Default Payments in cash or to
convert all or any portion of such accrued Conversion Default Payments, at
any time, into Common Stock at the lowest Conversion Price in effect during
the period beginning on the date of the Conversion Default through the
Conversion Date with respect to such Conversion Default Payments. In the
event a holder elects to receive any Conversion Default Payments in cash, it
shall so notify the Corporation in writing. Such payment shall be made in
accordance with and be subject to the provisions of Article XIV.E. In the
event a holder elects to convert all or any portion of the Conversion Default
Payments into Common Stock, the holder shall indicate on a Notice of
Conversion such portion of the Conversion Default Payments which such holder
elects to so convert and such conversion shall otherwise be effected in
accordance with the provisions of Article IV.
b. Adjustment to Conversion Price. If a holder has not received
certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of Series C Preferred Stock for any reason (other than because
such issuance would exceed such holder's allocated portion of the Reserved
Amount, for which failure the holders shall have the remedies set forth in
Article V), then the Fixed Conversion Price in respect of any shares of
Series C Preferred Stock held by such holder (including shares of Series C
Preferred Stock submitted to the Corporation for conversion, but for which
shares of Common Stock have not been issued to such holder) shall thereafter
be the lesser of (i) the Fixed Conversion Price on the Conversion Date
specified in the Notice of Conversion which resulted in the Conversion
Default and (ii) the lowest Conversion Price in effect during the period
beginning on, and including, such Conversion Date through and including the
earlier of (x) the day such shares of Common Stock are delivered to the
holder and (y) the day on which the holder regains its rights as a holder of
Series C Preferred Stock with respect to such unconverted shares of Series C
Preferred Stock pursuant to the provisions of Article XIV.F hereof. If there
shall occur a Conversion Default of the type described in clause (y) of
Article VI.A, then the Fixed Conversion Price with respect to any conversion
thereafter shall be the lowest Conversion Price in effect at any time during
the period beginning on, and including, the date of the occurrence of such
Conversion Default through and including the Default Cure Date. The Fixed
Conversion Price shall thereafter be subject to further adjustment for any
events described in Article XI.
c. Buy-In Cure. Unless the Corporation has notified the applicable
holder in writing prior to the delivery by such holder of a Notice of
Conversion that the Corporation is unable to honor conversions, if (i) (a)
the Corporation fails for any reason to deliver during the Delivery Period
shares of Common Stock to a holder upon a conversion of shares of Series C
Preferred Stock or (b) there shall occur a Legend Removal Failure (as defined
in Article VIII.A(iii) below) and (ii) thereafter, such holder purchases (in
an open market transaction or otherwise) shares of Common
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Stock to make delivery in satisfaction of a sale by such holder of the
unlegended shares of Common Stock (the "Sold Shares") which such holder
anticipated receiving upon such conversion (a "Buy-In"), the Corporation
shall pay such holder (in addition to any other remedies available to the
holder) the amount by which (x) such holder's total purchase price (including
brokerage commissions, if any) for the unlegended shares of Common Stock so
purchased exceeds (y) the net proceeds received by such holder from the sale
of the Sold Shares. For example, if a holder purchases unlegended shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for $10,000, the Corporation will
be required to pay the holder $1,000. A holder shall provide the Corporation
written notification and supporting documentation indicating any amounts
payable to such holder pursuant to this Paragraph C. The Corporation shall
make any payments required pursuant to this Paragraph C in accordance with
and subject to the provisions of Article XIV.E.
d. Redemption Right. If the Corporation fails, and such failure
continues uncured for five (5) business days after the Corporation has been
notified thereof in writing by the holder, for any reason (other than because
such issuance would exceed such holder's allocated portion of the Reserved
Amount, for which failure the holders shall have the remedies set forth in
Article V) to issue shares of Common Stock within ten (10) business days
after the expiration of the Delivery Period with respect to any conversion of
Series C Preferred Stock, then the holder may elect at any time and from time
to time prior to the Default Cure Date for such Conversion Default, by
delivery of a Redemption Notice to the Corporation, to have all or any
portion of such holder's outstanding shares of Series C Preferred Stock
purchased by the Corporation for cash, at an amount per share equal to the
Redemption Amount (as defined in Article VIII.B). If the Corporation fails
to redeem any of such shares within five (5) business days after such
Redemption Date, then such holder shall be entitled to the remedies provided
in Article VIII.C.
7.[Intentionally Omitted]
8. REDEMPTION DUE TO CERTAIN EVENTS
a. Redemption by Holder. In the event (each of the events described in
clauses (i)-(vi) below after expiration of the applicable cure period (if
any) being a "Redemption Event"):
(i) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of the Series C Preferred Stock) is suspended from
trading on any of, or is not listed (and authorized) for trading on at least
one of, the NYSE, the American Stock Exchange or the Nasdaq National Market
for an aggregate of ten (10) trading days in any nine (9) month period;
(ii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement
entered into in connection with and pursuant
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to the Securities Purchase Agreement (the "Registration Rights Agreement"),
has not been declared effective by March 2, 1998 or such Registration
Statement, after being declared effective, cannot be utilized by the holders
of Series C Preferred Stock for the resale of all of their Registrable
Securities (as defined in the Registration Rights Agreement) for an aggregate
of more than thirty (30) days excluding any Disclosure Delay Period permitted
under the Registration Rights Agreement;
(iii) the Corporation fails to remove any restrictive legend on
any certificate or any shares of Common Stock issued to the holders of Series
C Preferred Stock upon conversion of the Series C Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase
Agreement or the Registration Rights Agreement (a "Legend Removal Failure"),
and any such failure continues uncured for five (5) business days after the
Corporation has been notified thereof in writing by the holder;
(iv) the Corporation provides notice to any holder of Series C
Preferred Stock, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any holder of Series C
Preferred Stock upon conversion in accordance with the terms of this
Certificate of Designation (other than due to the circumstances contemplated
by Article V for which the holders shall have the remedies set forth in such
Article);
(v) the Corporation shall:
a. sell, convey or dispose of all or substantially all of its
assets;
b. merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation
of the Corporation and other than pursuant to a merger in which the
Corporation is the surviving corporation and in which the Corporation does
not issue securities having voting power in the election of the directors
greater than 20% of the voting power in the election of directors of all
outstanding securities for the Corporation calculated before the issuance of
voting securities in the merger); or
c. have fifty percent (50%) or more of the voting power of
its capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Securities Exchange Act of 1934,
as amended), other than a person, entity or "group" comprised of one or more
of the Purchasers (as defined in the Securities Purchase Agreement);
(vi) the Corporation otherwise shall breach any material term
hereunder or under the Securities Purchase Agreement or the Registration
Rights Agreement (other than a breach of Section 4(j) of the Securities
Purchase Agreement constituting a Redemption Event under clause (v) of this
Paragraph A);
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then, upon the occurrence of any such Redemption Event, each holder of shares
of Series C Preferred Stock shall thereafter have the option, exercisable in
whole or in part at any time and from time to time by delivery of a
Redemption Notice (as defined in Paragraph C below) to the Corporation while
such Redemption Event continues, to require the Corporation to purchase for
cash any or all of the then outstanding shares of Series C Preferred Stock
held by such holder for an amount per share equal to the Redemption Amount
(as defined in Paragraph B below) in effect at the time of the redemption
hereunder. For the avoidance of doubt, the occurrence of any event described
in clauses (i), (ii), (iv), (v) or (vi) above shall immediately constitute a
Redemption Event and there shall be no cure period. Upon the Corporation's
receipt of any Redemption Notice hereunder (other than during the three (3)
trading day period following the Corporation's delivery of a Redemption
Announcement (as defined below) to all of the holders in response to the
Corporation's initial receipt of a Redemption Notice from a holder of Series
C Preferred Stock), the Corporation shall immediately (and in any event
within one (1) business day following such receipt) deliver a written notice
(a "Redemption Announcement") to all holders of Series C Preferred Stock
stating the date upon which the Corporation received such Redemption Notice
and the amount of Series C Preferred Stock covered thereby. The Corporation
shall not redeem any shares of Series C Preferred Stock during the three (3)
trading day period following the delivery of a required Redemption
Announcement hereunder.
b. Definition of Redemption Amount. The "Redemption Amount" with
respect to a share of Series C Preferred Stock means an amount equal to:
V
--------- X M
C P
where:
"V" means the face amount thereof plus the accrued Premium thereon and
all unpaid Conversion Default Payments owing (if any) with respect thereto
through the date of payment of the Redemption Amount;
"CP" means the Conversion Price in effect on the Redemption Date; and
"M" means (i) with respect to all redemptions other than redemptions
pursuant to Article VIII.A(v) where the conditions of Section 4(j)(i) and/or
4(j)(ii) of the Securities Purchase Agreement are not satisfied, the highest
Volume Weighted Average Sale Price of the Corporation's Common Stock during
the period beginning on the Redemption Date and ending on the date
immediately preceding the date of payment of the Redemption Amount and (ii)
with respect to redemptions pursuant to Article VIII.A(v) hereof where the
conditions of Section 4(j)(i) and/or 4(j)(ii) of the Securities Purchase
Agreement are not satisfied, the greater of (a) the amount determined
pursuant to clause (i) of this definition or (b) the fair market value, as of
the date immediately preceding the date of redemption, of the consideration
payable to the holder of a share of Common Stock pursuant
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<PAGE>
to the transaction which triggers the redemption; provided, however, that if
the Minimum Return (as defined below) is greater than the Redemption Amount,
as calculated utilizing the greater of (a) and (b), then the Redemption
Amount shall equal the Minimum Return. For purposes of this definition,
"fair market value" shall be determined by the mutual agreement of the
Company and holders of a majority-in-interest of the shares of Series C
Preferred Stock then outstanding, or if such agreement cannot be reached
within five (5) business days prior to the date of redemption, by an
investment banking firm selected by the Corporation and reasonably acceptable
to holders of a majority-in-interest of the then outstanding shares of Series
C Preferred Stock, with the costs of such appraisal to be borne by the
Corporation. For purposes of this definition, "Minimum Return" shall mean
the sum of the face amount of one share of Series C Preferred Stock, plus
accrued Premium thereon, plus interest at eighteen percent (18%) per annum on
such face amount and accrued Premium.
c. Redemption Defaults. If the Corporation fails to pay any holder the
Redemption Amount with respect to any share of Series C Preferred Stock
within five (5) business days after its receipt of a notice requiring such
redemption (a "Redemption Notice"), then the holder of Series C Preferred
Stock delivering such Redemption Notice (i) shall be entitled to interest on
the Redemption Amount at a per annum rate equal to the lower of twenty-four
percent (24%) and the highest interest rate permitted by applicable law from
the Redemption Date until the date of payment of the Redemption Amount
hereunder, and (ii) shall have the right, at any time and from time to time,
to require the Corporation, upon written notice, to immediately convert (in
accordance with the terms of Paragraph A of Article IV) all or any portion of
the Redemption Amount, plus interest as aforesaid, into shares of Common
Stock at the lowest Conversion Price in effect during the period beginning on
the Redemption Date and ending on the Conversion Date with respect to the
conversion of such Redemption Amount. In the event the Corporation is not
able to redeem all of the shares of Series C Preferred Stock subject to
Redemption Notices delivered after the Corporation's delivery of a Redemption
Announcement pursuant to Article VIII.B hereof prior to the date upon which
such redemption is to be effected (as set forth in the Redemption
Announcement), the Corporation shall redeem shares of Series C Preferred
Stock from each holder pro rata, based on the total number of shares of
Series C Preferred Stock outstanding at the time of redemption included by
such holder in all Redemption Notices delivered and prior to the date upon
which such redemption is to be effected relative to the total number of
shares of Series C Preferred Stock outstanding at the time of redemption
included in all of the Redemption Notices delivered prior to the date upon
which such redemption is to be effected.
9. RANK
All shares of the Series C Preferred Stock shall rank (i) prior to the
Corporation's Common Stock and Series A Junior Participating Preferred Stock;
(ii) prior to any class or series of capital stock of the Corporation
hereafter created (unless, with the consent of the holders of Series C
Preferred Stock obtained in accordance with Article XIII hereof, such class
or series of capital stock specifically, by its terms, ranks senior to or
pari passu with the Series C Preferred Stock) (collectively with the Common
Stock, "Junior Securities"); (iii) pari passu with any class or series
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of capital stock of the Corporation hereafter created (with the consent of
the holders of Series C Preferred Stock obtained in accordance with Article
XIII hereof) specifically ranking, by its terms, on parity with the Series C
Preferred Stock (the "Pari Passu Securities"); and (iv) junior to (a) the
Series B Convertible Preferred Stock of the Corporation and (b) any class or
series of capital stock of the Corporation hereafter created (with the
consent of the holders of Series C Preferred Stock obtained in accordance
with Article XIII hereof) specifically ranking, by its terms, senior to the
Series C Preferred Stock (the "Senior Securities"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
10. LIQUIDATION PREFERENCE
a. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay
its debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the U.S. Federal bankruptcy laws or
any other applicable bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and any such decree or order shall be unstayed and in effect
for a period of sixty (60) consecutive days and, on account of any such
event, the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, including, but
not limited to, the sale or transfer of all or substantially all of the
Corporation's assets in one transaction or in a series of related
transactions (a "Liquidation Event"), no distribution shall be made to the
holders of any shares of capital stock of the Corporation (other than Senior
Securities) upon liquidation, dissolution or winding up unless prior thereto
the holders of shares of Series C Preferred Stock shall have received the
Liquidation Preference with respect to each share. If, upon the occurrence
of a Liquidation Event, the assets and funds available for distribution among
the holders of the Series C Preferred Stock and holders of Pari Passu
Securities shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series C Preferred
Stock and the Pari Passu Securities shall be distributed ratably among such
shares in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.
b. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Corporation.
Neither the consolidation or merger of the Corporation with or into any other
entity nor the sale or transfer by the Corporation of less than substantially
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<PAGE>
all of its assets shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Corporation.
c. The "Liquidation Preference" with respect to a share of Series C
Preferred Stock means an amount equal to the Face Amount thereof plus the
accrued Premium thereon through the date of final distribution. The
Liquidation Preference with respect to any Pari Passu Securities shall be as
set forth in the Certificate of Designation filed in respect thereof.
11. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as
follows:
a. Stock Splits, Stock Dividends, Etc. If at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, combination, reclassification or other
similar event, the Fixed Conversion Price shall be proportionately reduced,
or if the number of outstanding shares of Common Stock is decreased by a
reverse stock split, combination or reclassification of shares, or other
similar event, the Fixed Conversion Price shall be proportionately increased.
In such event, the Corporation shall notify the Corporation's transfer agent
of such change on or before the effective date thereof.
b. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result
of a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the
Corporation is the surviving or continuing entity and its capital stock is
unchanged), (iii) any sale or transfer of all or substantially all of the
assets of the Corporation or (iv) any share exchange pursuant to which all of
the outstanding shares of Common Stock are converted into other securities or
property (each of (i) - (iv) above being a "Corporate Change"), then the
holders of Series C Preferred Stock shall thereafter have the right to
receive upon conversion, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would
have been issued or payable in such Corporate Change with respect to or in
exchange for the number of shares of Common Stock which would have been
issuable upon conversion (without giving effect to the limitations contained
in Article IV.C) had such Corporate Change not taken place, and in any such
case, appropriate provisions shall be made with respect to the rights and
interests of the holders of the Series C Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for adjustment
of the Conversion Price and of the number of shares of Common Stock issuable
upon conversion of the Series C Preferred Stock) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of
stock or securities thereafter deliverable upon the conversion thereof. The
Corporation shall not effect any Corporate Change unless (i) each holder of
Series C Preferred Stock has received written notice of such transaction at
least thirty (30) days prior thereto, but in no event later than ten (10)
days prior to the record date for the determination of shareholders
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<PAGE>
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this Certificate of Designation. The above provisions shall
apply regardless of whether or not there would have been a sufficient number
of shares of Common Stock authorized and available for issuance upon
conversion of the shares of Series C Preferred Stock outstanding as of the
date of such transaction, and shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
c. Adjustment Due to Major Announcement. In the event the Corporation
at any time after the Issuance Date (i) makes a public announcement that it
intends to consolidate or merge with any other entity (other than a merger in
which the Corporation is the surviving or continuing entity and its capital
stock is unchanged and in which the Corporation does not issue securities
having voting power in the election of the directors greater than 20% of the
voting power in the election of directors of all outstanding securities for
the Corporation calculated before the issuance of voting securities in the
merger) or to sell or transfer all or substantially all of the assets of the
Corporation or (ii) any person, group or entity (including the Corporation)
publicly announces a tender offer, exchange offer or another transaction to
purchase 50% or more of the Corporation's Common Stock (the date of the
announcement referred to in clause (i) or (ii) of this Paragraph C is
hereinafter referred to as the "Announcement Date"), then the Conversion
Price shall, effective upon the Announcement Date and continuing through the
sixth (6th) trading day following the earlier of the consummation of the
proposed transaction or tender offer, exchange offer or another transaction
or the Abandonment Date (as defined below), be equal to the lower of (x) the
Conversion Price which would have been applicable for an Optional Conversion
occurring on the Announcement Date and (y) the Conversion Price determined in
accordance with Article III.C on the Conversion Date set forth in the Notice
of Conversion for the Optional Conversion. From and after the sixth trading
day following the Abandonment Date, the Conversion Price shall be determined
as set forth in Article III.C. "Abandonment Date" means with respect to any
proposed transaction or tender offer, exchange offer or another transaction
for which a public announcement as contemplated by this Paragraph C has been
made, the date upon which the Corporation (in the case of clause (i) above)
or the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or
tender offer, exchange offer or another transaction which caused this
Paragraph C to become operative.
d. Adjustment Due to Distribution. If at any time after the Issuance
Date the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares
(or rights to acquire shares) of capital stock of a subsidiary (i.e. a
spin-off)) (a "Distribution"), then the holders of Series C Preferred Stock
shall be entitled, upon any conversion of shares of Series C Preferred Stock
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been
payable to the holder with respect to the shares of Common Stock issuable
upon such conversion (without giving effect to the limitations contained in
Article IV.C) had such holder been the holder of such shares of Common Stock
on the record date for the determination of shareholders entitled to such
Distribution.
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e. Issuance of Other Securities With Variable Conversion Price. If the
Corporation shall issue any securities which are convertible into or
exchangeable for Common Stock ("Convertible Securities") (i) at a conversion
or exchange rate based on a discount to the market price of the Common Stock
at the time of conversion or exercise, then the Conversion Percentage in
respect of any conversion of Series C Preferred Stock after such issuance
shall be calculated utilizing the higher of the greatest discount applicable
to any such Convertible Securities and the difference between one hundred
percent (100%) and the Conversion Percentage then in effect or (ii) at a
market price more favorable to the holder thereof than the Volume Weighted
Average Sale Price then in effect, then the term Variable Conversion Price in
respect of any conversion of Series C Preferred Stock after such issuance
shall automatically be amended to mean the definition resulting in such more
favorable market price.
f. Purchase Rights. If at any time after the Issuance Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to
the record holders of any class of Common Stock, then the holders of Series C
Preferred Stock will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Series C Preferred Stock (without
giving effect to the limitations contained in Article IV.C) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.
g. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series C Preferred
Stock a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of
Series C Preferred Stock, furnish to such holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Conversion Price at the
time in effect and (iii) the number of shares of Common Stock and the amount,
if any, of other securities or property which at the time would be received
upon conversion of a share of Series C Preferred Stock.
12. VOTING RIGHTS
The holders of the Series C Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation
Law (the "Business Corporation Law"), in this Article XII and in Article XIII
below.
Notwithstanding the above, the Corporation shall provide each holder of
Series C Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). If the Corporation takes a record of its shareholders for the
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purpose of determining shareholders entitled to (a) receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property,
or to receive any other right, or (b) to vote in connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the
Corporation, or any proposed merger, consolidation, liquidation, dissolution
or winding up of the Corporation, the Corporation shall mail a notice to each
holder, at least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier, but in no event earlier than public announcement of
such proposed transaction), of the date on which any such record is to be
taken for the purpose of such vote, dividend, distribution, right or other
event, and a brief statement regarding the amount and character of such vote,
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the Business Corporation Law the vote of the
holders of the Series C Preferred Stock, voting separately as a class or
series, as applicable, is required to authorize a given action of the
Corporation, the affirmative vote or consent of the holders of at least a
majority-in-interest of the shares of the Series C Preferred Stock
represented at a duly held meeting at which a quorum is present or by written
consent of majority-in-interest of the shares of Series C Preferred Stock
(except as otherwise may be required under the Business Corporation Law)
shall constitute the approval of such action by the class. To the extent
that under the Business Corporation Law holders of the Series C Preferred
Stock are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share of Series C Preferred Stock shall be
entitled to a number of votes equal to the number of shares of Common Stock
into which it is then convertible (without giving effect to the limitations
contained in Article IV.C) using the record date for the taking of such vote
of shareholders as the date as of which the Conversion Price is calculated.
13. PROTECTION PROVISIONS
So long as any shares of Series C Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by the Business Corporation Law) of the holders
of (i) all of the then outstanding shares of Series C Preferred Stock with
respect to subsection (a) below or (ii) at least 67% of the then outstanding
shares of Series C Preferred Stock with respect to subsections (b) through
(h) below:
a. alter or change the rights, preferences or privileges of
the Series C Preferred Stock;
b. alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the Series C
Preferred Stock;
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c. create any new class or series of capital stock having a
preference over the Series C Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation (as previously
defined in Article IX hereof, "Senior Securities");
d. create any new class or series of capital stock ranking
pari passu with the Series C Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation (as previously
defined in Article IX hereof, "Pari Passu Securities");
e. increase the authorized number of shares of Series C
Preferred Stock;
f. issue any shares of Senior Securities or Pari Passu
Securities;
g. issue any shares of Series C Preferred Stock other than
pursuant to the Securities Purchase Agreement; or
h. redeem, or declare or pay any cash dividend or
distribution on, any Junior Securities.
Notwithstanding the foregoing, no change pursuant to this Article XIII shall
be effective to the extent that, by its terms, it applies to less than all of
the holders of shares of Series C Preferred Stock then outstanding.
14. MISCELLANEOUS
a. Cancellation of Series C Preferred Stock. If any shares of Series C
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series C Preferred Stock.
b. Lost or Stolen Certificates. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Corporation, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Corporation shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Corporation shall not be
obligated to reissue such lost or stolen Preferred Stock Certificate(s) if
the holder contemporaneously requests the Corporation to convert such Series
C Preferred Stock.
c. Allocation of Reserved Amount. The initial Reserved Amount shall be
allocated pro rata among the holders of Series C Preferred Stock based on the
number of shares of Series C Preferred Stock issued to each holder. Each
increase to the Reserved Amount shall be allocated pro rata among the holders
of Series C Preferred Stock based on the number of shares of Series C
Preferred Stock held by each holder at the time of the increase in the
Reserved Amount. In the event a holder shall sell or otherwise transfer any
of such holder's shares of Series C Preferred Stock, each
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transferee shall be allocated a pro rata portion of such transferor's
Reserved Amount. Any portion of the Reserved Amount which remains allocated
to any person or entity which does not hold any Series C Preferred Stock
shall be allocated to the remaining holders of shares of Series C Preferred
Stock, pro rata based on the number of shares of Series C Preferred Stock
then held by such holders.
d. Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the registration statement required to be
filed pursuant to Section 2(a) of the Registration Rights Agreement is
declared effective and thereafter so long as any shares of Series C Preferred
Stock are outstanding, the Corporation shall deliver (or cause its transfer
agent to deliver) to each holder a written report notifying the holders of
any occurrence which prohibits the Corporation from issuing Common Stock upon
any such conversion. The report shall also specify (i) the total number of
shares of Series C Preferred Stock and Warrants outstanding as of the end of
such quarter, (ii) the total number of shares of Common Stock issued upon all
conversions of Series C Preferred Stock and all exercises of Warrants prior
to the end of such quarter, and (iii) the total number of shares of Common
Stock which are reserved for issuance upon conversion of the Series C
Preferred Stock and exercise of Warrants as of the end of such quarter. The
Corporation (or its transfer agent) shall deliver the report for each quarter
to each holder prior to the tenth (10th) day of the calendar month following
the quarter to which such report relates. In addition, the Corporation (or
its transfer agent) shall provide, within fifteen (15) days after delivery to
the Corporation of a written request by any holder, any of the information
enumerated in clauses (i) - (iii) of this Paragraph D as of the date of such
request.
e. Payment of Cash; Defaults. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designation (as a
Conversion Default Payment, upon redemption or otherwise), such cash payment
shall be made to the holder within five (5) business days after delivery by
such holder of a notice specifying that the holder elects to receive such
payment in cash and the method (e.g., by check, wire transfer) in which such
payment should be made. If such payment is not delivered within such five
(5) business day period, such holder shall thereafter be entitled to interest
on the unpaid amount at a per annum rate equal to the lower of twenty-four
percent (24%) and the highest interest rate permitted by applicable law until
such amount is paid in full to the holder.
f. Status as Stockholder. Upon submission of a Notice of Conversion by
a holder of Series C Preferred Stock, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their issuance would
exceed such holder's allocated portion of the Reserved Amount) shall be
deemed converted into shares of Common Stock and (ii) the holder's rights as
a holder of such converted shares of Series C Preferred Stock shall cease and
terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at
law or in equity to such holder because of a failure by the Corporation to
comply with the terms of this Certificate of Designation. In situations
where Article VI.B is applicable, the number of shares of Common Stock
referred to in clauses (i) and (ii) of the immediately preceding sentence
shall be determined on the date on which such shares of Common
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<PAGE>
Stock are delivered to the holder. Notwithstanding the foregoing, if a
holder has not received certificates for all shares of Common Stock prior to
the tenth (10th) business day after the expiration of the Delivery Period
with respect to a conversion of Series C Preferred Stock for any reason, then
(unless the holder otherwise elects to retain its status as a holder of
Common Stock by so notifying the Corporation within five (5) business days
after the expiration of such ten (10) business day period after expiration of
the Delivery Period) the holder shall regain the rights of a holder of Series
C Preferred Stock with respect to such unconverted shares of Series C
Preferred Stock and the Corporation shall, as soon as practicable, return
such unconverted shares to the holder. In all cases, the holder shall retain
all of its rights and remedies (including, without limitation, (i) the right
to receive Conversion Default Payments pursuant to Article VI.A to the extent
required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to
subsequent conversions determined in accordance with Article VI.B) for the
Corporation's failure to convert Series C Preferred Stock.
g. Remedies Cumulative. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies
available under this Certificate of Designation, at law or in equity
(including a decree of specific performance and/or other injunctive relief),
and nothing herein shall limit a holder's right to pursue actual damages for
any failure by the Corporation to comply with the terms of this Certificate
of Designation. The Corporation acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of Series C
Preferred Stock and that the remedy at law for any such breach may be
inadequate. The Corporation therefore agrees, in the event of any such
breach or threatened breach, that the holders of Series C Preferred Stock
shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
21
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation this __ day of September, 1997.
NATIONAL MEDIA CORPORATION
By: _____________________________
Name:
Title:
22
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________ shares of
Series C Preferred Stock (the "Conversion"), represented by stock certificate
Nos(s). ___________ (the "Preferred Stock Certificates") into shares of
common stock ("Common Stock") of National Media Corporation (the
"Corporation") according to the conditions of the Certificate of
Designations, Preferences and Rights of Series C Convertible Preferred Stock
(the "Certificate of Designation"), as of the date written below. If
securities are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. No fee will be charged to the holder for any conversion, except for
transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
The Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or
its nominee (which is _________________) with DTC through its Deposit
Withdrawal Agent Commission System ("DTC Transfer").
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of
the Series C Preferred Stock shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933, as amended (the "Act"), or
pursuant to an exemption from registration under the Act.
/ / In lieu of receiving the shares of Common Stock issuable pursuant to this
Notice of Conversion by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned physical
certificates representing such shares of Common Stock.
Date of Conversion:___________________________
Applicable Conversion Price:____________________
Amount of Conversion Default Payments
to be Converted, if any:______________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_______________________________________
Address:_______________________________________
_______________________________________
_______________________________________
<PAGE>
EXHIBIT 4.2
<PAGE>
EXHIBIT B
to
Securities
Purchase
Agreement
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON SEPTEMBER ___, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase _______Shares of
Common Stock,
par value $.01 per share
Date: September __, 1997
NATIONAL MEDIA CORPORATION
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _____________________________ or
its registered assigns, is entitled to purchase from NATIONAL MEDIA CORPORATION,
a corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, ___________ (_______) fully paid and nonassessable shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), at an
exercise price per share (the "Exercise Price") equal to $6.82. The number of
shares of Common Stock purchasable hereunder (the "Warrant Shares") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "Warrants" means this Warrant and the other warrants of the Company issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the other signatories thereto (the
"Securities Purchase Agreement").
<PAGE>
This Warrant is subject to the following terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the holder is permitted to
effect a Cashless Exercise (as defined in Section 11(c) hereof) pursuant to
Section 11(c) hereof, delivery to the Company of a written notice of an election
to effect a Cashless Exercise for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof, as the record owner of such shares, as of the close of business
on the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment shall have been made
for such shares as set forth above or, if such date is not a business date, on
the next succeeding business date. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding two (2) business days, after this Warrant shall have been so exercised
(the "Delivery Period"). The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company fails for
any reason to deliver, on or prior to the fourth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "Exercise
Default"), then the Company shall pay to the holder payments ("Exercise Default
Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) below) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with Section 1 (the "Exercise Default Date") exceeds
the Exercise Price, multiplied by (c) the number of shares of Common Stock the
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N = the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default. The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common Stock at the Exercise
Price, at the holder's option, as follows:
2
<PAGE>
a. In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth (5th) day of the month following
the month in which it has accrued; and
b. In the event holder elects to take such payment in Common Stock,
the holder may convert such payment amount into Common Stock (in accordance with
the terms contained in Article IV of the Certificate of Designations,
Preferences and Rights (the "Certificate of Designation") governing the
Company's Series C Convertible Preferred Stock (the "Series C Preferred Stock"))
at the lower of the Exercise Price or the Market Price (as defined in Section
4(l)) (as in effect at the time of conversion) at any time after the fifth (5th)
day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock as required pursuant to the terms of Section 3(b) or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and each holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
2. Period of Exercise.
a. This Warrant is immediately exercisable, at any time or from time
to time on or after the date of initial issuance of this Warrant (the "Issue
Date") and before 5:00 p.m., New York City time on, September __, 2002 (the
"Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
a. Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
b. Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 7(g) hereof).
c. Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
3
<PAGE>
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
d. Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
e. Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable hereunder and for which this
Warrant is then exercisable pursuant to Section 2 hereof shall be subject to
adjustment from time to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
a. Adjustment of Exercise Price. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Dilutive Market Price (as hereinafter
defined) on the date of issuance (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
E' = E x O + P/M
------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Dilutive Market Price (as defined in
Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
4
<PAGE>
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(l)) immediately after
the Dilutive Issuance.
b. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("Below Market Options"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the
5
<PAGE>
Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange thereof at
the time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon exercise, conversion or exchange of
such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio to any person or entity other than the holder hereof (a
"Variable Rate Convertible Security"), then the price per share for which Common
Stock is issuable upon such exercise, conversion or exchange for purposes of the
calculation contemplated by Section 4(b)(ii)(A) shall be deemed to be the lowest
price per share which would be applicable (assuming all holding period and other
conditions to any discounts contained in such Convertible Security have been
satisfied) if the Market Price on the date of issuance of such Convertible
Security was 75% of the Market Price on such date (the "Assumed Variable Market
Price"). Further, if the Market Price at any time or times thereafter is less
than or equal to the Assumed Variable Market Price last used for making any
adjustment under this Section 4 with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to equal
the Exercise Price which would have resulted if the Assumed Variable Market
Price at the time of issuance of the Variable Rate Convertible Security had been
75% of the Market Price existing at the time of the adjustment required by this
sentence.
(iii) Change in Option Price or Conversion Rate. If there is
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or exchange
of any Convertible Securities is not, in fact, issued and the rights to exercise
such Option or to exercise, convert or exchange such Convertible Securities
shall have expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
6
<PAGE>
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair market
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the Issue Date and
set forth on Schedule 3(c) of the Securities Purchase Agreement in accordance
with the terms of such securities as of such date; (ii) upon the grant or
exercise of any stock or options which may hereafter be granted or exercised
under any employee benefit plan of the Company now existing or to be implemented
in the future, so long as the issuance of such stock or options is approved by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose; (iii) upon the issuance of any shares of Series C Preferred
Stock or Warrants issued or issuable in accordance with terms of the Securities
Purchase Agreement; or (iv) upon conversion of the Series C Preferred Stock or
exercise of the Warrants.
c. Subdivision or Combination of Common Stock. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
d. Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable shall be adjusted by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment
7
<PAGE>
by the number of shares of Common Stock issuable or for which this Warrant is or
may become exercisable (as applicable) upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
e. Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as were issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company
will make appropriate provision to insure that the provisions of this Section 4
hereof will thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger or sale or
conveyance unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
f. Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon exercise
of this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets (or rights) which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
g. Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
h. Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward
8
<PAGE>
and shall be made at the time and together with the next subsequent adjustment
which, together with any adjustments so carried forward, shall amount to not
less than 1% of such Exercise Price.
i. No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
j. Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on
which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall
not affect the validity of the proceedings referred to in clauses (i), (ii),
(iii) and (iv) above.
k. Certain Events. If, at any time during the Exercise Period, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise
9
<PAGE>
Price and the number of shares of Common Stock acquirable upon exercise of this
Warrant so that the rights of the holder shall be neither enhanced nor
diminished by such event.
l. Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "Dilutive Market Price," as of any date, (i) means the
closing sale price for the shares of Common Stock as reported on the New York
Stock Exchange for the trading day immediately preceding such date, or (ii) if
the New York Stock Exchange is not the principal trading market for the shares
of Common Stock, the closing sale prices on the principal trading market for the
Common Stock for the trading day immediately preceding such date, or (iii) if
market value cannot be calculated as of such date on any of the foregoing bases,
the Dilutive Market Price shall be the average fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Dilutive Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.
(iii) "Market Price," as of any date, (i) means the volume
weighted average sale price for the shares of Common Stock as reported on the
New York Stock Exchange for the trading day immediately preceding such date, or
(ii) if the New York Stock Exchange is not the principal trading market for the
shares of Common Stock, the volume weighted average sale prices on the principal
trading market for the Common Stock for the trading day immediately preceding
such date, or (iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the average fair market value
as reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the holder, with the costs of the appraisal to be
borne by the Company. The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.
(iv) "Common Stock," for purposes of this Section 4, includes the
Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
10
<PAGE>
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
a. Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) and (g) hereof and to the provisions of
Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the other signatories
thereto (the "Registration Rights Agreement").
b. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
c. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
11
<PAGE>
d. Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7. The Company shall
indemnify and reimburse the holder of this Warrant for all costs and expenses
(including legal fees) incurred by such holder in connection with the
enforcement of its rights hereunder.
e. Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
f. Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an "accredited investor" as defined
in Rule 501(a) promulgated under the Securities Act; provided that no such
opinion, letter, status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
g. Additional Restrictions on Exercise or Transfer. Notwithstanding
anything contained herein to the contrary, unless the holder hereof delivers a
waiver in accordance with the last sentence of this Section 7(g), in no event
shall the holder hereof exercise Warrants to the extent that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
(including the Series C Preferred Stock) subject to a limitation on conversion
or exercise analogous to the limitation contained herein) and (b) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portion
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by such holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(a) hereof. Except as provided in the immediately succeeding sentence, the
restrictions contained in this Section 7(g) may not be amended
12
<PAGE>
without the consent of the holder of this Warrant and the holders of a majority
of the Company's then outstanding Common Stock. The holder hereof may waive the
restrictions set forth in this Section 7(g) by written notice to the Company
upon not less than sixty one (61) days prior notice (with such waiver taking
effect only upon the expiration of such sixty one (61) day notice period).
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
9. Notices. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, Chief Executive Officer, and
Attn: Brian J. Sisko, Senior Vice President and General Counsel
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
10. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Agreement and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect
the holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
13
<PAGE>
11. Miscellaneous.
a. Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
b. Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
c. Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time after the first
anniversary of the Issue Date until the end of the Exercise Period, by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying
the Exercise Price in cash, the holder shall surrender this Warrant for that
number of shares of Common Stock determined by multiplying the number of Warrant
Shares to which it would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the Market Price of a share of the Common
Stock on the date of exercise and the Exercise Price, and the denominator of
which shall be such Market Price per share of Common Stock.
d. Business Day. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
NATIONAL MEDIA CORPORATION
By: _________________________________
Name:_____________________________
Title:______________________________
<PAGE>
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, and
Attn: Brian J. Sisko
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of National Media Corporation, a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant, and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
e. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144 is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
f. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_________________ _____________________________________
Signature of Holder
_____________________________________
Name of Holder (Print)
Address:
_____________________________________
_____________________________________
_____________________________________
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow,
to:
Name of Assignee Address No of Shares
- ----------------- --------- --------------
, and hereby irrevocably constitutes and appoints______________ ________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _____________________, ____,
In the presence of
__________________
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
________________________
Address: ________________________
________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
<PAGE>
EXHIBIT 4.3
<PAGE>
EXHIBIT C
to
Securities Purchase
Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September 4,
1997 by and among NATIONAL MEDIA CORPORATION, a corporation organized under the
laws of the State of Delaware , with headquarters located at Eleven Penn Center,
1835 Market Street, Suite 1100, Philadelphia, Pennsylvania 19103 (the
"Company"), and the undersigned (together with affiliates, the "Initial
Investors").
WHEREAS:
a. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
shares of its Series C Convertible Preferred Stock (the "Preferred Stock") that
is convertible into shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designations, Rights and Preferences
with respect to such Preferred Stock (the "Certificate of Designation") and (ii)
warrants (the "Warrants") to acquire shares of Common Stock;
b. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investors and any transferees
or assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 10 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the
<PAGE>
Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares
and the Warrant Shares (including any Conversion Shares issuable with respect to
Conversion Default Payments under the Certificate of Designation or in
redemption of any Preferred Stock and any Warrant Shares issuable with respect
to Exercise Default Payments under the Warrants) issued or issuable with respect
to the Warrants and the Preferred Stock and any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a distribution on or
in exchange for or otherwise with respect to any of the foregoing.
(iv) "Registration Statement" means a registration statement of
the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
before the twenty-fifth (25th) day after the date hereof, file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of all of the Registrable Securities, subject to the consent of the
Initial Investors (as determined pursuant to Section 12(j) hereof)) covering the
resale of at least 7,000,000 Registrable Securities, which Registration
Statement, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock (i) to
prevent dilution resulting from stock splits, stock dividends or similar
transactions or (ii) by reason of reductions in the Conversion Price of the
Preferred Stock in accordance with the terms thereof, including, but not limited
to, the terms which cause the Variable Conversion Price to decrease to the
extent the volume weighted average sale price of the Common Stock decreases.
The Registrable Securities initially set forth in the Registration Statement
shall be allocated to the Investors as set forth in Section 12(k) hereof. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval of) the Initial Investors and their counsel prior to its
filing or other submission. Holders of shares of Series B Preferred Stock,
Buckeye Communications, Inc. and Value Vision International, Inc. have
"piggyback" registration rights with respect to such registration to the extent
required by the terms of the respective agreements with such holders and
entities, all of which are identified on Schedule 3(c) to the Securities
Purchase Agreement.
b. Payments by the Company. The Company shall cause the
Registration Statement required to be filed pursuant to Section 2(a) hereof to
become effective as soon as practicable, but in no event later than January 2,
1998. If (i) the Registration Statement(s) covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof is not
declared effective by the SEC on or before January 2, 1998 (the "Registration
Deadline") or if, after the Registration Statement has been declared effective
by the SEC, sales of all the Registrable
<PAGE>
Securities (including any Registrable Securities required to be registered
pursuant to Section 4(b) hereof) cannot be made pursuant to the Registration
Statement (by reason of a stop order or the Company's failure to update the
Registration Statement or any other reason outside the control of the Investors)
or (ii) the Common Stock is not listed or included for quotation on the New York
Stock Exchange (the "NYSE"), the Nasdaq National Market ("Nasdaq") or the
American Stock Exchange (the "AMEX") at any time after the Registration
Deadline, then the Company will make payments to the Investors in such amounts
and at such times as shall be determined pursuant to this Section 2(b) as
partial relief for the damages to the Investors by reason of any such delay in
or reduction of their ability to sell the Registrable Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity).
The Company shall pay to each Investor an amount equal to the product of (i) the
aggregate Purchase Price of the Preferred Stock and Warrants held by such
Investor (including, without limitation, Preferred Stock that has been converted
into Conversion Shares and Warrants that have been exercised for Warrant Shares
then held by such Investor) (the "Aggregate Share Price") multiplied by (ii) two
hundredths (.02) multiplied by (iii) the sum of: (y) the number of months
(prorated for partial months) after the Registration Deadline and prior to the
date the Registration Statement filed pursuant to Section 2(a) is declared
effective by the SEC and (z) the number of months (prorated for partial months)
that sales of any Registrable Securities cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective or the Common Stock is not listed or included for quotation on the
NYSE, Nasdaq or AMEX; provided, however that there shall be excluded from each
such period any delays which are solely attributable to changes (other than
corrections of Company mistakes with respect to information previously provided
by the Investors) required by the Investors in the Registration Statement with
respect to information relating to the Investors, including, without limitation,
changes to the plan of distribution. (For example, if the Registration
Statement is not effective by the Registration Deadline, the Company would pay
$20,000 per month for each $1,000,000 of Aggregate Share Price until the
Registration Statement becomes effective.) Such amounts shall be paid in cash
or, at each Investor's option, may be convertible into Common Stock at the
"Conversion Price" (as defined in the Certificate of Designation) then in
effect. Any shares of Common Stock issued upon conversion of such amounts shall
be Registrable Securities. If the Investor desires to convert the amounts due
hereunder into Registrable Securities it shall so notify the Company in writing
within two (2) business days after the date on which such amounts are first
payable in cash and such amounts shall be so convertible (pursuant to the
mechanics set forth under Article IV of the Certificate of Designation),
beginning on the last day upon which the cash amount would otherwise be due in
accordance with the following sentence. Payments of cash pursuant hereto shall
be made within five (5) days after the end of each period that gives rise to
such obligation, provided that, if any such period extends for more than thirty
(30) days, interim payments shall be made for each such thirty (30) day period.
c. Piggy-Back Registrations. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to each Investor who is
entitled to registration rights under this Section 2(c) written notice of such
determination and, if within fifteen (15) days after the date of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any such
registration (A) in the case of an underwritten public offering
<PAGE>
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution or (B) 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 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
such Investor has requested inclusion hereunder as the underwriter or such
holders, respectively, shall permit. Any exclusion of Registrable Securities
shall be made pro rata among the Investors seeking to include Registrable
Securities, in proportion to the number of Registrable Securities sought to be
included by such Investors; 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 (the "September 1994 Amended Agreement") or the Option
Agreement, dated as of January 13, 1995, between the Company and Buckeye
Communications, Inc., or the Warrant to purchase Common Stock, dated November
24, 1995, issued to Value Vision International, Inc. (the "VVI Warrant") shall
be allocated among the parties thereto as provided therein). No right to
registration of Registrable Securities under this Section 2(c) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor 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.
d. Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
e. Rule 416. The Company and the Investors each acknowledge that an
indeterminate number of Registrable Securities shall be registered pursuant to
Rule 416 under the Securities Act so as to include in such Registration
Statement any and all Registrable Securities which may become issuable (i) to
prevent dilution resulting from stock splits, stock dividends or similar
transactions and (ii) by reason of reductions in the Conversion Price of the
Preferred Stock in accordance with the terms thereof, including, but not limited
to, the terms which cause the
<PAGE>
Variable Conversion Price to decrease to the extent the volume weighted average
sale price of the Common Stock decreases (collectively, the "Rule 416
Securities"). In this regard, the Company agrees to take all steps necessary to
ensure that all Registrable Securities are registered pursuant to Rule 416 under
the Securities Act in the Registration Statement and, absent guidance from the
SEC or other definitive authority to the contrary, the Company shall
affirmatively support and not take any action adverse to the position that the
Registration Statements filed hereunder cover all of the Rule 416 Securities.
If the Company determines that the Registration Statements filed hereunder do
not cover all of the Rule 416 Securities, the Company shall immediately provide
to each Investor written notice (a "Rule 416 Notice") setting forth the basis
for the Company's position and the authority therefor.
3. DELAY PERIODS; SUSPENSION OF SALES.
a. If, at any time prior to the expiration of the Registration
Period (as defined below), 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 the 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 Section 3(b) hereof, up to thirty (30) calendar days after the date on which
the Company provides a notice to the Investors under Section 4(f) hereof 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 material fact required to be
stated therein or necessary to make the statements therein not misleading. For
the avoidance of doubt, in no event shall a Disclosure Delay Period exceed
thirty (30) calendar days.
b. The Company will give prompt written notice, in the manner
prescribed by Section 12 hereof, to the Investors 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 Investor, by accepting Registrable
Securities upon conversion of shares of Preferred Stock or exercise of Warrants,
agrees that, upon receipt of such notice prior to Investor's disposition of all
such Registrable Securities, Investor 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. In addition, the provisions of Section 2(b) hereof shall not apply to
the Disclosure Delay Periods. Notwithstanding anything in this Section 3 to the
contrary, there shall not be more than an aggregate of sixty (60) calendar days
in any twelve (12) month period during which the Company is in a Disclosure
Delay Period nor more than an aggregate of thirty (30) calendar days in any
ninety (90) calendar day period during which the Company is in a Disclosure
Delay Period.
c. The Company shall not be obligated to file any Registration
Statement pursuant to this Agreement within 120 days after the effectiveness of
any registration statement registering securities of the Company pursuant to the
December 1994 Agreement or the September 1994 Amended Agreement or the VVI
Warrant; provided, however, that the conditions of Section 9(b) of the December
1994 Agreement or Section 6.14 of the September 1994 Amended Agreement or
Section 7(l) of the VVI Warrant, as applicable, shall have been satisfied;
provided, further, however, that if such 120 day delay occurs, the Company shall
issue to each Investor a number of
<PAGE>
warrants, having identical terms, provisions and conditions as the Warrants,
equal to the number of Warrants purchased by such Investor pursuant to the
Securities Purchase Agreement. For the avoidance of doubt, the failure to have
the Registration Statement declared effective by the SEC on or before the
Registration Deadline including, but not limited to, a failure caused by the
occurrence of a 120 day delay pursuant to this Section 3(c), shall in no way
affect the Company's payment obligations pursuant to Section 2(b) hereof.
4. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2(a), and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement effective pursuant to Rule 415 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 (in the reasonable opinion of counsel to the Initial
Investors) may be immediately sold to the public without registration under Rule
144(k) under the Securities Act (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event (i) the
Company delivers a Rule 416 Notice to the Investors or the Investors who hold a
majority in interest of the Registrable Securities shall reasonably determine or
the SEC shall state formally or informally that Rule 416 under the Securities
Act does not permit a registration statement to cover securities which may
become issuable upon conversion or exercise of convertible or exercisable
securities by reason of reductions in the conversion or exercise price of such
securities and (ii) the number of shares available under a Registration
Statement filed pursuant to this Agreement is, for any three (3) consecutive
trading days (the last of such three (3) trading days being the "Registration
Trigger Date"), insufficient to cover one hundred thirty five percent (135%) of
the Registrable Securities issued or issuable upon conversion (without giving
effect to any limitations on conversion contained in Article IV.C of the
Certificate of Designation) of the Preferred Stock and exercise of the Warrants,
the Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover two hundred percent (200%) of the Registrable Securities issued or
issuable (without giving effect to any limitations on conversion contained in
Article IV.C of the Certificate of Designation) as of the Registration Trigger
Date, in each case, as soon as practicable, but in any event within fifteen (15)
days after the Registration Trigger Date (based on the market price then in
effect of the Common Stock and other relevant
<PAGE>
factors on which the Company reasonably elects to rely). The Company shall
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. In the event the Company
fails to obtain the effectiveness of any such Registration Statement within
sixty (60) days after a Registration Trigger Date, each Investor shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time by delivery of a written notice to the Company (a "Redemption
Notice"), to require the Company to purchase for cash, at an amount per share
equal to the Redemption Amount (as defined in Article VIII.B of the Certificate
of Designation), a portion of the Investor's Preferred Stock such that the total
number of Registrable Securities included on the Registration Statement for
resale by such Investor exceeds 135% of the Registrable Securities issued or
issuable upon conversion (without giving effect to any limitations on conversion
contained in Article IV.C of the Certificate of Designation) of such Investor's
Preferred Stock and exercise of such Investor's Warrants. If the Corporation
fails to redeem any of such shares within five (5) business days after its
receipt of a Redemption Notice, then such Investor shall be entitled to the
remedies provided in Article VIII.C of the Certificate of Designation.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC (including, without limitation, any request to
accelerate the effectiveness of any Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than any portion, if
any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (iii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 4(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
<PAGE>
e. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable moment (including in each case by amending or supplementing
such Registration Statement) and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
(and if such Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
<PAGE>
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 4(j). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees
that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
l. The Company shall use its best efforts to promptly either (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on the NYSE or the AMEX or another national securities exchange and on
each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation of all the Registrable Securities
covered by the Registration Statement on the Nasdaq and, without limiting the
generality of the foregoing, to arrange for or maintain at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
m. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
n. The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, or the Investors may reasonably request and registered in such names as or
the Investors may request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies
<PAGE>
to the Investors whose Registrable Securities are included in such Registration
Statement) an opinion of such counsel in the form attached hereto as Exhibit 1.
o. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
p. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the SEC.)
5. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 4(f) or
4(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4(f) or 4(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
d. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees
<PAGE>
to pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to Section 6 below.
6. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 4, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
selected by the Investors shall be borne by the Company. In addition, the
Company shall pay all of the Investors' costs and expenses (including legal
fees) incurred in connection with the enforcement of the rights of the Investors
hereunder.
7. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees, agents and each
person who controls any Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), if any, (each, an "Indemnified Person"), against any joint
or several losses, claims, damages, liabilities or expenses (collectively,
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other
applicable securities law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 7(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 7(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified
<PAGE>
Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available by the Company pursuant to Section 4(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 10.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 7(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 7(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 7(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 7(b) and Section 8) for only that amount
as does not exceed the net proceeds actually received by such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 10. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 7(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, and the Indemnified Party failed to utilize such
corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 7 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 7, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the
<PAGE>
fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential conflicts of interest
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding or the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person or the Indemnified Party and the indemnifying party and any such
Indemnified Person or Indemnified Party reasonably determines that there may be
legal defenses available to such Indemnified Person or Indemnified Party which
are different from or in addition to those available to such indemnifying party.
The indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates (with the approval of the Initial Investors if they hold Registrable
Securities included in such Registration Statement), if the Investors are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 7,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 7
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
8. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
7 to the fullest extent permitted by law; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
7, (ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 12(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
9. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
<PAGE>
b. furnish to each Investor so long as such Investor owns shares of
Preferred Stock, Warrants or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
under Rule 144 without registration.
10. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the shares of Preferred Stock, the Warrants or the Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, (iv) the transferee or
assignee agrees in writing for the benefit of the Company to be bound by all of
the provisions contained herein, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
11. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company and Investors who
hold a majority interest of the Registrable Securities; provided, however, that
no amendment hereto which restricts the ability of an Investor to elect not to
participate in an underwritten offering shall be effective against any Investor
which does not consent in writing to such amendment; provided, further, however,
that no consideration shall be paid to an Investor by the Company in connection
with an amendment hereto unless each Investor similarly affected by such
amendment receives a pro-rata amount of consideration from the Company. Unless
an Investor otherwise agrees, each amendment hereto must similarly affect each
Investor. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.
12. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by
<PAGE>
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti,
Chief Executive Officer
and
Attn: Brian J. Sisko,
Senior Vice President and General Counsel
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 12(b).
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed in the State of Delaware. The Company irrevocably consents to the
jurisdiction of the United States federal courts and the state courts located in
the State of Delaware in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company further agrees that service of process upon the Company, mailed by
first class mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect
the Investors' right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement, the Securities Purchase Agreement and the
Warrants (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. This Agreement, the Securities Purchase Agreement and the Warrants
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 10 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
or the Initial Investors pursuant to this Agreement shall be made by the
Investors or the Initial Investors holding a majority of the Registrable
Securities (determined as if all shares of Preferred Stock and Warrants then
outstanding had been converted into or exercised for Registrable Securities)
held by all Investors or Initial Investors, as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase (if any) to the number of Registrable
Securities included thereon shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each Investor at the time
of such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be allocated a pro rata portion of the number of
Registrable Securities included on a Registration Statement for such transferor.
Any shares of Common Stock included on a Registration Statement and which remain
allocated to any person or entity which does not hold any Registrable Securities
shall be allocated to the remaining Investors, pro rata based on the number of
shares of Registrable Securities then held by such Investors. For the avoidance
of doubt, the number of Registrable Securities held by any Investor shall be
determined as if all shares of Preferred Stock and Warrants then
outstanding were converted into or exercised for Registrable Securities.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first above written.
NATIONAL MEDIA CORPORATION
By:_______________________________
Name:_____________________________
Its:______________________________
INITIAL INVESTORS:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, its authorized agent
By:________________________________
Name:______________________________
Its:_______________________________
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., General Partner
By:_________________________________
Name:_______________________________
Its:________________________________
<PAGE>
EXHIBIT 1
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: NATIONAL MEDIA CORPORATION
Ladies and Gentlemen:
We are counsel to National Media Corporation, a corporation organized under
the laws of the State of Delaware (the "Company"), and we understand that [Name
of Investor] (the "Holder") has purchased from the Company (i) shares of the
Company's Series __ Convertible Preferred Stock (the "Preferred Stock") that are
convertible into shares of the Company's common stock, par value $.01 per share
(the "Common Stock") and (ii) warrants (the "Warrants") to acquire shares of
Common Stock. Pursuant to a Registration Rights Agreement, dated as of
September __, 1997, by and among the Company and the signatories thereto (the
"Registration Rights Agreement"), the Company agreed with the Holder, among
other things, to register the Registrable Securities (as that term is defined in
the Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "Securities Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Registration
Rights Agreement, on _____ __, 1997, the Company filed a Registration Statement
on Form S-___ (File No. 333- _____________) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
<PAGE>
EXHIBIT 4.4
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September 4,
1997, by and among National Media Corporation, a corporation organized under the
laws of the State of Delaware (the "Company"), with headquarters located at
Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia, Pennsylvania
19103 and each of the purchasers (the "Purchasers") set forth on the execution
pages hereof (the "Execution Pages").
WHEREAS:
a. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
b. Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, units (the "Units"), each Unit consisting of (i) one
(1) share of the Company's Series C Convertible Preferred Stock, par value $.01
per share (the "Preferred Shares"), convertible into the Company's common stock,
par value $.01 per share (the "Common Stock") and (ii) warrants, in the form
attached hereto as Exhibit B to acquire 49.4707 shares of Common Stock per
warrant, or an aggregate of 989,413 shares of Common Stock (the "Warrants"). The
rights, preferences and privileges of the Preferred Shares, including the terms
upon which such Preferred Shares are convertible into shares of Common Stock,
are set forth in the form of Certificate of Designations, Preferences and Rights
attached hereto as Exhibit A (the "Certificate of Designation"). The shares of
Common Stock issuable upon conversion of the Preferred Shares or otherwise
pursuant to the Certificate of Designation are referred to herein as the
"Conversion Shares" and the shares of Common Stock issuable upon exercise of or
otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares." The Preferred Shares, Warrants, Conversion Shares and the Warrant
Shares are collectively referred to herein as the "Securities."
c. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
<PAGE>
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
a. Purchase of Units. On the Closing Date (as defined below), subject
to the satisfaction (or waiver) of the conditions set forth in Section 6 and
Section 7 below, the Company shall issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company, such number of Units as
is set forth on such Purchaser's Execution Page hereto. The purchase price (the
"Purchase Price") per Unit shall be equal to One Thousand Dollars ($1,000.00).
Each Purchaser's obligation to purchase Units hereunder is distinct and separate
from each other Purchaser's obligation to purchase Units and no Purchaser shall
be required to purchase hereunder more than the number of Units set forth on
such Purchaser's Execution Page hereto notwithstanding any failure by any other
Purchaser to purchase Units hereunder.
b. Form of Payment. On the Closing Date, each Purchaser shall pay the
aggregate Purchase Price for the Units being purchased by such Purchaser on the
Closing Date by wire transfer to the Company, in accordance with the Company's
written wiring instructions, against delivery of duly executed certificates
representing the Preferred Shares and Warrants being purchased by such Purchaser
and the Company shall deliver such certificates and Warrants against delivery of
such aggregate Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units to each of the Purchasers pursuant to this
Agreement (the "Closing") shall be 12:00 noon Eastern Daylight Savings Time on
September 12, 1997, subject to a two (2) business day grace period at either
party's option, but in any event not later than September 19, 1997, or such
other time as may be mutually agreed upon by the Company and the Purchasers (the
"Closing Date"). The closing shall occur at the offices of Klehr, Harrison,
Harvey, Branzburg & Ellers, 1401 Walnut Street, Philadelphia, Pennsylvania
19102.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. Investment Purpose. Purchaser is purchasing the Preferred Shares and
Warrants for Purchaser's own account for investment purposes only and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales that are exempt from the registration requirements of the Securities Act
and/or sales registered under the Securities Act. Purchaser understands that
Purchaser must bear the economic risk of this investment indefinitely, unless
the Securities are registered pursuant to the Securities Act and any applicable
state securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering the
resale of any such Securities other than as contemplated by the Registration
Rights Agreement. Notwithstanding anything in this Section 2(a) to the
contrary, by making the representations herein, the Purchaser does not agree to
hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to
a registration statement or an exemption under the Securities Act.
-2-
<PAGE>
b. Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Purchaser understands that the Units are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Units.
d. Information. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Units which have been
specifically requested by Purchaser or its counsel. Purchaser and its counsel
have been afforded the opportunity to ask questions of the Company and have
received what Purchaser believes to be satisfactory answers to any such
inquiries. Neither such inquiries nor any other investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. Purchaser understands that Purchaser's investment
in the Securities involves a high degree of risk.
e. Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) except as provided
in the Registration Rights Agreement, the sale or resale of the Securities have
not been and are not being registered under the Securities Act or any state
securities laws, and the Securities may not be transferred unless (a) the resale
of the Securities has been registered; (b) Purchaser shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (c) sold under Rule 144
promulgated under the Securities Act (or a successor rule) ("Rule 144") or (d)
sold or transferred to an affiliate of Purchaser who agrees to sell or otherwise
transfer the Securities only in accordance with the provisions of this Section
2(f) and who is an Accredited Investor; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws (other than pursuant to the
Registration Rights Agreement).
g. Legends. Purchaser understands that the Preferred Shares, Warrants
and, until such time as the Conversion Shares and Warrant Shares have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser under Rule 144, the certificates for the Conversion
Shares and Warrant Shares may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of counsel,
in
-3-
<PAGE>
form, substance and scope customary for opinions of counsel in comparable
transactions, that registration is not required under said Act or unless
sold under Rule 144 under said Act.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement; (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may
be made without registration under the Securities Act; or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
under Rule 144. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering such Security
is suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
Purchaser the Company may require that the above legend be placed on any such
Security that cannot then be sold pursuant to an effective registration
statement or under Rule 144 and Purchaser shall cooperate in the replacement of
such legend. Such legend shall thereafter be removed when such Security may
again be sold pursuant to an effective registration statement or under Rule 144.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
i. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
or under the Certificate of Designation, the Warrants or the Registration Rights
Agreement or (iii) the business, operations, properties, prospects or financial
condition of the Company and its subsidiaries, taken as a whole.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and the Registration Rights Agreement, to issue and sell the Units in
accordance with the terms hereof, to issue the Conversion Shares upon conversion
of the Preferred Shares in accordance with the terms of the Certificate of
Designation and to issue the Warrant Shares upon exercise and in accordance with
the terms of the
-4-
<PAGE>
Warrants; (ii) except as set forth in the last sentence of this Section 3(b),
the execution, delivery and performance of this Agreement, the Warrants and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation the
issuance of the Preferred Shares and Warrants and the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, any committee of the Board
of Directors, or its stockholders is required (under Rule 312.03 promulgated by
the New York Stock Exchange ("NYSE") or otherwise); (iii) this Agreement has
been duly executed and delivered by the Company; and (iv) this Agreement
constitutes, and, upon execution and delivery by the Company of the Warrants and
the Registration Rights Agreement, such agreements will constitute, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms. The Company has applied for and received a waiver granted by
the NYSE of the requirements of the NYSE under Rule 312.03 that the Company's
shareholders approve the issuance of the Securities, and no other approval of
the Company's shareholders other than holders of the Company's Series B
Preferred Stock is required for the execution, delivery and performance of this
Agreement, the Certificate of Designation, the Warrants and the Registration
Rights Agreement.
c. Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and Warrants)
exercisable or exchangeable for, or convertible into, any shares of Common Stock
and the number of shares to be reserved for issuance upon conversion of the
Preferred Shares and exercise of the Warrants is set forth on Schedule 3(c).
All of such outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such warrants, options or preferred stock, will
be, validly issued, fully paid and nonassessable. No shares of capital stock of
the Company (including the Preferred Shares, the Conversion Shares and the
Warrant Shares) are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances. Except for the
Securities and as set forth on Schedule 3(c), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
and (ii) there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement).
Except as set forth on Schedule 3(c), there are no securities or instruments
containing antidilution or similar provisions that will be triggered by the
issuance of the Securities in accordance with the terms of this Agreement, the
Certificate of Designation or the Warrants. The Company has furnished or made
available to the Purchasers true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof (the
"By-laws"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for Common Stock of the Company.
The Certificate of Designation, in the form attached hereto, will be duly filed
prior to Closing with the Secretary of State of the State of Delaware and, upon
the issuance of the Preferred Shares in accordance with the terms hereof, each
Purchaser shall be entitled to the rights set forth therein.
-5-
<PAGE>
d. Issuance of Shares. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability on
the holders thereof. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon conversion of the Preferred
Shares and exercise of the Warrants in accordance with the terms thereof, will
be validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) except as set forth on Schedule
3(e) hereof, conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment (including, without limitation, the
triggering of any anti-dilution provisions), acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including U.S. federal and state securities laws and
regulations and rules or regulations of any self-regulatory organizations to
which either the Company or its securities are subject) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except, with respect to
clause (ii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for (x) defaults currently existing
under the Company's credit facility with CoreStates Bank, NA as disclosed to the
Purchasers, and (y) possible other violations, defaults or rights in respect of
obligations in writing to trade creditors, as disclosed on Schedule 3(e) hereof,
in each case, as would not, individually or in the aggregate, have a Material
Adverse Effect. The businesses of the Company and its subsidiaries are not being
conducted, and shall not be conducted so long as a Purchaser owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations the sanctions for which either singly or
in the aggregate would not have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and the Registration Rights
Agreement, the Company is not, except as set forth on Schedule 3(e), required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Warrants or the Registration Rights
Agreement or to perform its obligations under the Certificate of Designation, in
each case in accordance with the terms hereof or thereof. The Company is not in
violation of the listing requirements of the NYSE and does not reasonably
anticipate that the Common Stock will be delisted by the NYSE for the
foreseeable future.
-6-
<PAGE>
f. SEC Documents, Financial Statements. Since March 31, 1994, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing, filed prior to the
date hereof and after March 31, 1994, and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to herein as the "SEC Documents").
The Company has delivered or made available to the Purchasers true and complete
copies of such SEC Documents as the Purchasers have requested. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial statements, (ii)
liabilities not required by generally accepted accounting principles ("GAAP") to
be disclosed on a balance sheet prepared in accordance with GAAP, and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which liabilities and obligations
referred to in clauses (i), (ii) and (iii) individually or in the aggregate, are
not material to the financial condition or operating results of the Company.
g. Absence of Certain Changes. Since March 31, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
Schedule 3(g) or in the SEC Documents filed prior to the date hereof, except
that the Company forecasts that the Company will continue to incur net operating
losses in the second quarter of fiscal 1997.
h. Absence of Litigation. Except as disclosed in the SEC Documents filed
prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such, which could reasonably be expected to have a Material
Adverse Effect. As indicated on Schedule 3(h), the Company has disclosed
certain litigation to the Purchasers, which litigation the Company does not
believe could reasonably be expected to have a Material Adverse Effect.
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i. Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all material patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted
and as described in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997. To the best knowledge of the Company, neither the Company
nor any subsidiary of the Company infringes or is in conflict with any right of
any other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. Except as disclosed in the SEC Documents,
neither the Company nor any of its subsidiaries has received written notice of
any pending conflict with or infringement upon such third party Intangibles,
which alleged pending conflict or alleged infringement, if adversely determined,
would result in a Material Adverse Effect. The termination of the Company's
ownership of, or right to use, any single Intangible would not result in a
Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has entered into any consent agreement, indemnification agreement
outside the ordinary course of business of the Company, forbearance to sue or
settlement agreement with respect to the validity of the Company's or its
subsidiaries' ownership or right to use its Intangibles and, to the best
knowledge of the Company, there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and are in good standing. The Company and its subsidiaries
have complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the best knowledge of the Company, no person is infringing on or
violating the Intangibles owned or used by the Company or its subsidiaries.
j. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
k. Disclosure. All information relating to or concerning the Company set
forth in this Agreement or provided to the Purchasers pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to the primary issuance of the
Company's securities.
l. Acknowledgment Regarding Purchasers' Purchase of the Units. The
Company acknowledges and agrees that none of the Purchasers is acting as a
financial advisor or fiduciary of
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the Company (or in any similar capacity) with respect to this Agreement or the
transactions contemplated hereby, and any advice given by any Purchaser or any
of their representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to each Purchaser's
purchase of Preferred Shares and has not been relied upon by the Company in any
way. The Company further acknowledges that the Company's decision to enter into
this Agreement has been based solely on an independent evaluation by the Company
and its representatives.
m. Form S-3 Eligibility. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement). The Company discloses that it believes that it is likely that the
staff of the SEC will review the next Registration Statement on Form S-3 that
the Company files under the Securities Act.
n. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
o. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions.
p. No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby.
q. Acknowledgment of Dilution. The number of Conversion Shares issuable
upon conversion of the Preferred Shares may increase in certain circumstances,
including the circumstance wherein the bid price of the Common Stock declines.
The Company acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with the Certificate of
Designation is absolute and unconditional, regardless of the dilution that such
issuance may have on the ownership interests of other stockholders. Taking the
foregoing into account, the Company's Board of Directors has determined that the
issuance of the Preferred Shares hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders.
r. Title. The Company and its subsidiaries have good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or
Schedule 3(r) or such as do not materially affect the value of
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such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and its subsidiaries. The Company does
not own any real property. Any real property and facilities held under lease by
the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
s. Tax Status. Except as set forth on Schedule 3(s), the Company and each
of its subsidiaries has made or filed all foreign, federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books a reserve
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. Except as set
forth on Schedule 3(s), there are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any federal, state or local tax. Except as set forth on Schedule
3(s), none of the Company's tax returns is presently being audited by any taxing
authority.
t. Exception to Application of NYSE Rule 312.03. The Audit Committee of
the Board of Directors of the Company has expressly approved the exception to
the application of NYSE Rule 312.03 to the issuance by the Company of the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares.
In addition, the Company has mailed to all of its shareholders a letter alerting
them to the Company's omission to seek the shareholder approval that would
otherwise be required by NYSE Rule 312.03 and indicating that the Audit
Committee of the Board of Directors of the Company has expressly approved the
exception to such approval.
u. Inventory. All inventory of the Company and its subsidiaries is
valued on the Company's consolidated books and records at the lower of cost,
determined by the "first in, first out" method of accounting, or the fair market
value thereof. Except to the extent of the Company's reserves for obsolete or
unmerchantable inventory reflected in the Company's SEC Documents, all such
inventory, after consideration of reserves consisting of finished goods is of
merchantable quality and is saleable in the ordinary course of business
consistent with past practice.
v. Rights Agreement. The Rights Agreement, dated as of January 3, 1994
(the "Rights Agreement") between the Company and Mellon Securities Trust
Company, as Rights Agent, as amended by Amendment No. 1 dated as of March 6,
1994, Amendment No. 2 dated as of September 26, 1994, Amendment No. 3 dated as
of September 30, 1994, Amendment No. 4 dated as of November 30, 1994 and
Amendment No. 5 dated as of August 14, 1997, is in full force and effect.
Pursuant to the Rights Agreement, no Distribution Date has occurred (or will
occur) as a result of the issuance of the Preferred Shares and Warrants or the
issuance of the Conversion Shares upon the conversion of the Preferred Shares or
the Warrant Shares upon exercise of the Warrants or any of
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the other transactions contemplated by either this Agreement, the Certificate of
Designation, the Warrants or any other past, present or future transaction known
to the Company, and no further action with respect to the Rights Agreement,
including an amendment thereof, needs to be taken by the Company to insure that
the transactions contemplated by this Agreement, the Certificate of Designation
and the Warrants will not result in the issuance of any Rights Certificates to
any person or in any person having a right to exercise a Right, as such terms
are defined in the Rights Agreement.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
b. Form D: Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
c. Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination other than a termination occurring in connection with an acquisition
of the Company by a third party or pursuant to some other form of business
combination, subject to the provisions of Section 4(j) of this Agreement.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
the Preferred Shares as set forth in Schedule 4(d).
e. Additional Equity Capital; Right of First Offer. The Company agrees
that during the period beginning on the date hereof and ending 180 days
following the effective date of the Registration Statement required to be filed
by the Company pursuant to Section 2(a) of the Registration Rights Agreement
(the "Lock-Up Period"), the Company will not, without the prior written consent
of Purchasers (or their designated agents) holding at least a
majority-in-interest of the then outstanding Preferred Shares, which consent
shall not be unreasonably withheld, contract with any party to obtain additional
equity financing (including any debt financing with an equity component) (as
defined below) ("Future Offerings"). In addition, the Company will not conduct
any Future Offering during the period beginning on the date hereof and ending
180 days following the expiration of the Lock-Up Period, unless it shall have
first delivered to each Purchaser at least ten (10) business days prior to the
closing of such Future Offering, written notice describing the proposed Future
Offering, including the terms and conditions thereof, and providing each
Purchaser and its affiliates, an option during the ten (10) business day period
following delivery of such notice
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to purchase up to the Applicable Portion (as defined below) of the securities
being offered in the Future Offering on the same terms as contemplated by such
Future Offering (the limitations referred to in this and the immediately
preceding sentence are collectively referred to as the "Capital Raising
Limitations"). The Capital Raising Limitations shall not apply to any
transaction involving issuances of securities as consideration in a merger,
consolidation or acquisition of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or as consideration for the acquisition of a business, product
or license by the Company. The Capital Raising Limitations also shall not apply
to (i) the issuance of securities pursuant to an underwritten public offering,
(ii) the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the date
hereof, (iii) the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option, bonus plan or restricted
stock plan for the benefit of the Company's employees, consultants or directors,
(iv) the incurrence of commercial debt and the issuance of warrants in
connection therewith, so long as (A) such debt, if convertible into securities
of the Company, is so convertible only at a fixed conversion price which is
equal to the closing sale price for the Company's securities on the date of
issuance of such debt and which is subject solely to standard anti-dilution
provisions; (B) such debt is used to repay in full the Company's existing
obligations to CoreStates Bank, N.A. and (C) the exercise price of any such
warrants is not at a discount to the market price for the Company's securities
at the time of issuance of any such warrants. For purposes of clause (A)
above, (y) any anti-dilution provisions which are triggered by changes in the
market price for the Company's securities or by comparable external factors
shall not be deemed to be standard anti-dilution provisions and (z) if the
Company incurs debt pursuant to which the Company has the right (at its option)
to require an investor(s), subject to certain conditions which may be contained
in the documentation evidencing such debt, to purchase securities of the Company
which are registered under the Securities Act from time to time on dates
designated by the Company (e.g., an equity line of credit), then such debt shall
not be deemed to be debt that is convertible into securities of the Company at a
fixed conversion price. The "Applicable Portion" shall mean a fraction, the
numerator of which is the number of Units purchased by such Purchaser hereunder
and the denominator of which is the total number of Units purchased by all of
the Purchasers hereunder.
f. Expenses. Except as otherwise provided in Section 4(o) hereof and in
Section 5 of the Registration Rights Agreement, each party hereto shall be
responsible for its own expenses incurred in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith; provided, however, that the
Company shall pay on the Closing Date the fees and expenses (in an amount not to
exceed $35,000) of Heights Capital Management incurred in connection with the
negotiation, documentation and execution of this Agreement and the transactions
contemplated hereby and investigation costs associated therewith.
g. Financial Information. The Company agrees to send the following
reports to each Purchaser until such Purchaser transfers, assigns or sells all
of its Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its
proxy statements and any Current Reports on Form 8-K; and (ii) within one (1)
day after release, copies of all press releases issued by the Company or any of
its subsidiaries.
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h. Reservation of Shares. The Company shall at all times have authorized
and reserved for the purpose of issuance a sufficient number of shares of Common
Stock to provide for the full conversion of the outstanding Preferred Shares and
issuance of the Conversion Shares in connection therewith, the full exercise of
the Warrants and the issuance of the Warrant Shares in connection therewith and
as otherwise required by the Certificate of Designation and the Warrants.
i. Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon the NYSE and each other national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares and Warrant Shares from time to time issuable
upon conversion of the Preferred Shares and exercise of the Warrants. Until
such time as the Company has been acquired by a third person or is otherwise
involved in a business transaction resulting in the Company no longer being
publicly held (in conformity with Section 4(j) hereof), the Company will use its
best efforts to continue the listing and trading of its Common Stock on the
NYSE, the American Stock Exchange ("AMEX") or the Nasdaq National Market ("
NASDAQ") and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the NYSE, such other
exchanges or the National Association of Securities Dealers ("NASD"), as
applicable. The Company shall promptly provide to each holder of Preferred
Shares and/or Warrants copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading on the NYSE or, if applicable, any
securities exchange or automated quotation system on which securities of the
same class or series issued by the Company are then listed or quoted, if any.
j. Corporate Existence. So long as a Purchaser beneficially owns any
Preferred Shares or Warrants, the Company shall maintain its corporate
existence, and in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, the Company shall ensure that the
surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the Certificate of Designation, the Warrants and
the agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all Preferred Shares and exercise in full of all Warrants
outstanding as of the date of such transaction and (ii) is a publicly traded
corporation whose common stock is listed for trading on the Nasdaq, NYSE or
AMEX. Notwithstanding the foregoing, the Company covenants and agrees that it
will not engage in any merger, consolidation or sale of all or substantially all
of its assets at any time prior to the effectiveness of the registration
statement required to be filed pursuant to the Registration Rights Agreement
without (A) providing each Purchaser with written notice of such transaction at
least sixty (60) days prior to the consummation of such transaction and (B)
obtaining the written consent of the Purchasers holding a majority-in-interest
of the then outstanding shares of Series C Preferred Stock on or before the
tenth (10th) day after the delivery of such notice by the Company.
k. No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of
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Securities to be integrated with any other offering of securities by the Company
for purposes of NYSE Rule 312.03.
l. Short Sales. So long as a Purchaser beneficially owns any Preferred
Shares, except as otherwise provided herein, such Purchaser shall not create a
"short position" in the Common Stock at a price below the Fixed Conversion Price
(as defined in the Certificate of Designation). For purposes hereof, a "short
position" shall be deemed to have been created by a Purchaser if such Purchaser
(i) enters into a "short sale" (as such term is defined in Rule 3b-3 under the
Exchange Act), (ii) purchases a put option to sell shares of Common Stock or
(iii) enters into any other agreement or arrangement designed to achieve the
same purposes or effects as those to be derived from the transactions enumerated
in clauses (i) or (ii) of this sentence. Notwithstanding the foregoing, the
provisions of this Section 4(l) shall not apply in the event of a sale by a
Purchaser of shares of Common Stock effected on the date on which a Notice of
Conversion is delivered to the Company covering at least the number of shares of
Common Stock equal to the number of shares so sold.
m. Legal Compliance. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
n. Series B Consent. The Company shall use its best efforts to obtain
the requisite consent of the holders of the Series B Preferred Stock of the
Company to the transactions contemplated by this Agreement.
o. Hart-Scott-Rodino Act. In the event that a holder of Series C
Preferred Stock is required to file a pre-merger notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect
to the transactions contemplated by this Agreement, the Certificate of
Designation, the Warrants and the Registration Rights Agreement, the holder of
Series C Preferred Stock and the Company shall promptly prepare and make all
such required filings, provide full cooperation to each other with respect
thereto and shall request early termination of the waiting period with respect
thereto. The Purchaser shall be responsible for its legal costs and expenses
associated with such filings and the Company shall be responsible for all other
costs and expenses (including, but not limited to, all filing fees) associated
with such filings.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Preferred Shares or exercise of
the Warrants. To the extent and during the periods provided in Section 2(f) and
2(g) of this Agreement, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement.
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b. The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof in the case of the transfer of the Conversion Shares or
Warrant Shares prior to registration of the Conversion Shares and Warrant Shares
under the Securities Act or without an exemption therefrom, will be given by the
Company to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way each Purchaser's obligations and agreement
set forth in Section 2(g) hereof to resell the Securities pursuant to an
effective registration statement or in compliance with an exemption from the
registration requirements of applicable securities law.
c. If a Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, or a Purchaser provides the Company
with reasonable assurances (including an opinion of counsel if requested by the
Company) that such Securities may be sold under Rule 144, the Company shall
permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by a Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to a
Purchaser hereunder is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
a. Each Purchaser shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Company.
b. Each Purchaser shall have delivered the Purchase Price for the Units
in accordance with Section 1(b) above.
c. The representations and warranties of each Purchaser shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date), and such Purchaser shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Purchaser at or
prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated
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hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
e. The aggregate number of Units being purchased hereunder by all
Purchasers hereunder shall be 20,000.
f. The Company shall have received a waiver granted by the NYSE of the
requirements of the NYSE under Rule 312.03 that the Company's shareholders
approve the issuance of the Units and such waiver shall not have been
subsequently revoked.
g. The Company's principal lender shall have agreed to extend the
facility provided by such lender to the Company in a manner reasonably
satisfactory to the Company.
h. The Company shall have received the requisite consent of the holders
of the Series B Preferred Stock of the Company to the transactions contemplated
by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units to be
purchased by it at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed this Agreement, the Warrants and the
Registration Rights Agreement, and delivered the same to such Purchaser.
b. The Certificate of Designation shall have been accepted for filing
with the Secretary of State of the State of Delaware and a copy thereof
certified by the Secretary of State of Delaware shall have been delivered to
such Purchaser.
c. The Company shall have delivered to such Purchaser duly executed
Warrants and certificates (in such denominations as such Purchaser shall
request) representing the Preferred Shares being so purchased by such Purchaser
in accordance with Section 1(b) above.
d. The Common Stock shall be listed on the NYSE and trading in the Common
Stock (or the NYSE generally) shall not have been suspended by the SEC or the
NYSE.
e. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. Such Purchaser shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of the
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<PAGE>
Closing Date to the foregoing effect and as to such other matters as may be
reasonably requested by such Purchaser.
f. No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, challenges or prohibits the consummation
of any of the transactions contemplated by this Agreement.
g. Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit D
attached hereto.
h. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit E.
i. The aggregate number of Units being purchased hereunder by all
Purchasers hereunder shall be 20,000.
j. The Company's principal lender shall have agreed to extend the
facility provided by such lender to the Company in a manner reasonably
satisfactory to the Purchasers.
k. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that (a) the Company has applied for and the NYSE has granted an
exception to the application of NYSE Rule 312.03 to the issuance by the Company
of the Preferred Shares, the Warrants, the Conversion Shares and the Warrant
Shares, which exception shall not have been subsequently revoked and (b) all
other requirements of such Rule have been fully satisfied.
l. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that the Company has requested and received the requisite consent
of the holders of the Series B Preferred Stock of the Company to the
transactions contemplated by this Agreement.
m. There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, since the date hereof, and no information, of
which the Purchasers are not currently aware, shall come to the attention of the
Purchasers that is materially adverse to the Company.
n. The Purchasers shall have completed their investigation with respect
to the members of the Company's management previously identified to the Company
by the Purchasers and the Purchasers shall be satisfied with the results of such
investigation.
8. GOVERNING LAW; MISCELLANEOUS.
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a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and
the Purchasers irrevocably consent to the jurisdiction of the United States
federal courts and the state courts located in the State of Delaware in any suit
or proceeding based on or arising under this Agreement and irrevocably agrees
that all claims in respect of such suit or proceeding may be determined in such
courts. The Company irrevocably waives the defense of an inconvenient forum to
the maintenance of such suit or proceeding. Service of process on the Company
mailed by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the right of any Purchaser to serve process in any other manner permitted
by law. The Company agrees that a final non-appealable judgment in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
b. 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 counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. No provision of this Agreement may
be waived other than by an instrument in writing signed by the party to be
charged with enforcement and no provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and each Purchaser.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
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<PAGE>
If to the Company:
National Media Corporation
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, PA 19103
Telecopy: (215) 988-4869
Attn: Robert N. Verratti, Chief Executive Officer and
Brian J. Sisko, Senior Vice President and General Counsel
If to any Purchaser, to such address set forth under such Purchaser's name
on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor any Purchaser shall assign
this Agreement, the Registration Rights Agreement or the Warrants or any rights
or obligations hereunder or thereunder. Notwithstanding the foregoing, any
Purchaser may assign its rights hereunder to any of its "affiliates," as that
term is defined under the Exchange Act, without the consent of the Company or to
any other person or entity with the consent of the Company, which consent shall
not be unreasonably withheld. This provision shall not limit a Purchaser's
right to transfer the Securities pursuant to the terms of the Certificate of
Designation, the Warrants and this Agreement or to assign such Purchaser's
rights hereunder to any such transferee. Except as otherwise set forth in this
Section 8(g), no transfer of Series C Preferred Stock to any entity (other than
an affiliate of any Purchaser or any Purchaser's clearing firm or prime broker)
having an aggregate liquidation preference that is less than (x) the lesser of
$1 million or (y) all Series C Preferred Stock then held by the transferor shall
be permitted without the consent of the Company, which may be given or withheld
in the Company's sole discretion, and no transfer of Warrants to purchase fewer
than 50,000 shares of the Company's Common Stock shall be permitted without the
consent of the Company, which consent may be given or withheld in the Company's
sole discretion.
h. Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 and the
representations and warranties of the Purchasers set forth in Section 2 shall
survive the closing hereunder notwithstanding any investigation conducted by or
on behalf of any Purchasers. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies a Purchaser may have
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<PAGE>
under applicable federal or state securities laws. The Company agrees to
indemnify and hold harmless each Purchaser and each of such Purchaser's
officers, directors, employees, partners, members, agents and affiliates for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations or covenants set forth herein,
including advancement of expenses as they are incurred.
j. Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC or NYSE filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC or NYSE filings
with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release and filing prior to its release and shall
be provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing Date shall not have
occurred on or before September 19, 1997, unless the parties agree otherwise,
this Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
m. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement. As such, the
language used herein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
n. Equitable Relief. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Purchaser by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations
hereunder (including, but not limited to, its obligations pursuant to Section 5
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Section 5 hereof), that a Purchaser
shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate issuance and
transfer of the Securities, without the necessity of showing economic loss and
without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
NATIONAL MEDIA CORPORATION
By: ____________________________
Name: __________________________
Title: _________________________
PURCHASER:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, its authorized agent
By: ____________________________
Name: __________________________
Title: _________________________
RESIDENCE: Cayman Islands
ADDRESS: c/o Heights Capital Management
425 California Street
Suite 1100
San Francisco, CA 94104
Telecopy: (415) 403-6525
Attn: Michael Spolan
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units* to be Purchased: 15,000
Purchase Price ($1,000 per Unit): $15,000,000
* Each Unit is comprised of 1 Preferred Share and Warrants to purchase
49.4707 shares of Common Stock
<PAGE>
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
NATIONAL MEDIA CORPORATION
By: ____________________________
Name: __________________________
Title: _________________________
PURCHASER:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., General Partner
By:_______________________________
Name: Wayne D. Bloch
Title: Managing Director
RESIDENCE: Cayman Islands
ADDRESS: c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East
251 St. Asaph's Road
Suite 200
Bala Cynwyd, PA 19004
Telecopier: (610) 617-0570
Attn: Wayne D. Bloch
AGGREGATE SUBSCRIPTION AMOUNT
Number of Units* to be Purchased: 5,000
Purchase Price ($1,000 per Unit): $5,000,000
* Each Unit is comprised of 1 Preferred Share and Warrants to purchase
49.4707 shares of Common Stock
<PAGE>
EXHIBIT 99
<PAGE>
National Media Announces Completion of $20 Million Equity Investment;
Also Announces an Agreement to Extend Line of Credit
PHILADELPHIA, Sept. 18/PRNewswire/ -- National Media Corporation (NYSE: NM)
announced today that it has completed the sale of $20,000,000 in convertible
preferred stock and warrants to purchase shares of the Company's common stock to
two institutional investors not previously affiliated with the Company. The
Company also announced an agreement to extend its line of credit with CoreStates
Bank, NA through December of 1998.
Robert N. Verratti, President and Chief Executive Officer of National Media
Corporation, said, "I'm pleased to announce the completion of this transaction,
as well as the reset and extension of our credit facility with our primary
lender. Both will significantly add flexibility in the operations of our
business and, in particular, will allow us to take advantage of the line-up of
exciting new shows we have planned for the fall and winter seasons. In
addition, as we explore strategic alternatives through our advisory relationship
with Lehman Brothers, it brings the focus of those discussions to the long-term
value of the Company's global franchise."
National Media Corporation is the world's largest publicly held infomercial
company, with programming available to an audience of more than 370 million
global households in more than 70 countries.
To request previous press releases on National Media Corporation, contact
PR Newswire at 800-758-5804. ext. 604644.
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/CONTACT: Bruce Boyle, Director of Investor Relations of National Media,
215-988-4641/
/Company News On-Call: http://www.prnewswire.com or fax, 800-758-5804,
ext. 604644/
(NM)
