<PAGE>
As filed with the Securities and Exchange Commission on January 9, 1998
Registration No. 333-36637
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NATIONAL MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-2658741
(I.R.S. Employer Identification Number)
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(Address of principal executive offices)
Brian J. Sisko, Senior Vice President and General Counsel
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(Name and address of agent for service)
(215) 988-4600
(Telephone number, including area code, of agent for service)
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box: / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest investment plans. Check the following box. /x/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed Amount of
Title of Securities Amount to be Maximum Offering Maximum Aggregate Registration
to be Registered Registered Price Per Share Offering Price Fee
- ------------------- ------------------------------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 per share 8,293,000 (1)(2)(3)(4)(5)(6)(7) $3.25/share(8) $26,952,250 $12,834.00(9)
</TABLE>
(1) Includes 7,000,000 shares of Registrant's Common Stock issuable upon
conversion of the Registrant's Series C Convertible Preferred Stock. For
purposes of estimating the number of shares of Common Stock to be included
in this Registration Statement, the Company calculated approximately 212%
of the number of shares of Common Stock issuable in connection with the
conversion of the Series C Convertible Preferred Stock (based on the
currently applicable conversion price of $6.06 per share as set forth in
the Series C Certificate of Designations, Preferences and Rights).
(2) Includes 989,413 shares of Registrant's Common Stock issuable upon exercise
of warrants (the "Series C Warrants") issued in connection with the
Series C Convertible Preferred Stock.
(3) Includes 125,000 shares of Registrant's Common Stock issuable upon exercise
of warrants (the "Bank Warrants") issued to CoreStates Bank, N.A. in
connection with the extension of the Company's principal credit facility.
(4) Includes 26,587 shares of Registrant's Common Stock issued in connection
with Registrant's acquisition of Nancy Langston & Associates, Inc. in
August 1996.
(5) Includes 100,000 shares of Registrant's Common Stock issuable upon exercise
of options (the "NW Options") issued to Natwest Securities Corp.
(6) Includes 52,000 shares of Registrant's Common Stock issuable upon exercise
of warrants (the "Settlement Warrants") issued to Bodylines, Inc. in
connection with the settlement of litigation.
(7) The shares of Common Stock set forth in the Calculation of Registration Fee
Table includes a good faith estimate of the number of shares of Common
Stock underlying the Series C Convertible Preferred Stock, the Series C
Warrants, the Bank Warrants, the NW Options and the Settlement Warrants
and, pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), such additional number of shares of the Registrant's
Common Stock as may become issuable (i) upon conversion of the Series C
Convertible Preferred Stock, (ii) upon exercise of the Series C Warrants,
Bank Warrants, NW Options and the Settlement Warrants, or (iii) as a result
of any premium paid on the Series C Convertible Preferred Stock in Common
Stock, stock splits, stock dividends and anti-dilution provisions
(including by reason of the floating rate conversion price mechanism and
certain other adjustments, as set forth in the Series C Certificate of
Designations, Preferences and Rights).
(8) Based on the closing sales price of the Registrant's Common Stock as
reported by the New York Stock Exchange on January 5, 1998, estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457(c) under the Securities Act of 1933.
(9) An aggregate filing fee of $12,784.00 was previously paid. A filing fee of
$50.00 has been paid to register an additional 52,000 shares of Common
Stock which are described in Footnote (6) above.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
section 8(a), may determine.
<PAGE>
"Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state."
<PAGE>
SUBJECT TO COMPLETION
PROSPECTUS
NATIONAL MEDIA CORPORATION
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(215) 988-4600
----------------
8,293,000 Shares of Common Stock
----------------
This prospectus concerns the offer and sale by the selling stockholders
named herein (the "Selling Stockholders"), from time to time, of up to 8,293,000
common shares (the "Offered Shares"), par value $.01 per share (the "Common
Stock") of National Media Corporation (together with its subsidiaries, the
"Company").
The Offered Shares consist of Common Stock which has been issued by the
Company to one of the Selling Stockholders, Nancy Langston (the "Langston
Shares"); or which is issuable by the Company (i) upon conversion by certain of
the Selling Stockholders (as defined herein, the "Series C Investors") of
Series C Convertible Preferred Stock, par value $.01 per share, of the Company
(the "Series C Preferred Stock") held by such Selling Stockholders (the
"Conversion Shares"), (ii) upon the exercise of warrants (the "Series C
Warrants") issued by the Company to the Series C Investors (the "Series C
Warrant Shares"); (iii) upon the exercise of warrants (the "Bank Warrants")
issued by the Company to another of the Selling Stockholders (the "Bank") (the
"Bank Shares"); (iv) upon the exercise of options (the "NW Options") held by
another of the Selling Stockholders ("NW") (the "NW Shares"), and (v) upon the
exercise of warrants (the "Settlement Warrants") issued by the Company to
Bodylines, Inc. ("Bodylines") in settlement of litigation (the "Settlement
Shares"). The Series C Warrants, the Bank Warrants and the Settlement Warrants
are sometimes hereinafter collectively referred to as the "Warrants". Nancy
Langston, the Series C Investors, NW, the Bank and Bodylines are sometimes
collectively referred to herein as the "Selling Stockholders."
The Offered Shares include a good faith estimate of the number of shares
underlying the Series C Preferred Stock, the Series C Warrants, the Bank
Warrants, the NW Options and the Settlement Warrants and, pursuant to Rule 416
of the Securities Act of 1933, as amended (the "Securities Act"), such
additional number of shares of Common Stock as may become issuable upon
conversion of the Series C Preferred Stock, exercise of the Warrants, as a
result of any premium paid on the Series C Preferred Stock in Common Stock,
stock splits, stock dividends and anti-dilution provisions (including, by reason
of any reduction in the floating rate conversion price mechanism and certain
other adjustment mechanisms of the Preferred Stock).
None of the proceeds from the sale of the Offered Shares by the Selling
Stockholders will be received by the Company. However, the Company will receive
proceeds from the exercise of the Warrants if the Warrants are exercised. The
Company will pay substantially all of the expenses with respect to the offering
and sale of the Offered Shares to the public, including the costs associated
with registering the Offered Shares under the Securities Act and preparing and
printing this Prospectus. Normal underwriting commission and broker fees,
however, as well as any applicable transfer taxes, are payable individually by
the Selling Stockholders.
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") and the Philadelphia Stock Exchange ("PHLX") under the symbol "NM." On
January 5, 1998, the closing sale price for the Common Stock, as quoted on the
NYSE, was $3.25 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY OTHER AUTHORITY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is January __, 1998.
-1-
<PAGE>
Pursuant to this Prospectus, the Offered Shares may be sold by the
Selling Stockholders, from time to time while the Registration Statement to
which this Prospectus relates is effective, on the NYSE, the PHLX or
otherwise at prices and terms prevailing at the time of sale, at prices and
terms related to such prevailing prices and terms, in negotiated transactions
or at fixed prices. The Selling Stockholders have advised the Company that
they currently intend to sell all or a portion of the Offered Shares pursuant
to this Registration Statement from time to time in any manner described
under "Plan of Distribution." See "Plan of Distribution." Notwithstanding
the registration of the offer and sale of Offered Shares hereunder to
subsequent purchasers, Selling Stockholders to whom the Offered Shares were
initially issued by the Company, whether or not affiliates of the Company,
that acquire the Langston Shares, the Conversion Shares, the Series C Warrant
Shares, the NW Shares, the Bank Shares or the Settlement Shares will be
required to deliver this Prospectus in accordance with the Securities Act in
connection with any transaction involving the resale of such securities.
----------------
-2-
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO BUY THE SECURITIES TO WHICH THIS PROSPECTUS RELATES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR SINCE THE DATE AS OF WHICH INFORMATION IS SET FORTH HEREIN.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports, proxy and information statements and other information can be
inspected and copied at prescribed rates at the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the Commission's regional offices located at 7 World Trade Center, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Such reports and other information filed
with the Commission can be reviewed through the Commission's Electronic Data
Gathering Analysis and Retrieval System, which is publicly available through
the Commission's website (http:www.sec.gov). The Common Stock of the Company
is listed on the NYSE and the PHLX and reports, proxy and information
material and other information concerning the Company may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005 and the PHLX,
1900 Market Street, Philadelphia, Pennsylvania 19103.
This Prospectus constitutes a part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. Reference is hereby made to the
Registration Statement and to the exhibits thereto for further information
with respect to the Company and the securities offered hereby. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may
be examined without charge at the Public Reference Section of the Commission
described above. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 (the "Form 10-K");
(b) Amendments to the Form 10-K filed on Form 10-K/A, dated, respectively,
July 28, 1997 and January 9, 1998 (together with the Form 10-K, the
"1997 Annual Reports");
(c) The Company's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1997 and September 30, 1997 and an amendment to the
Company's Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1997, dated January 9, 1998;
(d) The Company's Current Reports on Form 8-K, dated April 28, 1997, June
30, 1997, September 18, 1997 and January 5, 1998; and
(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, dated August 28, 1990,
including all amendments and reports filed for the purpose of updating
such description.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15 (d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
completion or termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be part hereof from the date of filing
of such documents. Any statement contained in a document, all or a portion
of which is incorporated or deemed to be incorporated by reference herein,
shall be
-3-
<PAGE>
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request, a copy of any or all of such documents which are incorporated herein
by reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this
Prospectus incorporates). Written or oral requests for copies should be
directed to National Media Corporation, Eleven Penn Center, Suite 1100, 1835
Market Street, Philadelphia, Pennsylvania 19103; Attention: Director of
Investor Relations, phone number 215-988-4600.
-4-
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking" statements regarding potential
future events and developments affecting the business of the Company. Such
statements relate to, among other things, (i) competition for customers for
its products and services; (ii) the uncertainty of developing or obtaining
rights to new products that will be accepted by the market and the timing of
the introduction of new products into the market; (iii) the limited market
life of the Company's products; and (iv) other statements about the Company
or the direct response consumer marketing industry.
The Company's ability to predict the results or the effect of any pending
events on the Company's operating results is inherently subject to various
risks and uncertainties, including competition for products, customers and
media access; the risks of doing business abroad; the uncertainty of
developing or obtaining rights to new products that will be accepted by the
market; the limited market life of the Company's products; and the effects of
government regulations. Reference is made in particular to the discussion
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's 1997 Annual Report incorporated in
this Prospectus by reference.
THE COMPANY
The Company is principally engaged in the use of direct response
transactional television programming, known as infomercials, to sell consumer
products. The Company manages all phases of direct marketing for the majority
of its products in both the United States and international markets, including
product selection and development, manufacturing by third parties, production
and broadcast of infomercials, order processing and fulfillment and customer
service.
The Company is engaged in direct marketing of consumer products in the
United States and Canada through its wholly-owned subsidiary, Quantum North
America, Inc. (formerly Media Arts International, Ltd.), which the Company
acquired in 1986, and internationally through its wholly-owned subsidiaries:
Quantum International Limited, which the Company acquired in 1991; Quantum
International Japan Company Limited, which the Company formed in June 1995;
and Prestige Marketing Limited and Prestige Marketing International Limited
(collectively, "Prestige") and Suzanne Paul Holding Pty Limited and its
operating subsidiaries (collectively, "Suzanne Paul"), which the Company
acquired in July 1996. The Company produces a substantial number of
infomercials through DirectAmerica Corporation ("DirectAmerica"), which the
Company acquired in October 1995 and Positive Response Television, Inc.
("Positive Response"), which the Company acquired in May 1996.
The Company is a Delaware corporation, with its principal executive
offices located at Eleven Penn Center, Suite 1100, 1835 Market Street,
Philadelphia, Pennsylvania 19103 and its telephone number is 215-988-4600.
RECENT DEVELOPMENTS
On January 5, 1998, the Company announced that it had entered into an
Agreement and Plan of Reorganization and Merger (the "Merger Agreement"),
dated as of January 5, 1998, by and among the Company, ValueVision
International, Inc. ("ValueVision") and V-L Holdings Corp. ("Newco"), a
newly-formed Delaware corporation to be renamed upon consummation of the
Merger Agreement. Following consummation of the transactions contemplated by
the Merger Agreement, the Company and ValueVision will be wholly-owned
subsidiaries of Newco (the "Merger"). Subject to the satisfaction of certain
conditions set forth below, the Merger is expected to be consummated in the
second calendar quarter of 1998.
Pursuant to the terms of the Merger Agreement, each outstanding share of
Common Stock will be converted into the right to receive one share of common
stock in Newco and each outstanding share of common stock, $.01 par value per
share ("ValueVision Common Stock") of ValueVision, will be converted into the
right to receive 1.19 shares of common stock in Newco. It is presently
anticipated that Newco will apply for listing on the New York Stock Exchange.
Robert Johander, current chief executive officer of ValueVision, will
serve as interim chief executive officer of Newco until the Board of
Directors completes its search for a permanent chief executive officer.
Robert Verratti, current chief executive officer of the Company, will reduce
his operational responsibilities upon completion of the Merger but will
remain a member of the Board of Directors and Executive Committee of Newco.
Frederick Hammer, Chairman of the Board of Directors of the Company, and Mr.
Johander will serve as co-chairmen of the Board of Directors of Newco.
Pursuant to the terms of the Merger Agreement, ValueVision has agreed to
extend to the Company a working capital loan (the "Loan") of up to $10
million. The Loan proceeds will be used by the Company for various purposes,
including funding of inventory and media purchases. The Loan bears interest
at prime rate plus one and one-half percent per annum and is due on the
earlier of January 1, 1999 or upon termination of the Merger Agreement in
certain circumstances. In the event the Company is unable to repay the Loan
when due, ValueVision may elect to receive payment in shares of Common Stock
at the then present market value. In addition, in consideration for
providing the Loan, the Company has issued to ValueVision a warrant to
acquire 250,000 shares of Common Stock. The Company also granted
registration rights in connection with the shares of Common Stock issuable in
connection with the Loan and the warrants issued to ValueVision.
Consummation of the Merger is subject to the satisfaction (or waiver) of
a number of conditions, including, but not limited to: (i) the approval and
adoption of the Merger Agreement and approval of the Merger by holders of a
majority of the issued and outstanding shares of Common Stock and ValueVision
Common Stock; (ii) redemption of the Company's Series C Stock for
approximately $23.5 million (which funds are to be advanced by ValueVision to
the Company immediately prior to the closing of the Merger); (iii)
consummation of the repurchase by ValueVision from Montgomery Ward of
1,280,000 shares of ValueVision Common Stock and cancellation of warrants
previously issued to Montgomery Ward to acquire approximately 3.8 million
shares of ValueVision Common Stock; (iv) the effectiveness of a Registration
Statement in connection with the issuance of Newco common stock in the
Merger; (v) the continuing accuracy in all material respects of the
representations and warranties made by each of the Company and ValueVision in
the Merger Agreement on and as of the Effective Time; (vi) the compliance by
the parties with certain covenants contained in the Merger Agreement; and
(vii) the receipt by each of the Company and ValueVision, as applicable, of
certain opinions regarding tax and certain other matters.
In the event of the termination of the Merger Agreement under certain
circumstances, the Company has granted to ValueVision and ValueVision has
granted to the Company the option to purchase up to 19.9% of such company's
common stock at prices set forth in such agreements.
RISK FACTORS
The purchase of the shares of Common Stock offered hereby involve certain
risks. In addition to the other information set forth and incorporated by
reference in this Prospectus, the following factors should be considered
carefully by prospective investors in evaluating an investment in the shares
of Common Stock offered hereby. The Company's fiscal year ends on March 31.
References to fiscal 1997, fiscal 1996 etc. refer to the fiscal period ending
in the indicated calendar year.
Recent Losses; Cash Flow
The Company has suffered net losses in three of its last four fiscal
years, including net losses of approximately $45.7 million in fiscal 1997,
approximately $670,000 in fiscal 1995 and approximately $8.7 million in
fiscal 1994. The Company expects to report a loss for the quarter ending
December 31, 1997. The Company also reported a net loss of approximately
$27.3 million for the first six months of fiscal 1998. Based upon the
deterioration which occurred in the Company's financial condition during
fiscal 1997 and the presence of certain other conditions, as of July 14,
1997, the Company's independent auditors opined that substantial doubt
existed as to the Company's ability to continue as a going concern. During
calendar year 1997, the Company also experienced, as a result of such losses
and other circumstances, significant cash flow difficulties. While the
Company has implemented a number of programs designed to reduce costs and
return the Company to profitability, there can be no assurance that the
Company's plans adequately addresses the circumstances and situations which
resulted in the Company's performance in the periods referred to above.
Unless the Company has adequately addressed the reasons for its recent
results of operations, there can be no assurance as to the Company's future
results of operations.
-5-
<PAGE>
Nature of the Infomercial Industry
The worldwide infomercial industry is now characterized by extreme
competition for products, customers and media access. The Company's future
in this industry will depend in part on its access to, and efficient
management of, media time; the introduction of successful products and the
full exploitation of such products through not only direct marketing but also
traditional retail marketing; its ability to enhance its product lines and
support product marketing and sales with efficient order fulfillment and
customer services; and its ability to successfully integrate the entities or
businesses the Company has or may acquire into an efficient global company.
The future revenues of the business will depend substantially on the
Company's ability to create and maintain an effective, integrated
organization to develop, introduce and market products that (i) address
changing consumer needs on a timely basis; (ii) establish and maintain
effective distribution channels (infomercial and non-infomercial) for its
products; and (iii) develop new geographic markets while expanding
established geographic markets. There can be no assurance that the Company
will be able to achieve these goals. While the Company maintains an internal
product development group responsible for seeking out new products from third
parties, there can be no assurance that present and potential third party
product providers will choose to market products through the Company in the
future. Delays in product introductions and short falls in successful
product introductions played a significant part in the Company's fiscal 1997
results of operations. Any significant delays or reductions in product
introductions in the future periods could have a material adverse effect on
the Company's future results of operations.
Dependence on Foreign Sales
The Company had no sales outside the United States and Canada prior to
June 1991. The Company now markets products to consumers in over 70
countries. In fiscal 1997, 1996 and 1995, approximately 47.4%, 51.6% and
45.7%, respectively, of the Company's net revenues were derived from sales to
customers outside the United States and Canada. Such sales represented a
12.4% increase in fiscal 1997 from fiscal 1996, a 87.6% increase in fiscal
1996 from fiscal 1995 and a 74.8% increase in fiscal 1995 from fiscal 1994.
In fiscal 1997, 1996 and 1995, sales in Germany accounted for approximately
5.7%, 7.0% and 13.0%, respectively, of the Company's net revenues. In early
1994, the Company began airing its infomercials in Asia. Sales of the
Company's products in Asia accounted for approximately 19.8% of the Company's
net revenues for fiscal 1997. Sales of the Company's products in Japan,
which represented a significant portion of Asian revenues, accounted for
approximately 17.7% of the Company's net revenues for fiscal 1997. The
Company experienced a decline of approximately 30.3% in its Japanese net
revenues in fiscal 1997 compared to fiscal 1996. During fiscal 1998 this
trend has continued. In the first six months of fiscal 1998, as compared to
the first six months of fiscal 1997, the Company's revenues in its Asian
marketplace had declined by 42.2%, 4.8% of which is attributable to currency
devaluation. Geographical expansion of sales activity results in increased
working capital requirements as a result of additional lead time for delivery
of and payment for product prior to receipt of sale proceeds. While the
Company's foreign operations have the advantage of airing infomercials that
have already proven successful in the United States market, as well as
successful infomercials produced by other international companies with
limited media access and distribution capabilities, there can be no assurance
that the Company's foreign operations will continue to generate increases in
net revenues. Competition in the Company's international marketplace is
increasing rapidly. In addition, the Company is subject to many risks
associated with doing business abroad, including: adverse fluctuations in
currency exchange rates; transportation delays and interruptions; political
and economic disruptions; the imposition of tariffs and import and export
controls; and increased customs or local regulations. The Company is
currently being negatively impacted by the downturn in the Far East
economies, which is evidenced by the significant devaluation in Far East
currencies. The occurrence of any one or more of the foregoing could have a
material adverse effect on the Company's results of operations.
Entering into New Markets
As the Company enters into new markets, including countries in Asia and
South America, it is faced with the uncertainty of never having done business in
those commercial, political and social settings. Accordingly, despite the
Company's best efforts, its likelihood of success in each new market which it
enters is unpredictable for reasons particular to each such market. It is also
possible that, despite the Company's apparently successful entrance into a new
market, some unforeseen circumstance could arise which would limit the Company's
ability to continue to do business or to expand in that new market.
Dependence on New Products; Unpredictable Market Life; Inventory Management and
Product Returns
The Company is dependent on its continuing ability to develop or obtain
rights to new products to supplement or replace existing products as they
mature through their product life cycles. The Company's future results of
operations will also be dependent upon its ability to proactively manage its
products through their life cycles. The Company's five most successful
products in each of fiscal 1997, 1996 and 1995 accounted for approximately
41.2%, 46.0% and 54.0%, respectively, of the Company's net revenues for such
periods. For the most part, the Company's five most successful products
change from year to year. Revenues are dependent from year to year on the
introduction of new products. Even if the Company is able to introduce new
products, there can be no assurance that such new products will be
-6-
<PAGE>
successful. The Company's future results of operations depend on its ability
to spread its revenue (sales) stream over a larger number of products in a
given period and to more effectively exploit the full revenue potential of
each product it introduces through all levels of consumer marketing, whether
directly or through third parties.
Product sales and results of operations for a given period will depend
upon, among other things, a positive customer response to the Company's
infomercials, the Company's effective management of product inventory and the
stage in their life cycles of products sold during such period. Customer
response to infomercials depends on many variables, including, the appeal of the
products being marketed, the effectiveness of the infomercials, the availability
of competing products and the timing and frequency of air-time. There can be no
assurance that the Company's new products will receive market acceptance.
In the event the Company does not have an adequate supply of inventory, as
a result of production delays or shortages or inadequate inventory management or
cash flow difficulties, it may lose potential product sales. The ability of the
Company to maintain systems and procedures to more effectively manage its
inventory (and its infomercial airings), in the domestic as well as
international markets, is of critical importance to the Company's continuing
cash flow and results of operations. It is possible that, during a product's
life, unanticipated obsolescence of such product may occur or problems may arise
regarding regulatory, intellectual property, product liability or other issues
which may affect the continued viability of the product for sale despite the
fact that the Company may still hold a sizable inventory position in such
product. Most of the Company's products have a limited market life. It is
therefore, extremely important that the Company fully realize the potential of
each successful product.
Historically, the majority of products generate their most significant
domestic revenue in their introductory year. Foreign revenues have tended to
have been generated more evenly over a somewhat longer period. In the event the
number of times an infomercial is broadcast within a market is increased, the
market life of such product in such market may decrease. There can be no
assurance that a product which has produced significant sales will continue to
produce significant, or any, sales in the future. As a result, the Company is
dependent on its ability to adapt to market conditions and competition as well
as other factors which affect the life cycles of its products and its ability to
continue to identify and successfully market new products. The failure of newly
introduced products or significant delays in the introduction of, or failure to
introduce, new products would adversely impact the Company's results of
operations in terms of both lost opportunity cost and actual loss of dollars
invested.
Even when market acceptance for the Company's new products occurs, the
Company's results of operations may be adversely impacted by returns of such
products, either pursuant to the Company's warranties or otherwise. While the
Company establishes reserves against such returns which it believes are adequate
based upon historic levels and product mix, there can be no assurance that the
Company will not experience unexpectedly high levels of returns (in excess of
its reserves) for certain products. In the event that returns exceed reserves,
the Company's results of operations would be adversely affected.
Dependence on Third Party Manufacturers and Service Providers
The Company is dependent on third party sources, both foreign and domestic,
to manufacture all of its products, although it does not depend on any
particular supplier for a majority of its products. The Company is also
dependent to an extent upon a number of companies which serve to fulfill orders
placed for the Company's products and/or provide telemarketing services. The
inability of the Company, either temporarily or permanently, to obtain a timely
supply of product to fulfill sales orders for a specific product or to satisfy
orders for such product could have a material adverse effect on the Company's
results of operations. Moreover, because the time from this initial approval of
a product by the Company's product development personnel to the first sale of
such product is relatively short, the Company's ability to cause its
manufacturing sources to meet its production and order fulfillment deadlines at
reasonable costs and produce a high-quality product or render quality service is
important to its business. There can be no assurance that the Company will
successfully manage this process in such a way to maximize its sales of its
products. Since the Company often relies on foreign manufacturers, it must
allow longer lead times for products to fulfill customer orders. Utilizing such
foreign manufacturers exposes the Company to the general risks of doing business
abroad.
Dependence on Media Access; Effective Management of Media Time
The Company is dependent on having access to media time to televise its
infomercials on cable networks, network affiliates and local stations. The
Company's future results of operations will also depend upon the Company's
ability to manage its media time, taking advantage of long-term purchases where
prudent and spot purchases where necessary. This media management function must
also include a meaningful coordination between available infomercials and
available media time. In the normal course of business, the Company's media
contracts expire pursuant to their terms from time to time. There can be no
assurance that, as existing contracts expire, the Company will be able to
purchase or renew media time on a long-term basis or at favorable price levels.
The Company purchases a significant amount of its media time from cable
television and satellite networks. These cable television and satellite
networks
-7-
<PAGE>
assemble programming for transmission to multiple and local cable system
operators. These cable system operators may not be required to carry all of the
network's programming. The Company currently does not pay and is not paid for
the "privilege" of being broadcast by these operators. It is possible that, if
demand for air time grows, these operators will begin to charge the Company to
continue broadcasting the Company's infomercials or limit the amount of time
available for broadcast. Recently, larger multiple system operators have
elected to change their operations by selling "dark" time (i.e., the hours
during which a station does not broadcast its own programming). Significant
increases in the cost of media time or significant decreases in the Company's
access to media time, domestically or internationally, including, but not
limited to, any failure to renew or extend existing agreements, could have a
material adverse effect on its results of operations. There can also be no
assurances that, even if the Company secures media access, its programming will
attract viewers or that its products will enjoy consumer acceptance. In
addition, periodically, due to world events, media access and the number of
persons viewing the Company's infomercials in one or more markets may be
substantially diminished. In such circumstances, the Company's results of
operations for such periods may be adversely affected. In recent periods the
Company has experienced an increase in the demand by international media
suppliers for fixed rates and/or for minimum revenue guarantees, both of which
increase the Company's risk.
A significant portion of the Company's media time has historically been
purchased under contracts which are one year or greater in length. Whenever the
Company makes advance purchases and commitments to purchase media time, if the
Company does not manage such media time effectively, such failure could have a
material adverse effect on the Company's results of operations. In the event
the Company is unable to utilize all of the media time it has acquired, it
attempts to arrange to sell a portion of its media time to others. There can be
no assurance, however, that the Company will be able to use all of its media
time or sell it to others or that, upon expiration of such long-term contracts,
the Company will be able to successfully negotiate extensions of such contracts
on terms favorable to the Company. The inability of the Company to extend one
or more of such contracts on reasonable terms as they expire could have a
material adverse effect on the Company's results of operations.
Litigation Involving the Company
The infomercial industry has historically been very litigious and the
Company in recent years has been involved in significant legal proceedings and
has incurred significant charges in prior periods related to such litigation.
Abbreviated information regarding the status of current material pending
litigation involving the Company is set forth below. However, as it pertains to
previously reported matters, such information does not purport to be complete
and is qualified in its entirety by the detailed description of the legal and
regulatory proceedings set forth in the reports filed by the Company pursuant to
the Exchange Act and incorporated by reference herein. Such descriptions
variously include information relating to the status of the proceedings and the
Company's evaluation of the claims made against it. Certain of such previously
reported matters have been resolved substantially in accordance with the terms
set forth in such prior disclosure. In addition, as set forth above, the
Company consummated the acquisition of DirectAmerica in October 1995. Further,
as discussed above, the Company consummated the acquisition of Positive Response
in May 1996. As a result of these acquisitions, all liabilities of
DirectAmerica and Positive Response became liabilities of the respective
wholly-owned subsidiary of the Company into which each of DirectAmerica and
Positive Response was merged. The Company also acquired Prestige and Suzanne
Paul in July 1996, including all of their respective liabilities.
NATIONAL MEDIA LITIGATION
WWOR Litigation
In March 1997, WWOR-TV filed a breach of contract action in the United
States District Court for New Jersey against one of the Company's operating
subsidiaries alleging that the subsidiary wrongfully terminated a contract for
the purchase of media time, seeking in excess of $1,000,000 in compensatory
damages. The Company is contesting the action and believes it has meritorious
defenses to the plaintiff's claims for damages. At this stage, the Company
cannot predict the outcome of this matter; however, even if plaintiffs were to
prevail on all of their claims, the Company does not believe that such result
would have a material adverse impact on the Company's financial condition or
results of operations.
Parkin
In early October 1997, John Parkin, an on air personality appearing in
certain of the Company's infomercials, brought an action for injunctive relief
and unspecified damages in the United States District Court for the Eastern
District of Pennsylvania, alleging principally breach of contract and
intellectual property based claims. Following court hearings, plaintiff's
claims for injunctive relief were dismissed. While at this stage it is not
possible to predict the outcome of this matter, the Company believes that any
resolution of this matter will not have a material adverse effect on the
Company's results of operations or financial condition.
PRTV LITIGATION
PRTV Shareholders' California Class Action
On May 1, 1995, prior to the acquisition of PRTV by the Company, a
purported class action suit was filed in the United States District Court for
the Central District of California against PRTV and its principal executive
officers alleging that PRTV made false and misleading statements in its public
filings, press releases and other public statements with respect to its business
and financial prospects. The suit was filed on behalf of all persons who
purchased PRTV common stock during the period from January 4, 1995 to April 28,
1995. The suit sought unspecified compensatory damages and other equitable
relief. On or about September 25, 1995, the plaintiffs filed a second amended
complaint
-8-
<PAGE>
which added additional officers as defendants and attempted to set forth new
facts to support plaintiff's entitlement to legal relief. The Company reached
an agreement in principle to settle this action in fiscal year 1997 which
provides for the payment of $550,000 to the class, 66% of which is to be paid by
PRTV's insurance carrier. The Company recorded a charge of $187,000 during
fiscal 1997 in connection with this matter, reflecting its portion of such
settlement. Such settlement is contingent upon final court approval.
Suntiger
In late March 1997, Suntiger, Inc., a distributor of sunglasses, filed suit
against PRTV and certain other parties alleging patent infringement. The
Company has reached a settlement with the plaintiffs involving a going forward
business relationship which will have no material adverse effect on the
Company's financial condition or results of operations.
REGULATORY MATTERS
The infomercial industry is regulated by the Federal Trade Commission (the
"FTC"), the United States Post Office, the Consumer Product Safety Commission,
the Federal Communications Commission, the Food and Drug Administration, various
States' Attorneys General and other state and local consumer protection and
health agencies. The FTC directly regulates marketers of products, such as the
Company, credit card companies which process customer orders and others involved
in the infomercial and direct marketing industries.
The Company's marketing activities and/or products have been and will
continue to be subject to the scrutiny of each of the aforementioned regulatory
agencies. An adverse determination or extended investigation by any of these
agencies could have a material adverse effect on the Company. Moreover, the
domestic and international regulatory environments in which the Company operates
are subject to change from time to time. It is possible that changes in the
regulations to which the Company is subject might have a material adverse effect
on the Company's business or results of operations. As a result of prior
settlements with the FTC, the Company has agreed to two consent orders. Prior
to the Company's acquisition of Positive Response, Positive Response and its
Chief Executive Officer, Michael S. Levey, also agreed to a consent order with
the FTC. Among other things, such consent orders require the Company, Positive
Response and Mr. Levey to submit compliance reports to the FTC staff. The
Company, Positive Response and Mr. Levey have submitted compliance reports as
well as additional information requested by the FTC staff. In June 1996, the
Company received a request from the FTC for additional information regarding two
of the Company's infomercials in order to determine whether the Company was
operating in compliance with the consent orders referred to above. The Company
responded to such request. The FTC later advised the Company that it believed
the Company had violated one of the consent orders by allegedly failing to
substantiate certain claims made in one of its infomercials. Such infomercials
are no longer being aired. The Company provided information to the FTC to
demonstrate substantiation. If the Company's substantiation is deemed to be
insufficient by the FTC, the FTC has a variety of enforcement mechanisms
available to it, including, but not limited to, monetary penalties. The Company
is indemnified by a third party in connection with any continuing costs or
damages related to this matter. While no assurances can be given, especially
given the applicable indemnification, the Company does not believe that any
remedies to which it may become subject will have a material adverse effect on
the Company's results of operations or financial condition.
In addition, in accordance with applicable regulations, the Company
notified the CPSC of breakages which were occurring in its Fitness Strider
product. The Company also notified the CPSC of its replacement of certain parts
of the product with upgraded components. The CPSC reviewed the Company's
testing results in order to assess the adequacy of the Company's upgraded
components and conducted testing of its own. On November 5, 1997, the CPSC
informed the Company that the compliance staff had made a preliminary
determination that the Fitness Strider product and the upgraded component
present a substantial product hazard, as defined under applicable law. The
Company and the CPSC Staff are discussing voluntary action to address the CPSC's
concerns, including replacement of the affected components. At present it is
not anticipated that any action agreed upon, or action required by the CPSC,
will have any material adverse impact on the Company's financial condition or
results of operations. The Company has also been contacted by Australian
consumer protection regulatory authorities regarding the safety and fitness of
the Fitness Strider product. At this point, it is not possible to predict
whether the outcome of these matters regarding the
-9-
<PAGE>
Fitness Strider will have a material adverse impact upon the Company's financial
condition or results of operations.
The Company's international business is subject to the laws and regulations
of England, the European Union, Japan and other countries in which the Company
sells its products, including, but not limited to, the various consumer and
health protection laws and regulations in the territories in which the
programming is broadcast, where applicable. If any significant actions were
brought against the Company or any of its subsidiaries in connection with a
breach of such laws or regulations, including the imposition of fines or other
penalties, or against one of the entities through which the Company obtains a
significant portion of its media access, the Company could be materially
adversely affected. There can be no assurance that changes in the laws and
regulations of any territory which forms a significant portion of the Company's
market will not adversely affect the Company's financial condition or results of
operations.
Product Liability Claims
Products sold by the Company may expose it to potential liability from
claims by users of such products, subject to the Company's rights, in certain
instances, to indemnification against such liability from the manufacturers of
such products. The Company generally requires the manufacturers of its products
to carry product liability insurance, although in certain instances where a
limited quantity of products are purchased from non-U.S. vendors, the vendor may
not be formally required to carry product liability insurance. Certain of such
vendors, however, may in fact maintain such insurance. There can be no
assurance that such parties will maintain this insurance or that this coverage
will be adequate to cover all potential claims, including coverage in amounts
which it believes to be adequate. There can be no assurance that the Company
will be able to maintain such coverage or obtain additional coverage on
acceptable terms, or that such insurance will provide adequate coverage against
all potential claims.
Competition
The Company competes directly with many companies which generate sales from
infomercials. The Company also competes with a large number of consumer product
companies and retailers which have substantially greater financial, marketing
and other resources than the Company, some of which have recently commenced, or
indicated their intent to conduct, direct response marketing. The Company also
competes with companies that make imitations of the Company's products at
substantially lower prices. Products similar to the Company's products may be
sold in department stores, pharmacies, general merchandise stores and through
magazines, newspapers, direct mail advertising and catalogs.
Dependence on Key Personnel
The Company's executive officers have substantial experience and expertise
and make significant contributions to the Company's growth and success. The
unexpected loss of the services of one or more of such individuals could have a
material adverse effect on the Company.
Convertible Securities; Shares Eligible for Future Sale
Sales of substantial amounts of the shares of Common Stock currently
issued, issuable upon conversion or exercise of securities convertible into or
exercisable for Common Stock or of the shares of Common Stock offered hereby
could adversely affect the market value of the Common Stock, depending upon the
timing of such sales, and, in the case of convertible and exercisable
securities, may effect a dilution of the book value per share of Common Stock.
As of December 24, 1997, 20,000 shares of the Company's Series C Preferred
Stock were issued and outstanding. Each share of the Series C Preferred stock
is convertible into such number of shares of Common Stock as is determined by
dividing the stated value ($1,000) of the shares of Series C Preferred Stock (as
such value is increased by a premium of six percent (6%) per annum based on the
number of days the Series C Preferred Stock is held) by the then current
conversion price (which is determined by reference to the Certificate of
Designations, Preferences and Rights of the Series C Preferred Stock and the
then current market price). The terms of the Series C Preferred Stock did not
provide for a beneficial conversion price upon issuance. If converted on
December 24, 1997, the Series C Preferred Stock would have been convertible into
approximately 3,300,330 shares of Common Stock. Depending on market conditions
at the time of conversion, the number of shares issuable could prove to be
significantly greater in the event of a decrease in the trading price of the
Common Stock. For example, in the event that the volume weighted average sale
of the Common Stock was equal to $3.00 per share on the date of conversion, the
Series C Preferred Stock would be convertible into 6,666,667 shares of Common
Stock. Purchasers of Common Stock could therefore experience substantial
dilution upon conversion of the Series C Preferred Stock. The shares of Series
C Preferred Stock are not registered and may be sold only if registered under
the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144. The shares of Common
-10-
<PAGE>
Stock into which the Series C Preferred Stock may be converted are being
registered pursuant to this Registration Statement.
As of December 24, 1997, approximately 10,376,921 shares of Common Stock
were reserved for issuance upon exercise of outstanding warrants (including the
Warrants), options and the Company's Series B Convertible Preferred Stock and an
additional 10,000,000 shares of Common Stock were reserved for issuance upon
conversion of the Series C Preferred Stock and exercise of the Series C
Warrants. At December 24, 1997, there were 26,212,716 shares of Common Stock
outstanding, nearly all of which were freely tradeable without restriction under
the Securities Act unless held by affiliates.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Offered
Shares of Common Stock offered hereby. The Selling Stockholders will receive
all of the net proceeds from the sale of the Offered Shares of Common Stock
offered hereby. Upon the exercise of the Warrants or the NW Options by the
holders thereof, the Company will receive the exercise price of the Warrants or
the NW Options, as the case may be. To the extent the Warrants or the NW
Options are exercised, the Company will apply the proceeds thereof to its
general corporate purposes and working capital.
-11-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders, the
number of Common Shares beneficially owned by such Selling Stockholders as of
December 24, 1997 and the number of Offered Shares which may be offered for sale
pursuant to this Prospectus by each such Selling Stockholder. Other than for
CoreStates Bank, N.A. (or its predecessor in interest), which has been the
Company's principal lender since April 1995, and Nancy Langston, from whom the
Company purchased, and who is President of, the Company's Nancy Langston &
Associates, Inc. subsidiary, none of the Selling Stockholders has held any
position, office or other material relationship with the Company or any of its
affiliates within the past three years other than as a result of his or its
ownership of Common Shares. The Offered Shares may be offered from time to time
by the Selling Stockholders named below. See "Plan of Distribution." However,
such Selling Stockholders are under no obligation to sell all or any portion of
such Offered Shares, nor are the Selling Stockholders obligated to sell any such
Offered Shares immediately under this Prospectus. Because the Selling
Stockholders may sell all or part of their Offered Shares, no estimate can be
given as to the number of Common Shares that will be held by any Selling
Stockholder upon termination of any offering made hereby.
Pursuant to Rule 416 of the Securities Act, Selling Stockholders may also
offer and sell additional Common Shares issued with respect to the Series C
Preferred Stock and the Warrants as a result of any premiums paid on the Series
C Preferred Stock in Common Stock, stock splits, stock dividends and
anti-dilution provisions (including by reason of the floating rate conversion
price mechanism of the Series C Preferred Stock in accordance with the terms
thereof).
<TABLE>
<CAPTION>
Common Shares Beneficially
Owned After Offering (1)
--------------------------
Number of Common
Shares Beneficially Common Shares Percent of
Name of Selling Stockholder Owned Prior to Offering Offered Hereby Number Outstanding
- --------------------------- ----------------------- -------------- ------ -----------
<S> <C> <C> <C> <C>
Capital Ventures International(2) 5,992,060 (3) 5,992,060 0 0
RGC International Investors, LDC(2) 1,997,353 (3) 1,997,353 0 0
CoreStates Bank, N.A. 125,000 (4) 125,000 0 0
Nancy Langston 26,587 (5) 26,587 0 0
Natwest Securities Corp. 100,000 (6) 100,000 0 0
Bodylines, Inc. 52,000 (7) 52,000 0 0
</TABLE>
- ---------------
(1) Assumes the sale of all Offered Shares.
(2) Pursuant to that certain Securities Purchase Agreement, dated September 4,
1997, among the Company, Capital Ventures International and RGC
International Investors, LDC (collectively, the "Series C Investors"), the
Series C Investors purchased an aggregate of 20,000 shares of Series C
Preferred Stock which are convertible into Common Shares and Series C
Warrants to acquire 989,413 Common Shares.
(3) Represents the pro rata allocation among the Series C Investors of
7,000,000 Common Shares which may become issuable upon conversion of the
Series C Preferred Stock and 989,413 Common Shares issuable upon exercise
of the Series C Warrants which the Company is registering hereunder
pursuant to the registration rights agreement between the Company and the
Series C Investors. As of the date of this Prospectus, the actual number
of shares of Common Stock issuable upon conversion of Series C Preferred
Stock and exercise of the Series C Warrants is indeterminate, is subject to
adjustment and could be materially less or more than such estimated number
depending on factors which cannot be predicted by the Company at this time,
including, among other factors, the future market price of the Common
Stock. The 7,989,413 Common Shares registered hereby represents a good
faith estimate of the number of shares underlying the Series C Preferred
Stock and the Series C Warrants and, pursuant to Rule 416 under the
Securities Act such additional number of shares of Common Stock as may be
issued or issuable upon conversion of the Series C Preferred Stock and
exercise of the Series C Warrants by reason of the floating rate conversion
price mechanism or other adjustment mechanisms described therein, or by
reason of any stock split,
-12-
<PAGE>
stock dividend or similar transaction involving the Common Stock, in order
to prevent dilution. Pursuant to the terms of the Certificate of
Designations, Preferences and Rights of the Series C Preferred Stock, the
actual number of Common Shares issuable upon conversion of the Series C
Preferred Stock will equal (in addition to the Common Shares issuable upon
exercise of the Series C Warrants) (i) the aggregate stated value of the
shares of Series C Preferred Stock then being converted (i.e., $1,000 per
share), plus a premium in the amount of 6% per annum accruing from
September 18, 1997, through the date of conversion (unless the Company
chooses to pay such premium in cash) plus any conversion default amount (as
defined in the Certificate of Designations, Preferences and Rights of the
Series C Preferred Stock), divided by (ii) (x) if the conversion occurs on
or before March 3, 1998, a conversion price equal to $6.06 per share, or
(y) in the case of conversions after March 4, 1998, a conversion price
equal to the lower of $6.06 per share and the lowest volume weighted
average sale (as determined in accordance with the Certificate of
Designations, Preferences and Rights of the Series C Preferred Stock) price
of the Common 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).
Except under certain limited circumstances, no holder of the Series C
Preferred Stock and Series C Warrants is entitled to convert or exercise
such securities to the extent that the shares to be received by such holder
upon such conversion or exercise would cause such holder to beneficially
own more than 4.9% of the Common Shares. Therefore, the number of shares
set forth herein and which a Series C Investor may sell pursuant to this
Prospectus may exceed the number of Common Shares such Series C Investor
would otherwise beneficially own as determined pursuant to Section 13(d) of
the Exchange Act.
(4) Consists of 125,000 Common Shares issuable to such Selling Stockholder upon
the exercise of warrants received by such Selling Stockholder in connection
with the extension of the Company's principal credit facility in September
1997.
(5) Consists of 26,587 Common Shares issued to such Selling Stockholder in
connection with the Company's acquisition of Nancy Langston & Associates,
Inc. in August 1996.
(6) Consists of 100,000 Common Shares issuable to such Selling Stockholder upon
the exercise of options transferred to such Selling Stockholder in 1996.
(7) Consists of 52,000 Common Shares issuable to such Selling Stockholder in
connection with the settlement of litigation between the Company and such
Selling Stockholder in November 1997.
-13-
<PAGE>
PLAN OF DISTRIBUTION
The Offered Shares are being offered on behalf of the Selling Stockholders,
and, except for the exercise price of the Warrants, the Company will not receive
any proceeds from the Offering. The Offered Shares may be sold or distributed
from time to time by the Selling Stockholders, or by pledgees, donees or
transferees of, or other successors in interest to, the Selling Stockholders,
directly to one or more purchasers (including pledgees) or through brokers,
dealers or underwriters who may act solely as agent or may acquire Offered
Shares as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. The sale of the Offered Shares may be effected in
one or more of the following methods: (i) ordinary brokers' transactions, which
may include long or short sales; (ii) transactions involving cross or block
trades or otherwise on the NYSE and PHLX; (iii) purchases by brokers, dealers or
underwriters as principal and resale by such purchasers for their own accounts
pursuant to this Prospectus; (iv) "at the market" to or through market makers or
into established trading markets, including direct sales to purchasers or sales
effected through agents; (vi) any combination of the foregoing, or by any other
legally available means. In addition, the Selling Stockholders or their
successors in interest may enter into hedging transactions with broker-dealers
who may engage in short sales of Offered Shares in the course of hedging the
position they assume with the Selling Stockholders. The Selling Stockholders or
their successors in interest may also enter into option or other transactions
with broker-dealers that require the delivery by such broker-dealers of the
Offered Shares, which Offered Shares may be resold thereafter pursuant to this
Prospectus. There can be no assurance that all or any of the Offered Shares
will be issued to, or sold by, the Selling Stockholders.
Brokers, dealers, underwriters or agents participating in the sale of the
Offered Shares as agents may receive compensation in the form of commissions,
discounts or concessions from the Selling Stockholders and/or purchasers of the
Offered Shares for whom such broker-dealers may act as agent, or to whom they
may sell as principal, or both (which compensation to a particular broker-dealer
may be less than or in excess of customary commissions). The Selling
Stockholders and any broker-dealers or other persons who act in connection with
the sale of Offered Shares hereunder may be deemed to be "Underwriters" within
the meaning of the Securities Act, and any commission they receive and proceeds
of any sale of Offered Shares may be deemed to be underwriting discounts and
commission under the Securities Act. Neither the Company nor any Selling
Stockholder can presently estimate the amount of such compensation. The Company
knows of no existing arrangements between any Selling Stockholder any other
shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the Offered Shares.
The Selling Stockholders and any other persons participating in the sale or
distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Shares by the
Selling Stockholders or any other such persons. The foregoing may affect the
marketability of the Offered Shares.
The Company will pay substantially all of the expenses incident to the
registration, offering and sale of the Offered Shares to the public other than
commission or discounts of underwriter, broker-dealers or agents. The Company
has also agreed to indemnify certain of the Selling Stockholders and certain
related persons against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Offered Shares has been passed upon for the Company by
Brian J. Sisko, Esq., Senior Vice President and General Counsel of the Company.
EXPERTS
The consolidated financial statements and schedule of National Media
Corporation appearing in the Company's Annual Report (Form 10-K) for the year
ended March 31, 1997 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph indicating that matters exist that raise substantial doubt as to the
Company's ability to continue as a going concern) included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule have been incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
-14-
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING
DESCRIBED HEREIN AND, IF GIVEN
OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE
SELLING STOCKHOLDERS. THIS
PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY
A SECURITY OTHER THAN THE SHARES
OF COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
---------
TABLE OF CONTENTS
---------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................... 3
Incorporation of Certain
Documents by Reference.................... 3
Forward-Looking Statements................ 5
The Company............................... 5
Recent Developments....................... 5
Risk Factors.............................. 5
Use of Proceeds........................... 11
Selling Stockholders...................... 12
Plan of Distribution...................... 14
Legal Matters............................. 14
Experts................................... 14
</TABLE>
8,293,000 Shares of Common Stock
NATIONAL MEDIA CORPORATION
------
PROSPECTUS
------
January __, 1998
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the estimated amounts of all
expenses payable by the registrant in connection with the registration of the
Offered Shares, other than underwriting discounts and commissions:
Registration Fee--Securities and Exchange Commission (1) $ 12,834.00
*Blue Sky fees and expenses $ 1,000.00
*Accountants' fees and expenses $ 20,000.00
*Legal fees and expenses $ 25,000.00
*Printing and EDGAR expenses $ 5,000.00
*Miscellaneous $ 2,500.00
-----------
Total $ 66,334.00
-----------
-----------
__________________
(1) $12,784.00 has previously been paid.
* Estimate
Item 15. Indemnification of Directors and Officers.
A. The Delaware General Corporation Law provides that, to the extent
that any director, officer, employee or agent of the Company has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the Company) to which such person
was a party by reason of the fact that such person is or was a director,
officer, employee or agent of the Company or is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, the
Company shall indemnify any such person against expenses (including
attorneys' fees) actually and reasonably incurred in connection therewith.
B. In addition, the Company has the power to indemnify any of the
persons referred to above against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any such action, suit or proceeding, if such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful.
Notwithstanding the foregoing, in connection with any action or suit by
or in the right of the Company to procure a judgment in its favor, the
Company shall not make any indemnification as described above in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the Company unless, and only to the extent that, the Court of
Chancery (in the State of Delaware) or the court in which such action or suit
was brought shall determine, upon application, that despite adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
C. The Company also has the power, under the Delaware General
Corporation Law, to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any other liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the foregoing provisions.
D. The indemnification provided by or allowable pursuant to the
Delaware General Corporation Law shall or may, as applicable, continue as to
a person who has ceased to be a director, officer, employee or agent of the
Company and shall inure to the benefit of the heirs, executors and
administrators of such person.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Schedule of Exhibits.
Exhibit
Number Exhibit
------- -------
* 4.1 Certificate of Designations, Preferences and Rights of
Series C Convertible Preferred Stock.
* 4.2 Form of Warrant issued in connection with 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.
** 4.5 Form of Warrant issued to Corestates Bank, N.A.
** 5 Opinion and Consent of Brian J. Sisko, Esquire.
***10.1 Agreement and Plan of Merger and Reorganization dated as of
August 7, 1996, by and among the Company, NLA Acquisition
Corp., Nancy Langston & Associates, Inc. and Nancy Langston.
** 23.1 Consent of Ernst & Young LLP, independent auditors, with
respect to the consolidated financial statements of National
Media Corporation for the year ended March 31, 1997.
_________________
* Incorporated by reference to the Company's Current Report on Form 8-K dated
September 18, 1997.
** Filed herewith.
*** Incorporated by reference to the Company's Current Report on Form 8-K dated
August 13, 1996.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Philadelphia, Commonwealth of Pennsylvania, on this 9th day of January, 1998.
NATIONAL MEDIA CORPORATION
BY: /s/ Robert N. Verratti
---------------------------------------
Robert N. Verratti, President and Chief
Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement on Form S-3 has been signed by
the following persons in the capacities indicated on this 9th day of January,
1998.
<TABLE>
<CAPTION>
Signature Title(s)
--------- --------
<S> <C>
/s/ Robert N. Verratti
------------------------
Robert N. Verratti President, Chief Executive Officer and Director
/s/ Paul R. Brazina
------------------------
Paul R. Brazina Vice President and Chief Financial Officer
*
------------------------
Constantinos I. Costalas Vice Chairman of the Board, Director
*
------------------------
Albert R. Dowden Director
*
------------------------
Michael J. Emmi Director
*
------------------------
William M. Goldstein Director
*
------------------------
Frederick S. Hammer Chairman of the Board, Director
*
------------------------
Robert E. Keith, Jr. Director
------------------------
Ira M. Lubert Director
*
------------------------
Brian McAdams Director
*
------------------------
Warren V. Musser Director
*
------------------------
Jon W. Yoskin II Director
* Attorney-in-fact pursuant to power of attorney filed as part of the
original filing of this Registration Statement.
</TABLE>
/s/ Paul R. Brazina
------------------------
Paul R. Brazina
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4.5 Form of Warrant issued to Corestates Bank, N.A.
5 Opinion and Consent of Brian J. Sisko, Esquire.
23.1 Consent of Ernst & Young LLP, independent auditors, with respect
to the consolidated financial statements of National Media
Corporation for the year ended March 31, 1997.
</TABLE>
<PAGE>
Exhibit 4.5
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND THE TERMS AND CONDITIONS HEREOF. THE HOLDER OF THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE
RESTRICTIONS HEREIN SET FORTH.
VOID AFTER 5:00 P.M., PHILADELPHIA, PENNSYLVANIA TIME, SEPTEMBER 18, 2002.
*********************************
WARRANT
to
PURCHASE COMMON STOCK
of
NATIONAL MEDIA CORPORATION
*********************************
This certifies that, for good and valuable consideration, National Media
Corporation, a Delaware corporation (the "Company"), grants to CoreStates Bank,
N.A. or permitted registered assigns (the "Warrantholder" or "Warrantholders"),
the right to subscribe for and purchase from the Company, at $5.1875 per share
(the "Exercise Price"), from and after the date hereof, and to and including
5:00 P.M. Philadelphia, Pennsylvania time on September 18, 2002 (the "Expiration
Date"), 125,000 shares, as such number of shares may be adjusted from time to
time (the "Warrant Shares"), of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), subject to the provisions and upon the terms and
conditions herein set forth The Exercise Price and the number of Warrant Shares
are subject to adjustment from time to time as provided in Section 6.
<PAGE>
SECTION 1. Exercise of Warrant; Limitation on Exercise: Payment of Taxes
1.1 Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, at any time and from
time to time after the date hereof, in whole or in part, by presentation and
surrender of this Warrant to the Company at its principal executive offices with
the Subscription Form annexed hereto duly executed and accompanied by cash
payment of the full Exercise Price for each Warrant Share to be purchased
against the Exercise Price as set forth in Section 1.3 hereof.
(b) Upon receipt of this Warrant, with the Subscription Form duly
executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, the Company shall
cause to be issued certificates for the total number of whole shares of Common
Stock for which this Warrant is being exercised (adjusted to reflect the effect
of the antidilution provisions contained in Section 6 hereof, if any, and as
provided in Sections 5 and 7.8 hereof) in such denominations as are requested
for delivery to the Warrantholder, and the Company shall thereupon cause its
transfer agent to deliver such certificates to the Warrantholder. The stock
certificates so delivered shall be in such denominations as may be specified by
the Warrantholder and shall be issued in the name of the Warrantholder or, if
permitted by Section 5 and in accordance with the provisions thereof, such other
name as shall be designated in the Subscription Form. The Warrantholder shall
be deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Warrantholder. If at the time
this Warrant is exercised, a registration statement is not in effect to register
under the Securities Act of 1933, the resale of the Warrant Shares issuable upon
exercise of this Warrant, the Company may require the Warrantholder to make such
customary representations, and may place such customary legends on certificates
representing the Warrant Shares, as may be reasonably required in the opinion of
counsel to the Company to permit the Warrant Shares to be issued without such
registration.
(c) If this Warrant shall have been exercised only in part, the
Company shall, at the time of delivery of the certificates for the Warrant
Shares, deliver to the Warrantholder a replacement Warrant evidencing the rights
to purchase the remaining Warrant Shares, which replacement Warrant shall in all
other respects be identical with this Warrant. No adjustments or payments shall
be made on or in respect of Warrant Shares issuable on the exercise of this
Warrant for any regular cash dividends paid or payable to holders of record of
Common Stock prior to the date as of which the Warrantholder shall be deemed to
be the record holder of such Warrant Shares.
1.2 Limitation on Exercise. If this Warrant is not exercised prior to
5:00 P.M. on the Expiration Date (or the next succeeding Business Day, if the
Expiration Date is a Saturday, Sunday or a day on which the New York Stock
Exchange is authorized to close or on which the Company is otherwise closed for
business (a "Nonbusiness Day"), this Warrant, or any new Warrant issued
2
<PAGE>
pursuant to Section 1.1, shall cease to be exercisable and shall become void and
all rights of the Warrantholder hereunder shall cease.
1.3 Payment of Exercise Price. Payment of the Exercise Price shall be
made to the Company in cash; by certified or official bank check payable in
United States dollars to the order of the Company; or by any combination of the
foregoing.
1.4 Payment of Taxes. The Company shall be required to pay any and all
taxes which may be payable in respect to the issuance and delivery of any
certificates for Warrant Shares, 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 initial holder
of this Warrant.
SECTION 2. Reservation and Listing of Shares. Etc.; Registration
All Warrant Shares which are issued upon the exercise of the rights
represented by this Warrant shall, upon issuance and payment of the Exercise
Price, be validly issued, fully paid and nonassessable and free from all taxes,
liens, security interests, charges and other encumbrances with respect to the
issue thereof other than taxes in respect of such issuance. During the period
within which this Warrant may be exercised, the Company shall at all times have
authorized and reserved, and keep available free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of this
Warrant, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the exercise of this Warrant (and
all other Warrants and securities of the Company convertible into or exercisable
or exchangeable for Common Stock), in addition to such other remedies as shall
be available to a Warrantholder, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes. In addition, the Company shall at its expense procure the
listing of the Warrant Shares (or any other issues of capital stock issuable
upon the exercise of this Warrant if such other class of capital stock is then
so listed) which shall be issued upon exercise of this Warrant (subject to
official notice of issuance) as then may be required on all stock exchanges or
interdealer quotation systems on which the Common Stock is then listed and shall
maintain such listing if and so long as any shares of the same class shall be
listed on such stock exchanges or interdealer quotation systems. The Company
shall, from time to time, take all such action as may be required to assure that
the par value per share of the Warrant Shares is at all times equal to or less
than the then effective Exercise Price.
The resale by Warrantholder of the Warrant Shares shall be registered under
the Securities Act of 1933 and applicable state securities laws, as soon a
practicable, and shall be maintained by the Company in effect until the Warrant
has been exercised or has expired.
3
<PAGE>
SECTION 3. Exchange, Loss or Destruction of Warrant
If permitted by Section 5 and in accordance with the provisions thereof,
upon surrender of this Warrant to the Company with a duly executed instrument of
assignment and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant of like tenor in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be cancelled. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of such bond or
indemnification as the Company may reasonably require, and, in the case of such
mutilation, upon surrender and cancellation of this Warrant, the Company will
execute and deliver a new Warrant of like tenor. The term "Warrant" as used
herein includes any Warrants issued in substitution or exchange of this Warrant.
SECTION 4. Ownership of Warrant; Certain Rights of Warrantholders
(a) The Company may deem and treat the person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company or its agent)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
subsection 1. 1, Section 3 or Section 5.
(b) Nothing contained in this Warrant shall be construed as conferring
upon the Warrantholder or its transferees the right to vote or to receive
dividends or to consent or to receive notice as a stockholder in respect of any
meeting of stockholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as stockholders of the Company. 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.
SECTION 5. Split-Up, Combination. Exchange and Transfer of Warrants
(a) Subject to the provisions of Section 5(b), this Warrant may be split
up, combined or exchanged for another Warrant or Warrants containing the same
terms to purchase a like aggregate number of Warrant Shares. If the
Warrantholder desires to split up, combine or exchange this Warrant, he, she or
it shall make such request in writing delivered to the Company and shall
surrender to the Company this Warrant and any other Warrants to be so split up,
combined or exchanged. Upon any such surrender for a split up, combination or
exchange, the Company shall execute and deliver to the person entitled thereto a
Warrant or Warrants, as the case may be, as so requested. The Company shall not
be required to effect any split up, combination or exchange which will result in
the issuance of a warrant entitling the Warrantholder to purchase upon exercise
a fraction of a share of Common Stock or a fractional Warrant. The Company may
require such
4
<PAGE>
Warrantholder to pay a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any split up, combination or exchange of
Warrants.
(b) Neither this Warrant nor the Warrant Shares may be transferred except
in accordance with and subject to the provisions of the Securities Act and the
rules and regulations promulgated thereunder. The Company may require the
Warrantholder to make such customary representations, and may place such
customary legends on certificates representing this Warrant, as may be
reasonably required in the opinion of counsel to the Company to permit a
transfer without registration.
SECTION 6. Certain Adjustments
(a) If at any time or from time to time the Company shall (i) take a
record of the holders of the Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of, shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock into a larger number of
shares of Common Stock or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then the number of shares of
Common Stock thereafter issuable upon exercise of this Warrant and the Exercise
Price then in effect shall be adjusted so that this Warrant shall be exercisable
for the same number of shares that a record holder of the number of shares of
Common Stock issuable upon exercise of this Warrant immediately prior to the
happening of such event would own or be entitled to receive after the happening
of such event and so that the aggregate Exercise Price payable for the purchase
of all Warrant Shares pursuant to this Warrant shall remain unchanged. Any
adjustments required by this Section 6(a) shall be made whenever and as often as
any specified event requiring an adjustment shall occur. If the Company shall
take a record of the holders of the Common Stock for the purpose of effecting
such distribution, subdivision or combination and shall, thereafter and before
such distribution, subdivision, or combination, legally abandon its plan to pay
or deliver such distribution or effect such subdivision or combination, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(b) If at any time prior to the exercise of this Warrant in full, the
Company shall (i) other than pursuant to the exercise or conversion of a Common
Stock Equivalent (as hereinafter defined) outstanding as of the date hereof or
pursuant to the exercise or conversion of a Common Stock Equivalent with
exercise or conversion price which was at the date of issuance of such Common
Stock Equivalent set at a price equal or greater than market price of the Common
Stock, issue or sell any Common Stock without consideration or for consideration
per share (in cash, property or other assets) less than the current market price
per share on the date of such issuance or sale as determined pursuant to Section
6(d), (ii) issue or sell a Common Stock Equivalent with an exercise or
conversion price which, as of the date of issuance of such Common Stock
Equivalent, is less than the then current market price of the Common Stock or
(iii) fix a record date for the issuance of subscription rights, options or
warrants to all holders of Common Stock entitling them to subscribe for or
purchase Common Stock (or Common Stock Equivalents) at a price (or having an
exercise or conversion price per share) less than the then current market price
of the Common Stock (as
5
<PAGE>
determined pursuant to Section 6(d)) on the record date described below, the
Exercise Price shall be adjusted so that the Exercise Price shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
to the date of such sale or issuance (which date in the event of a distribution
to stockholders shall be deemed to be the record date set by the Company to
determine stockholders entitled to participate in such distribution) by a
fraction, the numerator of which shall be (i) the number of shares of Common
Stock outstanding on the date of such sale or issuance, plus (ii) the number of
additional shares of Common Stock which the aggregate consideration received by
the Company upon such issuance or sale (plus the aggregate of any additional
amount to be received by the Company upon the exercise of such subscription
rights, options or warrants) would purchase at such current market price per
share of the Common Stock and the denominator of which shall be (i) the number
of shares of Common Stock outstanding on the date of such issuance or sale, plus
(H) the number of additional shares of Common Stock offered for subscription or
purchase (or into which the Common Stock Equivalents so offered are exercisable
or convertible). Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to this Section 6(b), the number of Warrant Shares
issuable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Warrant Shares issuable upon exercise of this Warrant
by the Exercise Price in effect on the date of such adjustment and dividing the
product so obtained by the Exercise Price, as adjusted. Any adjustments
required by this Section 6(b) shall be made immediately after such issuance or
sale or record date, as the case may be. No duplicative adjustment shall be
made in the event of a Common Stock Equivalent requiring an adjustment hereunder
and the subsequent exercise or conversion of such Common Stock Equivalents. To
the extent that shares of Common Stock (or Common Stock Equivalents) are not
delivered in connection with the exercise of such subscription rights, options
or warrants, or as result of the expiration or termination thereof, the Exercise
Price shall be readjusted to the Exercise Price which would then be in effect
had the adjustments made upon the issuance of such rights, options or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or Common Stock Equivalents) actually delivered. In the case of an issue
of additional Common Stock or Common Stock Equivalents for cash, the
consideration received by the Company therefor, before deducting therefrom any
reasonable discount or commission or other reasonable expenses allowed, paid or
incurred by the Company for underwriting of, or otherwise in connection with,
the issuance thereof, shall be deemed to be the amount received by the Company
therefor. In the case of an issue of additional Common Stock or Common Stock
Equivalents for consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
reasonably determined by the Company's Board of Directors. No adjustments to
the Exercise Price or the number of Warrant Shares issuable upon exercise of
this Warrant shall be made pursuant to this Section 6(b) for (x) any transaction
for which adjustment thereto is required to be made pursuant to Section 6(a)
hereof, (y) the exercise of Warrants or (2) the conversion, exchange or exercise
of any Common Stock Equivalents.
(c) For purposes of this Section 6, "Common Stock Equivalents" shall mean
any options, warrants or other securities or rights convertible into, or
exercisable or exchangeable for, shares of Common Stock.
6
<PAGE>
(d) For the purpose of any computation under this Section 6, the current
market price per share of Common Stock at any date shall be deemed to be (i) 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,
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. The term
"issue" shall include the sale other disposition of shares held by or on account
of the Company or in the treasury of the Company but until so sold or otherwise
disposed of such shares shall not be deemed outstanding.
(e) In the event that at any time, as a result of any adjustment made
pursuant to Section 6, the Warrantholder thereafter shall become entitled to
receive any shares of the Company other than Common Stock, thereafter the number
of such other shares so receivable upon exercise of any Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Section 6.
(f) Liquidating Dividends, Etc. If the Company at any time while Warrants
are outstanding and unexpired makes a distribution of its assets (or rights to
acquire its assets) to the holders of its Common Stock as a dividend in
liquidation or by way of return of capital or stock repurchase or other than as
a dividend payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in respect of the
sale of all or substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections), the holder of this
Warrant shall be entitled to receive upon the exercise hereof, in addition to
the shares of Common Stock receivable upon such exercise, and without payment of
any consideration other than the Exercise Price, an amount in cash equal to the
value of such distribution per share of Common Stock multiplied by the number of
shares of Common Stock which, on the record date for such distribution, are
issuable upon exercise of this Warrant (with no further adjustment being made
following any event which causes a subsequent adjustment in the number of shares
of Common Stock issuable upon the exercise hereof), and an appropriate provision
therefor should be made as part of any such distribution. The value of a
distribution which is paid in other than cash shall be determined in good faith
by the Board of Directors.
(g) No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this
7
<PAGE>
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.
(h) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Exercise Price pursuant to this Section 6, the Company,
at its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Warrantholder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of the Warrantholder, furnish or
cause to be furnished to such holder a like certificate setting forth (i) such
adjustment and readjustment, (ii) the Exercise Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the exercise of this Warrant.
(i) 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 of 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 prior to the exercise of this Warrant, 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 thereto 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 6 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 of
the Company whereby the resulting entity is not the Company unless prior to or
upon the consummation thereof, the successor corporation assumes in writing the
Company's obligations under this Warrant, including the obligation to deliver to
the Warrantholder such shares of stock or securities as, in accordance with the
other provisions hereof, the Warrantholder may be entitled to acquire.
(j) Certain Events. If, at any time prior to the exercise of the Warrant,
any event occurs of the type contemplated by the adjustment provisions of this
Section 6 but not expressly provided for by such provisions, the Company's Board
of Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
8
<PAGE>
(k) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares 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 voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
then, in 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.
SECTION 7. Miscellaneous.
7.1 Entire Agreement. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to this Warrant and
Warrant Shares.
7.2 Binding Effects; Benefits. This Warrant shall inure to the benefit of
and shall be binding upon the Company and the Warrantholder and their respective
heirs, legal representatives, successors and assigns, including any entity
succeeding to the Company by merger, consolidation or acquisitions of all or
substantially all of the Company's assets. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company,
the Warrantholders and holders of Warrant Shares, or their respective heirs,
legal representatives, successors or assigns,
9
<PAGE>
any rights, remedies, obligations or liabilities under or by reason of this
Warrant or the Warrant Shares.
7.3 Amendments and Waivers. This Warrant may not be modified or amended
except by an instrument in writing signed by the Company and the Warrantholder.
The Company and the Warrantholder may, by an instrument in writing, waive
compliance by the other party with any term or provision of this Warrant on the
part of such other party hereto to be performed or complied with. The waiver by
any such party of a breach of any term or provision of this Warrant shall not be
construed as a waiver of any subsequent breach.
7.4 Section and Other Headings. The section and other headings contained
in this Warrant are for reference purposes only and shall not be deemed to be a
part of this Warrant or to affect the meaning or interpretation of this Warrant.
7.5 Further Assurances. Each of the Company and the Warrantholder shall
do and perform all such further acts and things and execute and deliver all such
other certificates, instruments and/or documents (including without limitation,
such proxies and/or powers of attorney as may be necessary or appropriate) as
any party hereto may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Warrant.
7.6 Notices. All demands, requests, notices and other communications
required or permitted to be given under this Warrant shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
United States certified or registered first class mail, postage prepaid, to the
parties hereto at the following addresses or at such other address as any party
hereto shall hereafter specify by notice to the other party hereto:
(a) if to the Company, addressed to:
National Media Corporation
Suite 1100, 1835 Market Street
Philadelphia, Pennsylvania 19103
Attention: General Counsel
(b) if to Warrantholder, address to:
CoreStates Bank, N.A.
The Widener Building
1339 Chestnut Street
Philadelphia, PA 19107
Attention: Patricia Barford
10
<PAGE>
Except as otherwise provided herein, all such demands, requests, notices
and other communications shall be deemed to have been received on the date of
personal delivery thereof or on the third business day after the mailing
thereof.
7.7 Separability. Any term or provision of this Warrant which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable any other term or provision of this Warrant
or affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
7.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the current market price (as determined as of the date of
exercise, and with reference to the applicable trading market, in accordance
with Section 1.1 (a)(ii)) of a share of such stock as of the date of such
exercise.
7.9 Rights of the Holder. The Warrantholder shall not, solely by virtue
of this Warrant, be entitled to any rights of a stockholder of the Company,
either at law or in equity.
7.10 Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts made and performed in Delaware.
7.11 Indemnification and Contribution. In connection with any inclusion by
the Company of the Warrant Shares in a registration statement under the
Securities Act ("Registration Statement") for the purpose of registering the
resale by the Warrantholder of the Warrant Shares (for the purpose, the
"Registrable Securities"), the Company and the Warrantholder agree as follows:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) the Warrantholder and (ii) the directors, officers,
partners, members, employees, agents and each person who controls the
Warrantholder 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, including without limitation,
reasonable attorney's fees and 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
11
<PAGE>
any amendment thereof or supplement thereto with the United States Securities
Exchange Commission ("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 below, the
Company shall reimburse the Warrantholder 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 are incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained herein: (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 to the Company by such Indemnified Person 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 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,
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 advise, used it. The indemnity
provided hereunder shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person, and shall survive
the exercise, expiration or termination of this Warrant.
b. The Warrantholder agrees to indemnify, hold harmless and defend,
to the same extent and in the same manner set forth in Subsection (a) above, the
Company, each of its directors, each of its officers, 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, and "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 conformity with information
furnished to the Company by such Investor for use in connection with such
Registration Statement; and, subject to the limitations set forth below, the
Warrantholder 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 herein shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Warrantholder, which consent shall not be unreasonably withheld;
provided, further,
12
<PAGE>
however, that the Warrantholder shall be liable under this Agreement for only
that amount as does not exceed the net proceeds actually received by the
Warrantholder as a result of the sale of the 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. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Subsection (a) 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. The indemnity provided hereunder shall survive the
exercise, expiration or termination of this Warrant.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party 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, 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 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 the Warrantholder or the Company, 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, except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action. The indemnification required
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.
d. 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
hereunder 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 above, (ii)
no person guilty of fraudulent misrepresentation (within the meaning of Section
12(f) of the Securities
13
<PAGE>
Act) shall be entitled to contribution from the Warrantholder if the
Warrantholder was not guilty of such fraudulent misrepresentation, and (iii)
contribution (together with any indemnification or other obligations under this
Agreement) by the Warrantholder shall be limited in amount to the net amount of
proceeds received from the sale of such Registrable Securities.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
NATIONAL MEDIA CORPORATION
By: ___________________________________
Name:
Title:
Dated:
14
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant
pursuant to Section 1.1(a))
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
shares of Common Stock, as provided for therein, and delivers payment in full of
the Exercise Price in the amount of $ as follows:
Cash $________
Certified or Official bank check $________
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name: __________________________________
Address: __________________________________
__________________________________
__________________________________
Social Security No.:_________________________
(Please Print Name, Address and
Social Security No.)
Signature:_________________________________
NOTE: The above signature should
correspond exactly with the name on the
first page of this Warrant Certificate
or with the name of the assignee
appearing in the assignment form
delivered herewith.
And if said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
15
<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.
[This assignment is conditioned upon and subject to the terms of the within
Warrant regarding assignment, conveyance and transfer]
16
<PAGE>
EXHIBIT 5
<PAGE>
NATIONAL MEDIA CORPORATION
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, PA 19103
January 6, 1998
Board of Directors
National Media Corporation
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Re: Amendment No. 2 to Registration Statement on Form S-3; File No.
333-36637
Gentlemen:
I am general counsel to National Media Corporation (the "Company") and have
caused to be prepared a registration statement on Form S-3 (File No. 333-36637)
in connection with the proposed registration of shares of the Company's common
stock, par value $.01 per share (the "Common Stock") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"). Such registration statement, as
it may be amended or supplemented from time to time, including all exhibits
thereto, is referred to hereinafter as the "Registration Statement."
The shares to be registered (the "Offered Shares") consist of (i) 7,000,000
shares of Common Stock (the "Series C Conversion Shares") issuable upon
conversion of the Company's Series C Convertible Preferred Stock, par value $.01
per share (the "Series C Preferred Stock"), (ii) 989,413 shares of Common Stock
(the "Series C Warrant Shares") issuable upon exercise of warrants issued in
connection with the Series C Preferred Stock, (iii) 125,000 shares of Common
Stock (the "Credit Facility Warrant Shares") issuable upon exercise of warrants
issued in connection with the extension of the Company's principal credit
facility, (iv) 100,000 shares of Common Stock (the "Natwest Option Shares")
issuable upon exercise of options held by Natwest Securities Corp., (v) 26,587
shares of Common Stock (the "Langston Shares") issued by the Company in
connection with its acquisition of Nancy Langston & Associates, Inc., and
(vi) 52,000 shares of Common Stock (the "Settlement Shares") issuable upon
exercise of warrants issued by the Company to Bodylines, Inc. in connection with
settlement of certain litigation to which the Company is a party. The Shares
may be offered and sold from time to time for the account of the persons
referred to in the Registration Statement as "Selling Stockholders."
In this regard, I have examined: (i) the agreements (the "Agreements")
pursuant to which the Selling Stockholders have received or may acquire the
Offered Shares from the Company; (ii) the Company's Certificate of Incorporation
and Bylaws, each as amended and as presently in effect; (iii) the Registration
Statement; and (iv) such officers' certificates, resolutions, minutes, corporate
records and other documents as I have deemed necessary or appropriate for
purposes of rendering the opinions expressed herein.
<PAGE>
Board of Directors
January 6, 1998
Page 2
In rendering such opinions, I have assumed the authenticity of all
documents and records examined, the conformity with the original documents of
all documents submitted to me as copies and the genuineness of all signatures.
The opinions expressed herein are based solely upon my review of the
documents and other materials expressly referred to above. Other than such
documents and related materials, I have not reviewed any other documents in
rendering such opinions. Such opinions are therefore qualified by the scope of
that document examination.
Based upon and subject to the foregoing, and on such other examinations of
law and fact as I have deemed necessary or appropriate in connection herewith, I
am of the opinion that, (i) the Langston Shares are duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock and (ii) upon
issuance in accordance with the provisions of the appropriate Agreements, the
Series C Conversion Shares, the Series C Warrant Shares, the Credit Facility
Warrant Shares, the Natwest Option Shares and the Settlement Shares will be duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock.
This opinion is limited to the laws of the Commonwealth of Pennsylvania and
the General Corporation Law of the State of Delaware; provided, however, that no
opinion is hereby rendered as to the state securities laws of either the
Commonwealth of Pennsylvania or the State of Delaware. Except as expressly
otherwise noted herein, this opinion is given as of the date hereof.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to me under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement.
By giving such consent, I do not hereby admit that I fall within the category of
persons whose consent is required pursuant to Section 7 of the Securities Act.
Very truly yours,
/s/ Brian J. Sisko, Esq.
Brian J. Sisko, Esq.
<PAGE>
EXHIBIT 23.1
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 2 to the Registration Statement (Form S-3 No. 333-36637) and related
Prospectus of National Media Corporation for the registration of 8,293,000
shares of its common stock and to the incorporation by reference therein of our
report dated July 14, 1997 with respect to the consolidated financial statements
and schedule of National Media Corporation included in its Annual Report (Form
10-K) for the year ended March 31, 1997, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 6, 1998
