<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 13, 1998
NATIONAL MEDIA CORPORATION
(Exact name of registrant as specified in charter)
<TABLE>
<CAPTION>
Delaware I-6715 13-2658741
<S> <C> <C>
(State or Other Juris- (Commission File Number) (IRS Employer Identi-
diction of Incorporation) fication No.)
</TABLE>
Eleven Penn Center, Ste. 1100, 1835 Market Street, Philadelphia, PA 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 215-988-4600
N/A
(Former name or former address, if changed since last report.)
------------------------------------
Exhibit Index appears on Page 5 hereof.
<PAGE>
Item 5. Other Events.
On August 13, 1998, National Media Corporation (the "Company")
announced the execution of definitive agreements related to a previously
announced transaction pursuant to which an investor group (the "Investor
Group") headed by Stephen C. Lehman has agreed to acquire a substantial
equity interest in, and operational control of, the Company through an
investment of a minimum of $30,000,000 (the "Transaction"). In connection
with the execution of the definitive agreements regarding the Transaction,
the Investor Group consummated the acquisition of one-half of the Company's
outstanding Series D Convertible Preferred Stock (the "Series D Stock") along
with 992,942 warrants which had previously been issued to the original
holders of the Series D stock (the "Series D Warrants," and together with the
Series D Stock, the "Series D Securities") from the holders of the Series D
Securities for an aggregate of $10 million. Upon consummation of such
acquisition, the Investor Group, the original holders of the Series D
Securities and the Company agreed to eliminate the floating conversion price
feature of the Series D Stock and to certain standstill provisions regarding
sales of the Series D Securities.
In addition to the $10 million acquisition of the Series D Securities,
the Investor Group agreed to invest a minimum of $20 million and a maximum of
$22 million directly into the Company in exchange for a newly created Series E
Preferred Stock which will be convertible into shares of Common Stock at a fixed
conversion price of $1.50 per share.
Upon execution of the definitive agreements regarding the Transaction,
Mr. Lehman was named acting Chief Executive Officer of the Company. Mr. Lehman,
Eric Weiss and Andrew Schuon were also named to the Company's Board of
Directors. The Company also entered into a consulting agreement (the "Consulting
Agreement") with Temporary Media Co., LLC ("TMC"), a newly formed entity
controlled by Mr. Lehman, Mr. Weiss and Daniel Yukelson, pursuant to which TMC
will provide executive management consulting services to the Company pending
closing of the Transaction. In connection with such Consulting Agreement, the
Company granted to TMC (i) a five-year option (the "TMC Options) to purchase up
to 212,500 shares of Common Stock, subject to certain vesting requirements, at
an exercise price of $1.32 per share and (ii) contingent warrants (the "TMC
Warrants"), which will only become effective following consummation of the
Transaction, to purchase up to 3,762,500 shares of Common Stock, at exercise
prices ranging from $1.32 per share to $3.00 per share. In the event that the
Company's stockholders do not approve the Transaction, all TMC Warrants and all
non-vested TMC Options will be cancelled. 1,000,000 of such warrants will be
will be utilized to retain and attract personnel to the Company.
The Company also executed agreements with First Union Bank ("First
Union") and ValueVision International, Inc. ("ValueVision") providing for
modifications to the Company's two primary credit facilities. First Union agreed
to waive all outstanding financial covenant violations and to modify certain
financial covenants pending closing of the Transaction. First Union also agreed
to accept payment of seventy-five percent (75%) of all outstanding principal
obligations in full satisfaction of the Company's indebtedness, provided such
payment is made to First Union by November 15, 1998.
ValueVision agreed to waive its right to repayment of its $10 million
demand note (the "ValueVision Note") upon announcement of the Transaction.
ValueVision also agreed to certain standstill provisions and certain limitations
regarding the Company's payment of the ValueVision Note prior to January 1,
1999. In consideration thereof, the Company agreed to re-price certain warrants
held
-2-
<PAGE>
by ValueVision to $2.74 per share. The Company retained its right to re-pay the
ValueVision Note in cash or Common Stock, at its option.
The Company intends to seek regulatory and stockholder approval for the
Transaction.
Copies of the agreements set forth under Item 7 below and of the press
release announcing the execution of the definitive Transaction documents are
attached hereto, and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
4.1 Option Agreement, dated August 11, 1998, in favor of Temporary
Media Corporation ("TMC").
4.2 Form of Warrant, dated August 11, 1998, in favor of TMC.
4.3 Form of Certificate of Designations, Preferences and Rights of
Series E Preferred Stock.
4.4 Amendment No. 7 to Rights Agreement, dated as of August 11,
1998.
10.1 Stock Purchase Agreement, dated August 12, 1998, by and
between the Company and NM Acquisition Co., LLC ("ACO").
10.2 Consulting Agreement, dated August 11, 1998, by and between
TMC and the Company.
10.3 Registration Rights Agreement, dated August 11, 1998, between
the Company and ACO.
10.4 Agreement, dated August 12, 1998 among the Company, ACO,
Capital Ventures International and RGC International
Investors, LDC.
10.5 Agreement, dated August 11, 1998, among the Company, ACO and
ValueVision International, Inc.
10.6(1) Agreement, dated July 15, 1998, among the Company, ACO and
First Union National Bank.
99 Press Release, dated August 13, 1998.
(1) Previously filed.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL MEDIA CORPORATION
(Registrant)
Date: August 18, 1998 By: /s/ Brian J. Sisko
--------------------
Name: Brian J. Sisko
Title: Senior Vice President and
General Counsel
-4-
<PAGE>
EXHIBIT INDEX
No.
4.1 Option Agreement, dated August 11, 1998, in favor of Temporary Media
Corporation ("TMC").
4.2 Form of Warrant, dated August 11, 1998, in favor of TMC.
4.3 Form of Certificate of Designations, Preferences and Rights of Series E
Preferred Stock.
4.4 Amendment No. 7 to Rights Agreement, dated as of August 11, 1998.
10.1 Stock Purchase Agreement, dated August 12, 1998, by and between the
Company and NM Acquisition Co., LLC ("ACO").
10.2 Consulting Agreement, dated August 11, 1998, by and between TMC and the
Company.
10.3 Registration Rights Agreement, dated August 11, 1998, between the Company
and ACO.
10.4 Agreement, dated August 12, 1998 among the Company, ACO, Capital Ventures
International and RGC International Investors, LDC.
10.5 Agreement, dated August 11, 1998, among the Company, ACO and ValueVision
International, Inc.
99 Press Release, dated August 13, 1998.
5
<PAGE>
EXHIBIT 4.1
Common Stock Option
<PAGE>
THIS OPTION AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
August 11, 1998
NATIONAL MEDIA CORPORATION
COMMON STOCK OPTION
Option to Purchase 212,500 Shares of Common Stock
Expiring August 11, 2003
THIS CERTIFIES THAT, for value received, Temporary Media Co.,
LLC, a Delaware limited liability company, or its successors or assigns
(collectively, the "Option Holder"), at the Vesting Dates (as defined below)
shall be entitled to subscribe for and purchase from National Media Corporation,
a Delaware corporation (the "Company"), 212,500 shares of Common Stock at a
price per share equal to the Exercise Price (as defined below); provided that
the number of shares of Common Stock issuable upon any exercise of this Option
and the Exercise Price shall be adjusted and readjusted from time to time in
accordance with Section 5.
1. Certain Definitions.
The following terms, as used herein, have the following
meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with such Person.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Closing Price" means, for any trading day with respect to
each share of Common Stock, (a) the last reported sale price on such day on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if no such reported sale takes place on any such day,
the average of the closing bid and asked prices thereon, as reported in The Wall
Street
<PAGE>
Journal, or (b) if such Common Stock shall not be listed or admitted to trading
on a national securities exchange, the last reported sales price on the NASDAQ
National Market System or, if no such reported sale takes place on any such day,
the average of the closing bid and asked prices thereon, as reported in The Wall
Street Journal, or (c) if such Common Stock shall not be quoted on such National
Market System nor listed or admitted to trading on a national securities
exchange, then the average of the closing bid and asked prices, as reported by
The Wall Street Journal for the over-the-counter market, or (d) if there is no
public market for such Common Stock the fair market value of a share of such
Common Stock as determined in good faith by the Board of Directors of the
Company after consultation with an independent investment bank of national
repute (whose report will be made available to the Option Holder prior to such
determination of fair market value); provided that if clause (a), (b), or (c)
applies and no price is reported in The Wall Street Journal for any trading day,
then the price reported in The Wall Street Journal for the most recent prior
trading day shall be deemed to be the price reported for such trading day.
"Commission" means the Securities and Exchange Commission or
any other Federal agency administering the Securities Act at the time.
"Common Stock" means the Company's currently authorized class
of common stock, $.01 par value, and stock of any other class or other
consideration into which such currently authorized class of common stock may
hereafter have been changed.
"Exchange Act" means the Securities Exchange Act of 1934, or
any successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Exercise Price" means $1.32 per share, as may be adjusted
from time to time pursuant to Section 5.
"Market Price" on any day means the unweighted average of the
daily Closing Prices per share of Common Stock for the 20 consecutive trading
days prior to such date; provided that for purposes of the application of
Section 5(b) to a Common Stock Distribution pursuant to a public offering
registered under the Securities Act, "Market Price" means the Closing Price per
share of Common Stock for the trading day preceding the effective date of the
registration statement with respect to such public offering.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
<PAGE>
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Vesting Dates" means one-sixth of such Options shall vest on
each of the 30th, 60th, 90th, 120th, 150th, and 180th day following the date
hereof, provided that certain Consulting Agreement dated August 11, 1998 by and
between Temporary Media Co., LLC and the Company is in effect as of such date;
provided, however, (1) all such options shall immediately vest upon the earlier
of (a) the Closing Date (as defined in the Stock Purchase Agreement of even date
hereto between the Company and NM Acquisition Co., LLC (the "Stock Purchase
Agreement"); or (b) termination of the Consulting Agreement (as defined in the
Stock Purchase Agreement) pursuant to Section 4C thereof, provided that all
non-vested options shall be cancelled on the earlier of: (a) the Company's
stockholders vote not to approve the matters contained in the Proxy Statement
(as defined in the Stock Purchase Agreement); or (b) termination of the
Consulting Agreement if pursuant to Section 4E thereof.
"Option Shares" means the 212,500 shares of Common Stock
issued or issuable upon exercise of this Option, as may be adjusted from time to
time pursuant to Section 5.
2. Exercise of Option.
The Option Holder may exercise this Option in whole or in
part, in accordance with the vesting dates on or prior to the Expiration Date,
by delivering to the Company a duly executed notice (a "Notice of Exercise") in
the form of Annex A hereto and, at the election of the Option Holder, either:
(a) by receiving from the Company the number of
Option Shares as to which this Option is being exercised and paying to
the Company the Exercise Price for each such Option Share, by wire transfer of
immediately available funds to the account of the Company in an amount equal to
the product of (i) the Exercise Price times (ii) the number of Option Shares as
to which the Option is being exercised; or
(b) by receiving from the Company the number of
Option Shares equal to (i) the number of Option Shares as to which this
Option is being exercised minus (ii) a number of Option Shares having value
equal to the product of (x) the Exercise Price times (y) the number of Option
Shares as to which this Option is being exercised, divided by the average of the
Closing Price on the five consecutive trading days immediately prior to the date
of such exercise.
As soon as practicable but not later than five Business Days
after the Company shall have received such Notice of Exercise and payment, the
Company shall execute and deliver or cause
<PAGE>
to be executed and delivered, in accordance with such Notice of Exercise, a
certificate or certificates representing the number of shares of Common Stock
specified in such Notice of Exercise, issued in the name of the Option Holder.
This Option shall be deemed to have been exercised and such share certificate or
certificates shall be deemed to have been issued, and such Option Holder, shall
be deemed for all purposes to have become a holder of record of shares of Common
Stock, as of the date that such Notice of Exercise and payment shall have been
received by the Company.
The Option Holder shall surrender this Option Certificate to
the Company when it delivers the Notice of Exercise, and in the event of a
partial exercise of the Option, the Company shall execute and deliver to the
Option Holder, at the time the Company delivers the share certificate or
certificates issued pursuant to such Notice of Exercise, a new Option
Certificate for the unexercised section of the Option, but in all other respects
identical to this Option Certificate.
Each certificate for Option Shares issued upon exercise of
this Option, unless at the time of exercise such Option Shares are registered
under the Securities Act, shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Any certificate for Option Shares issued at any time in exchange or substitution
for any certificate bearing such legend (unless at that time such Option Shares
are registered under the Securities Act) shall also bear such legend unless, in
the written opinion of counsel selected by the holder of such certificate (who
may be an employee of such holder), which counsel and opinion shall be
reasonably acceptable to the Company, the Option Shares represented thereby need
no longer be subject to restrictions on resale under the Securities Act.
The Company shall not be required to issue fractions of shares
of Common Stock upon an exercise of the Option. If any fraction of a share
would, but for this restriction, be issuable upon an exercise of the Option, in
lieu of delivering such fractional share, the Company shall pay to the Option
Holder, in cash, an amount equal to the same fraction times the Closing Price on
the trading day immediately prior to the date of such exercise.
The Company shall pay all expenses, taxes and owner charges
payable in connection with the preparation, issuance and delivery of
certificates for the Option Shares and any new Option Certificates, except that
if the certificates for the Option Shares or the new Option Certificates are
<PAGE>
to be registered in a name or names other than the name of the Option Holder,
funds sufficient to pay all transfer taxes payable as a result of such transfer
shall be paid by the Option Holder at the time of its delivery of the Notice of
Exercise or promptly upon receipt of a written request by the Company for
payment.
3. Investment Representation.
By accepting the Option, the Option Holder represents that it
is acquiring the Option for its own account for investment purposes and not with
the view to any sale or distribution, and that the Option Holder will not offer,
sell or otherwise dispose of the Option or the Option Shares except under
circumstances as will not result in a violation of applicable securities laws.
4. Validity of Option and Issuance of Shares.
The Company represents and warrants that this Option has been
duly authorized and is validly issued.
The Company further represents and warrants that on the date
hereof it has duly authorized and reserved, and the Company hereby agrees that
it will at all times until the Expiration Date have duly authorized and
reserved, such number of shares of Common Stock as will be sufficient to permit
the exercise in full of the Option, and that all such shares are and will be
duly authorized and, when issued upon exercise of the Option, will be validly
issued, fully paid and non-assessable, and free and clear of all security
interests, claims, liens, equities and other encumbrances.
5. Antidilution Provisions.
The Exercise Price in effect at any time, and the number of
Option Shares that may be purchased upon any exercise of the Option, shall be
subject to change or adjustment as follows:
(a) Common Stock Reorganization. If the Company
shall subdivide its outstanding shares of Common Stock into a greater
number of shares, by way of stock split, stock dividend or otherwise, or
consolidate its outstanding shares of Common Stock into a smaller number of
shares (any such event being herein called a "Common Stock Reorganization"),
then (i) the Exercise Price shall be adjusted, effective immediately after the
effective date of such Common Stock Reorganization, to a price determined by
multiplying the Exercise Price in effect immediately prior to such effective
date by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on such effective date before giving effect to such
Common Stock Reorganization and the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (ii) the number of shares of Common Stock subject to
purchase upon exercise of this Option shall be adjusted, effective at such time,
to a number determined by multiplying the number of shares of Common Stock
subject
<PAGE>
to purchase immediately before such Common Stock Reorganization by a fraction,
the numerator of which shall be the number of shares outstanding after giving
effect to such Common Stock Reorganization and the denominator of which shall be
the number of shares of Common Stock outstanding immediately before giving
effect to such Common Stock Reorganization.
(b) Common Stock Distribution.
(i) If the Company shall issue, sell or
otherwise distribute any shares of Common Stock, other than pursuant to
a Common Stock Reorganization (which is governed by Section 5(a)) (any such
event, including any event described in paragraphs (ii) and (iii) below, being
herein called a "Common Stock Distribution"), for a consideration per share less
than the Market Price immediately prior to such Common Stock Distribution, then,
effective upon such Common Stock Distribution, the Exercise Price shall be
reduced to a price determined by multiplying the Exercise Price by a fraction,
the numerator of which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such Common Stock Distribution multiplied
by the Market Price, plus (B) the consideration, if any, received by the Company
upon such Common Stock Distribution, and the denominator of which shall be the
product of (1) the total number of shares of Common Stock outstanding
immediately after such Common Stock Distribution multiplied by (2) the Market
Price.
If any Common Stock Distribution shall require an adjustment
to the Exercise Price pursuant to the foregoing provisions of this Section 5(b),
including by operation of paragraph (ii) or (iii) below, then, effective at the
time such adjustment is made, the number of shares of Common Stock subject to
purchase upon exercise of this Option shall be increased to a number determined
by multiplying the number of shares of Common Stock subject to purchase
immediately before such Common Stock Distribution by a fraction, the numerator
of which shall be the Exercise Price in effect immediately prior to such event
and the denominator of which shall be the Exercise Price as adjusted in
accordance with this Section 5(b). In computing adjustments under this
paragraph, fractional interests in Common Stock shall be taken into account to
the nearest one-thousandth of a share.
Subject to Section 5(e) below, the provisions of this Section
5(b), including by operation of paragraph (ii) or (iii) below, shall not operate
to increase the Exercise Price or reduce the number of shares of Common Stock
subject to purchase upon exercise of this Option.
(ii) If the Company shall issue, sell,
distribute or otherwise grant in any manner any rights to subscribe for
or to purchase, or any warrants or options for the purchase of Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (such
rights, warrants or options being herein called "Options" or "Warrants" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or Warrants or the rights to convert
or exchange any such Convertible Securities in respect
<PAGE>
of such Options or Warrants are immediately exercisable or exercisable prior to
the Expiration Date, and the price per share for which Common Stock is issuable
upon the exercise of such Options or Warrants or upon conversion or exchange of
such Convertible Securities in respect of such Options or Warrants (determined
by dividing (x) the aggregate amount, if any, received or receivable by the
Company as consideration for the granting of such Options or Warrants, plus the
minimum aggregate amount of additional consideration payable to the Company upon
the exercise of all such Options or Warrants, plus, in the case of Options to
acquire Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options at such price) shall be less than the Market Price
immediately prior to the granting of such Options, then, for purposes of Section
5(b)(i), the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued as of the date of granting of such Options
and thereafter shall be deemed to be outstanding and the Company shall be deemed
to have received as consideration of such price per share, determined as
provided above, therefor. Except as otherwise provided in paragraph (iv) below,
no additional adjustment of the Exercise Price shall be made upon the actual
exercise of such Options or upon conversion or exchange of such Convertible
Securities.
(iii) If the Company shall issue, sell or
otherwise distribute (including by assumption) any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable or exercisable prior to the Expiration Date, and the
price per share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing (x) the
aggregate amount received or receivable by the Company as consideration for the
issuance, sale or distribution of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (y) the maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Market Price immediately prior to such
issuance, sale or distribution, then, for purposes of Section 5(b)(i), the total
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued as of the
date of the issuance, sale or distribution of such Convertible Securities
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise in paragraph (iv) below, no additional
adjustment of the Exercise Price shall be made upon the actual conversion or
exchange of such Convertible Securities.
(iv) If (x) the purchase price provided for
in any Option or Warrant referred to in Section 5(b)(ii) or the
additional consideration, if any, payable upon the conversion
<PAGE>
or exchange of any Convertible Securities referred to in Sections 5 (b)(ii) or
5(b)(iii) or the rate at which any Convertible Securities referred to in
Sections 5(b)(ii) or 5(b)(iii) are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of provisions
designed to protect against dilution upon an event which results in a related
adjustment pursuant to this Section 5), or (y) any of such Options or Warrants
or Convertible Securities shall have terminated, lapsed or expired, the Exercise
Price then in effect shall forthwith be readjusted (effective only with respect
to any exercise of this Option after such readjustment) to the Exercise Price
which would then be in effect had the adjustment made upon the issuance, sale,
distribution or grant of such Options or Warrants or Convertible Securities been
made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be (in the case of any event referred to in
clause (x) of this paragraph (iv)) or had such adjustment not been made (in the
case of any event referred to in clause (y) of this paragraph (iv)).
(v) If the Company shall pay a dividend
or make any other distribution upon any capital stock of the Company
payable in Common Stock, Options, Warrants or Convertible Securities, other than
pursuant to a Common Stock Reorganization (which is governed by Section 5(a)),
then, for purposes of this Section 5(b), such Common Stock, Options, Warrants or
Convertible Securities shall be deemed to have been issued or sold without
consideration.
(vi) If any shares of Common Stock, Options,
Warrants or Convertible Securities shall be issued, sold or distributed
for cash, the consideration received thereof shall be deemed to be the amount
received by the Company therefor, without any deduction therefrom of any
expenses incurred in connection therewith. If any shares of Common Stock,
Options, Warrants or Convertible Securities shall be issued, sold or distributed
for a consideration other than cash, the amount of the consideration other than
cash received by the Company shall be deemed to be the fair market value of such
consideration at the time of its receipt by the Company as determined in good
faith by the Board of Directors of the Company, without any deduction of any
expenses incurred in connection therewith. If any shares of Common Stock,
Options, Warrants or Convertible Securities shall be issued in connection with
any merger in which the Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair market value of such
portion of the assets and business of the non-surviving corporation as shall be
attributable to such Common Stock, Options, Warrants or Convertible Securities,
as the case may be, at the time of the merger as determined in good faith by the
Board of Directors of the Company. If any Options or Warrants shall be issued in
connection with the issuance and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options or Warrants by the parties thereto, such Options or
Warrants shall be deemed to have been issued without consideration.
(c) Special Dividends. If the Company shall
issue or distribute to all holders of shares of Common Stock evidences
of indebtedness, any other securities of the Company
<PAGE>
or any cash, property or other assets (excluding (i) a Common Stock
Reorganization, (ii) a Common Stock Distribution, (iii) quarterly cash dividends
paid in the ordinary course of business, or (iv) any purchase, redemption or
other acquisition by the Company of shares of Common Stock owned by any
individual shareholder owning fewer than 100 shares), whether or not accompanied
by a purchase, redemption or other acquisition of shares of Common Stock (any
such nonexcluded event being herein called a "Special Dividend"), the (x) the
Exercise Price shall be decreased, effective immediately after the effective
date of such Special Dividend, to a price determined by multiplying the Exercise
Price then in effect by a fraction, the numerator of which shall be the Market
Price immediately prior to such effective date less any cash and the then fair
market value, as determined in good faith by the Board of Directors of the
Company, of any evidences of indebtedness, securities or property or other
assets issued or distributed in such Special Dividend with respect to one share
of Common Stock, and the denominator of which shall be the Market Price
immediately prior to such effective date, and (y) the number of shares of Common
Stock subject to purchase upon exercise of this Option shall be increased to a
number determined by multiplying the number of shares of Common Stock subject to
purchase immediately before such Special Dividend by a fraction, the numerator
of which shall be the Exercise Price in effect immediately before such Special
Dividend and the denominator of which shall be the Exercise Price in effect
immediately after such Special Dividend. A reclassification of the Common Stock
(other than a change in par value, or from par value to no par value or from no
par value to par value) into shares of Common Stock and shares of any other
class of stock shall be deemed to be a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock and, if
the outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as part of such reclassification, a Common
Stock Reorganization.
(d) Capital Reorganization. If there shall be
any consolidation or merger to which the Company is a party, other than
a consolidation or a merger of which the Company is the continuing corporation
and which does not result in any reclassification of, or change (other than a
Common Stock Reorganization) in, outstanding shares of Common Stock, or any sale
or conveyance of the property of the Company as an entirety or substantially as
an entirety, or any recapitalization of the Company (any such event being called
a "Capital Reorganization"), then, effective upon the effective date of such
Capital Reorganization, the Option holder shall no longer have the right to
purchase Common Stock, but shall have instead the right to purchase, upon
exercise of this Option, the kind and amount of shares of stock and other
securities and property (including cash) which the Option Holder would have
owned or have been entitled to receive pursuant to such Capital Reorganization
if the Option had been exercised immediately prior to the effective date of such
Capital Reorganization. As a condition to effecting any Capital Reorganization,
the Company or the successor or surviving corporation, as the case may be, shall
execute and deliver to each Option Holder an agreement as to the Option Holder's
rights in accordance with this Section 5(d), providing, to the extent of any
right to purchase equity securities hereunder, for subsequent adjustments as
nearly equivalent as may be practicable to the adjustments provided for in this
<PAGE>
Section 5. The provisions of this Section 5(d) shall similarly apply to
successive Capital Reorganizations.
(e) Adjustment Rules.
(i) Any adjustments pursuant to this
Section 5 shall be made successively whenever any event referred to
herein shall occur, except that, notwithstanding any other provision of this
Section 5, no adjustment shall be made to the number of Option Shares to be
delivered to the Option Holder (or to the Exercise Price) if such adjustment
represents less than 1% of the number of Option Shares previously required to be
so delivered, but any lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which together
with any adjustments so carried forward shall amount to 1% or more of the number
of Option Shares to be so delivered.
(ii) No adjustments shall be made pursuant
to this Section 5 in respect of (x) the issuance of Option Shares upon
exercise of the Option; (y) the issuance, sale or grant or exercise before or
after the date hereof by the Company to any director, officer, consultant or
employee of the Company or any Affiliate of the Company of any Common Stock or
of any option, bonus or other award exercisable into Common Stock approved by
the Board of Directors of the Company or any duly authorized committee thereof;
or (z) any securities of the Company which are issued and outstanding as at the
date hereof or are issued pursuant to the Stock Purchase Agreement (including,
without limitation, the issuance of any Series E Preferred Stock) or the
Consulting Agreement.
(iii) If the Company shall take a record of
the holders of its Common Stock for any purpose referred to in this
Section 5, then (x) such record date shall be deemed to be the date of the
issuance, sale, distribution or grant in question and (y) if the Company shall
legally abandon such action prior to effecting such action, no adjustment shall
be made pursuant to this Section 5 in respect of such action.
(iv) Upon the expiration without being
exercised of any rights, options, warrants or conversion or exchange of
any rights, options, warrants or conversion or exchange privileges for which an
adjustment has been made pursuant to this Warrant, the Exercise Price and the
number of shares of Common Stock purchasable upon the exercise of each Warrant
shall, upon such expiration, be readjusted and shall thereafter, upon any future
exercise, be such as they would have been had they been originally adjusted (or
had the original adjustment not been required, as the case may be) as if (A) the
only shares of Common Stock so issued were the shares of such Common Stock, if
any, actually issued or sold upon the exercise of such rights, options, warrants
or conversion or exchange rights and (B) such shares of Common Stock, if any,
were issued or sold for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually received by the Company
for issuance, sale or grant of all such rights,
<PAGE>
options, warrants or conversion or exchange rights whether or not exercised;
provided, that no such readjustment shall have the effect of increasing the
Exercise Price by an amount, or decreasing the number of shares purchasable upon
exercise of each Warrant by a number, in excess of the amount or number of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.
(f) Proceedings Prior to Any Action Requiring
Adjustment. As a condition precedent to the taking of any action which
would require an adjustment pursuant to this Section 5, the Company shall take
any action which may be necessary, including obtaining regulatory approvals or
exemptions, in order that the Company may thereafter validly and legally issue
as fully paid and nonassessable all shares of Common Stock which the Option
Holder is entitled to receive upon exercise of the Option.
(g) Notice of Adjustment. Not less than 10 days prior
to the record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment pursuant to this
Section 5, the Company shall give notice to each Option Holder of such event,
describing such event in reasonable detail and specifying the record date or
effective date, as the case may be, and, if determinable, the required
adjustment and computation thereof. If the required adjustment is not
determinable as the time of such notice, the Company shall give notice to each
Option Holder of such adjustment and computation as soon as reasonably
practicable after such adjustment becomes determinable.
6. Registration of Option Shares.
Neither the Option nor the Option Shares have been registered
with the Commission under the Securities Act or qualified for sale pursuant to
any state blue sky law, and neither may be sold or transferred without such
registration or qualification, except pursuant to an exemption therefrom. No
rights shall be hereby granted which are in violation of applicable securities
laws or regulations.
7. Transfer of Option.
This Option is not transferable prior to the Closing Date of
the Stock Purchase Agreement. After such date, this Option is only transferable
to directors, officers, employees and consultants of the Company; provided that
no transfer shall be made that (a) transfers Options exercisable into fewer than
5,000 Option Shares, (b) does not comply with all applicable federal and state
securities laws or (c) would require registration or qualification of the Option
pursuant to the Securities Act or any applicable state blue sky law; and
provided further that the Option Holder upon transfer of the Option must deliver
to the Company a duly executed Option Assignment in the form of Annex B hereto,
with funds sufficient to pay any transfer tax imposed in connection with such
assignment (if any) and upon surrender of this Option Certificate to the
Company. The Company
<PAGE>
shall execute and deliver a new Option Certificate or Certificates in the form
of this Option Certificate with appropriate changes to reflect such Assignment,
in the name or names of the assignee or assignees specified in the fully
executed Option Assignment or other instrument of assignment and, if the Option
Holder's entire interest is not being transferred to assigned, in the name of
the Option Holder, and this Option Certificate shall promptly be cancelled. Any
transfer or exchange of this Option Certificate shall be without charge to the
Option Holder (except as provided above with respect to transfer taxes, if any)
and any new Option Certificate or Certificates issued shall be dated the date
hereof. The terms "Option" and "Option Holder" as used herein include all
Options into which this Option (or any successor Option) may be exchanged or
issued in connection with the transfer or assignment of this Option any
successor Option) and the holders of those Options, respectively.
8. Registration of Common Stock; Rule 144.
The Company hereby agrees that, in accordance with the
provisions of the Registration Rights Agreement (as defined in the Stock
Purchase Agreement) it will file any reports required to be filed by it under
the Securities Act, the Exchange Act or the rules and regulations adopted by the
Commission thereunder and that it will use all reasonable efforts to cooperate
with each Option Holder and each holder of Option Shares in supplying such
information concerning the Company as may be necessary for such Option Holder or
holder to complete and file any information reporting forms currently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Options or Option Shares.
The Company also agrees that, in accordance with the provisions of the
Registration Rights Agreement (as defined in the Stock Purchase Agreement) it
will take such further action, and supply such information (including the
information specified by Rule 144A(d)(4) under the Securities Act) as any Option
Holder may reasonably request to the extent required from time to time to enable
the Option Holder to sell Option Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 or
144A under the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission. Upon the
request of the Option Holder, the Company will deliver to the Option Holder a
written statement that it has complied with such reporting requirements.
Any other provision of this Option notwithstanding, the
Company shall not be obligated under any circumstances to cause this Option to
be listed or quoted on NASDAQ National Market System, any national securities
exchange or any other trading system or market, or to be registered under the
Securities Act.
9. Lost, Mutilated or Missing Option Certificates.
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of any Option Certificate, and, in
the case of loss, theft or destruction, upon
<PAGE>
receipt of indemnification satisfactory to the Company, or, in the case of
mutilation, upon surrender and cancellation of the mutilated Option Certificate,
the Company shall execute and deliver a new Option Certificate of like tenor and
representing the right to purchase the same aggregate number of Option Shares.
The recipient of any such Option Certificate shall reimburse the Company for all
reasonable expenses incidental to the replacement of such lost, mutilated or
missing Option Certificate.
10. Successors and Assigns.
All the provisions of this Option by or for the benefit of the
Company or the Option Holder shall bind and inure to the benefit of their
respective successors and assigns, provided, however, TMC may not assign any of
its rights, duties or obligations hereunder, except as specifically provided
herein without the prior written consent of the Company.
11. Notices.
Any notice or other communication hereunder shall be in
writing and shall be sufficient if sent by first-class mail or courier, postage
prepaid, and addressed as follows: (a) if to the Company, addressed to National
Media Corporation, 1835 Market St., 11 Penn Center, Suite 1100, Philadelphia, PA
19103, Attention: General Counsel; (b) if to the Option Holder, Temporary Media
Co., LLC, 15260 Ventura Blvd., Suite 500, Sherman Oaks, CA 91403-5339; and (c)
if to any party, addressed to such address as such party may hereafter specify
to the Company, in the case of any communication to be provided by the Company,
or to each Option Holder, in the case of any communication to be provided by the
Option Holder, for the purpose of notice hereunder.
12. Waivers; Amendments.
Any provision of this Option may be amended, modified or
waived with (but only with) the written consent of the Company and the holder or
holders of Options representing at least 51% of the shares of Common Stock
issuable upon exercise of all such Options; provided that no such amendment,
modification or waiver shall, without the written consent of the Company and
each Option Holder, (a) change the number of Option Shares issuable upon
exercise of the Options or the Exercise Price or (b) amend, modify or waive the
provisions of this Section 12. Any amendment, modification or waiver effected in
compliance with this Section 12 shall be binding upon the Company and each
Option Holder. The Company shall give notice as soon as reasonably practicable
to each Option Holder of any amendment, modification or waiver effected in
compliance with this Section 12. No failure or delay of the Company or any
Option Holder in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereon or the exercise of any
other right or power. No notice or demand on the Company in any case shall
entitle the Company to any other or future notice or
<PAGE>
demand in similar or other circumstances. The rights and remedies of the Company
and each Option Holder hereunder are cumulative and not exclusive of any rights
or remedies which it would otherwise have.
13. Miscellaneous.
(a) The Option shall not entitle the Option
Holder, prior to the exercise of the Option, to any rights as a
shareholder of the Company.
(b) The Company shall pay all reasonable
expenses of the Option Holder, including reasonable fees and
disbursements of counsel, in connection with the preparation of the Option, any
waiver or consent hereunder or any amendment or modification hereof.
(c) In case any one or more of the provisions
contained in this Option shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
(d) Without limiting the rights of the Company
and the Option Holder to pursue all other legal and equitable rights
available to such party for the other parties' failure to perform its
obligations hereunder, the Company and the Option Holder each hereto acknowledge
and agree that the remedy at law for any failure to perform any obligations
hereunder would be inadequate and that each shall be entitled to specific
performance, injunctive relief or other equitable remedies in the event of any
such failure.
(e) THIS OPTION SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW.
(f) Any legal suit, action or proceeding arising
out of or relating to this Option will be instituted exclusively in the
Delaware Court of Chancery, County of New Castle, Delaware, or in the United
States District Court, District of Delaware, Wilmington, Delaware, all parties
waive any objection which they may have now or hereafter based upon forum non
conveniens or to the venue of any such suit, action or proceeding, and all
parties irrevocably consent to the jurisdiction of the Delaware State Court of
Chancery, County of New Castle and the United States District Court for the
District of Delaware in any such suit, action or proceeding. The parties further
agree to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the Delaware State Court of
Chancery, County of New Castle or in the
<PAGE>
United States District Court for the District of Delaware and agrees that
service of process upon such party, mailed by certified mail to such party's
address, will be deemed in every respect effective service of process upon such
party, in any suit, action or proceeding. FURTHER, BOTH THE COMPANY AND THE
OPTION HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THIS OPTION.
(g) The section headings used herein are for
convenience of reference only and shall not be construed in any way to
affect the interpretation of any provisions of the Option.
IN WITNESS WHEREOF, the Company has caused this Option to be
duly executed its authorized officer, and its corporate seal to be hereunto
affixed, and attested by its Secretary, all as of the day and year first above
written.
NATIONAL MEDIA CORPORATION
By:
------------------------------------------
Name:
Title:
[Seal]
Attest:
- ----------------------------------
Asst. Secretary
<PAGE>
ANNEX A
Form of Notice of Exercise
____________________, 19___
To: National Media Corporation
Reference is made to the Option dated August ___, 1998. Terms
defined therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the
Option, hereby irrevocably elects and agrees to purchase _______ shares of
Common Stock, and makes payment herewith in full therefor at the Exercise Price
of $_______________ in the following form:
- -----------------------------------------------------------.
[If said number of shares is less than all of the shares purchasable
hereunder, the undersigned hereby requests that a new Option Certificate
representing the remaining balance of the shares be registered in the name of
______________________________, whose address is
- -----------------------
-----------------------
-----------------------]
The undersigned hereby represents that it is exercising the
Option for its own account for investment purposes and not with the view to any
sale or distribution and that the Option Holder
<PAGE>
will not offer, sell or otherwise dispose of the Option or any underlying Option
Shares in violation of applicable securities laws.
TEMPORARY MEDIA CO., LLC
By:
-------------------------------------
Name: Stephen C. Lehman
Title: Co-Managing Member
15260 Ventura Blvd., Suite 500
Sherman Oaks, CA 91403-5339
<PAGE>
ANNEX B
Form of Option Assignment
Reference is made to the Option dated August ____, 1998,
issued by National Media Corporation Terms defined therein are used herein as
therein defined.
FOR VALUE RECEIVED ____________________ (the "Assignor")
hereby sells, assigns and transfers all of the rights of the Assignor as set
forth in the Option dated August ___, 1998, with respect to the number of Option
Shares covered thereby as set forth below, to the Assignee(s) as set forth
below:
Name(s) of Number of
Assignee(s) Address(es) Option Shares
- --------------- -------------------- --------------------
- --------------- -------------------- --------------------
All notices to be given by the Company to the Assignor as
Option Holder shall be sent to the Assignee(s) at the above listed address(es),
and, if the number of shares being hereby assigned is less than all of the
shares covered by the Option held by the Assignor, then also to the Assignor.
In accordance with Section 7 of the Option Certificate, the
Assignor requests that the Company execute and deliver a new Option Certificate
or Option Certificates in the name or names of the assignee or assignees, as is
appropriate, or, if the number of shares being hereby assigned is less than all
of the shares covered by the Option held by the Assignor, new Option
Certificates in the name or names of the assignee or the assignees, as is
appropriate, and in the name of the Assignor.
The undersigned represents that the Assignee has represented
to the Assignor that the Assignee is acquiring the Option for its own account or
the account of an Affiliate for investment
<PAGE>
purposes and not with the view to any sale or distribution, and that the
Assignee will not offer, sell or otherwise dispose of the Option or the Option
Shares except under circumstances as will not result in a violation of
applicable securities laws.
Dated: _________________, 19___
TEMPORARY MEDIA CO., LLC
By:
---------------------------------
Name: Stephen C. Lehman
Title: Co-Managing Member
15260 Ventura Blvd., Suite 500
Sherman Oaks, CA 91403-5339
<PAGE>
EXHIBIT A
---------
FORM OF OPTION
<PAGE>
EXHIBIT 4.2
Warrant
-------
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
August 11, 1998
NATIONAL MEDIA CORPORATION
COMMON STOCK PURCHASE WARRANT
Warrant to Purchase 1,912,500 Shares of Common Stock
Expiring August 11, 2003
THIS CERTIFIES THAT, for value received, Temporary Media Co.,
LLC, a Delaware limited liability company or its successors or assigns
(collectively, the "Warrant Holder"), at any time and from time to time, subject
to the vesting schedule set forth in Section 2 hereto, on any Business Day on or
prior to 5:00 p.m., Pacific Time, on August 11, 2003 (the "Expiration Date") is
entitled to subscribe for and purchase from National Media Corporation, a
Delaware corporation (the "Company"), 1,912,500 shares of Common Stock at a
price per share equal to the Exercise Price (s defined below); provided that the
number of shares of Common Stock issuable upon any exercise of this Warrant and
the Exercise Price shall be adjusted and readjusted from time to time in
accordance with Section 5.
1. Certain Definitions.
The following terms, as used herein, have the following
meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with such Person.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
<PAGE>
"Closing Price" means, for any trading day with respect to
each share of Common Stock, (a) the last reported sale price on such day on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if no such reported sale takes place on any such day,
the average of the closing bid and asked prices thereon, as
reported in The Wall Street Journal, or (b) if such Common Stock shall not be
listed or admitted to trading on a national securities exchange, the last
reported sales price on the NASDAQ National Market System or, if no such
reported sale takes place on any such day, the average of the closing bid and
asked prices thereon, as reported in The Wall Street Journal, or (c) if such
Common Stock shall not be quoted on such National Market System nor listed or
admitted to trading on a national securities exchange, then the average of the
closing bid and asked prices, as reported by The Wall Street Journal for the
over-the-counter market, or (d) if there is no public market for such Common
Stock the fair market value of a share of such Common Stock as determined in
good faith by the Board of Directors of the Company after consultation with an
independent investment bank of national repute (whose report will be made
available to the Warrant Holder prior to such determination of fair market
value); provided that if clause (a), (b), or (c) applies and no price is
reported in The Wall Street Journal for any trading day, then the price reported
in The Wall Street Journal for the most recent prior trading day shall be deemed
to be the price reported for such trading day.
"Commission" means the Securities and Exchange Commission or
any other Federal agency administering the Securities Act at the time.
"Common Stock" means the Company's currently authorized class
of common stock, $.01 par value, and stock of any other class or other
consideration into which such currently authorized class of common stock may
hereafter have been changed.
"Exchange Act" means the Securities Exchange Act of 1934, or
any successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Exercise Price" means $1.32 per share, as may be adjusted
from time to time pursuant to Section 5.
"Market Price" on any day means the unweighted average of the
daily Closing Prices per share of Common Stock for the 20 consecutive trading
days prior to such date; provided that for purposes of the application of
Section 5(b) to a Common Stock Distribution pursuant to a public offering
registered under the Securities Act, "Market Price" means the Closing Price per
share of Common Stock for the trading day preceding the effective date of the
registration statement with respect to such public offering.
<PAGE>
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include a reference
to the comparable section, if any, of any such successor Federal statute.
"Warrant Shares" means the 1,912,500 shares of Common Stock
issued or issuable upon exercise of this Warrant, as adjusted from time to time
pursuant to Section 5.
2. Exercise of Warrant.
--------------------
The Warrant Holder may exercise this Warrant in whole or in
part, at any time or from time to time, subject to the immediately succeeding
sentence, on any Business Day on or prior to the Expiration Date, by delivering
to the Company a duly executed notice (a "Notice of Exercise") in the form of
Annex A hereto at the election of the Warrant Holder, either (a) by receiving
from the Company the number of Warrant Shares as to which this Warrant is being
exercised and paying to the Company the Exercise Price for each such Warrant
Share by wire transfer of immediately available funds to the account of the
Company in an amount equal to the product of (i) the Exercise Price times (ii)
the number of Warrant Shares as to which the Warrant is being exercised or (b)
by receiving from the Company the number of Warrant Shares equal to (i) the
number of Warrant Shares as to which this Warrant is being exercised minus (ii)
the number of Warrant Shares having a value equal to the product of (x) the
Exercise Price times (y) the number of Warrant Shares as to which this Warrant
is being exercised, divided by the average of the Closing Price on the five
conservative trading days immediately prior to the date of such exercise. This
Warrant shall vest and become exercisable on or after the Closing Date (as
defined in that certain Stock Purchase Agreement dated August 11, 1998 by and
between the Company and NM Acquisition, Co., LLC.
As soon as practicable but not later than five Business Days
after the Company shall have received such Notice of Exercise and payment, the
Company shall execute and deliver or cause to be executed and delivered, in
accordance with such Notice of Exercise, a certificate or certificates
representing the number of shares of Common Stock specified in such Notice of
Exercise, issued in the name of the Warrant Holder. This Warrant shall be deemed
to have been exercised and such share certificate or certificates shall be
deemed to have been issued, and such Warrant Holder shall be deemed for all
purposes to have become a holder of record of shares of Common Stock, as of the
date that such Notice of Exercise and payment shall have been received by the
Company.
The Warrant Holder shall surrender this Warrant Certificate to
the Company when it delivers the Notice of Exercise, and in the event of a
partial exercise of the Warrant, the Company
<PAGE>
shall execute and deliver to the Warrant Holder, at the time the Company
delivers the share certificate or certificates issued pursuant to such Notice of
Exercise, a new Warrant Certificate for the unexercised section of the Warrant,
but in all other respects identical to this Warrant Certificate.
Each certificate for Warrant Shares issued upon exercise of
this Warrant, unless at the time of exercise such Warrant Shares are registered
under the Securities Act, shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Any certificate for Warrant Shares issued at any time in exchange or
substitution for any certificate bearing such legend (unless at that time such
Warrant Shares are registered under the Securities Act) shall also bear such
legend unless, in the written opinion of counsel selected by the holder of such
certificate (who may be an employee of such holder), which counsel and opinion
shall be reasonably acceptable to the Company, the Warrant Shares represented
thereby need no longer be subject to restrictions on resale under the Securities
Act.
The Company shall not be required to issue fractions of shares
of Common Stock upon an exercise of the Warrant. If any fraction of a share
would, but for this restriction, be issuable upon an exercise of the Warrant, in
lieu of delivering such fractional share, the Company shall pay to the Warrant
Holder, in cash, an amount equal to the same fraction times the Closing Price on
the trading day immediately prior to the date of such exercise.
The Company shall pay all expenses, taxes and owner charges
payable in connection with the preparation, issuance and delivery of
certificates for the Warrant Shares and any new Warrant Certificates, except
that if the certificates for the Warrant Shares or the new Warrant Certificates
are to be registered in a name or names other than the name of the Warrant
Holder, funds sufficient to pay all transfer taxes payable as a result of such
transfer shall be paid by the Warrant Holder at the time of its delivery of the
Notice of Exercise or promptly upon receipt of a written request by the Company
for payment.
3. Investment Representation.
--------------------------
By accepting the Warrant, the Warrant Holder represents that
it is acquiring the Warrant for its own account for investment purposes and not
with the view to any sale or
<PAGE>
distribution, and that the Warrant Holder will not offer, sell or otherwise
dispose of the Warrant or the Warrant Shares except under circumstances as will
not result in a violation of applicable securities laws.
4. Validity of Warrant and Issuance of Shares.
-------------------------------------------
The Company represents and warrants that this Warrant has been
duly authorized and is validly issued.
The Company further represents and warrants that on the date
hereof it is duly authorized and reserved, and the Company hereby agrees that it
will at all times until the Expiration Date have duly authorized and reserved,
such number of shares of Common Stock as will be sufficient to permit the
exercise in full of the Warrant, and that all such shares are and will be duly
authorized and, when issued upon exercise of the Warrant, will be validly
issued, fully paid and non-assessable, and free and clear of all security
interests, claims, liens, equities and other encumbrances.
5. Antidilution Provisions.
------------------------
The Exercise Price in effect at any time, and the number of
Warrant Shares that may be purchased upon any exercise of the Warrant, shall be
subject to change or adjustment as follows:
(a) Common Stock Reorganization. If the Company
shall subdivide its outstanding shares of Common Stock into a greater number of
shares, by way of stock split, stock dividend or otherwise, or consolidate its
outstanding shares of Common Stock into a smaller number of shares (any such
event being herein called a "Common Stock Reorganization"), then (i) the
Exercise Price shall be adjusted, effective immediately after the effective date
of such Common Stock Reorganization, to a price determined by multiplying the
Exercise Price in effect immediately prior to such effective date by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
on such effective date before giving effect to such Common Stock Reorganization
and the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such Common Stock Reorganization, and (ii)
the number of shares of Common Stock subject to purchase upon exercise of this
Warrant shall be adjusted, effective at such time, to a number determined by
multiplying the number of shares of Common Stock subject to purchase immediately
before such Common Stock Reorganization by a fraction, the numerator of which
shall be the number of shares outstanding after giving effect to such Common
Stock Reorganization and the denominator of which shall be the number of shares
of Common Stock outstanding immediately before giving effect to such Common
Stock Reorganization.
<PAGE>
(b) Common Stock Distribution.
--------------------------
(i) If the Company shall issue, sell or
otherwise distribute any shares of Common Stock, other than pursuant to a Common
Stock Reorganization (which is governed by Section 5(a)) (any such event,
including any event described in paragraphs (ii) and (iii) below, being herein
called a "Common Stock Distribution"), for a consideration per share less than
the Market Price immediately prior to such Common Stock Distribution then,
effective upon such Common Stock Distribution, the Exercise Price shall be
reduced to a price determined by multiplying the Exercise Price by a fraction,
the numerator of which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such Common Stock Distribution multiplied
by the Market Price, plus (B) the consideration, if any, received by the Company
upon such Common Stock Distribution, and the denominator of which shall be the
product of (1) the total number of shares of Common Stock outstanding
immediately after such Common Stock Distribution multiplied by (2) the Market
Price.
If any Common Stock Distribution shall require an adjustment
to the Exercise Price pursuant to the foregoing provisions of this Section 5(b),
including by operation of paragraph (ii) or (iii) below, then, effective at the
time such adjustment is made, the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be increased to a number determined
by multiplying the number of shares of Common Stock subject to purchase
immediately before such Common Stock Distribution by a fraction, the numerator
of which shall be the Exercise Price in effect immediately prior to such event
and the denominator of which shall be the Exercise Price as adjusted in
accordance with this Section 5(b). In computing adjustments under this
paragraph, fractional interests in Common Stock shall be taken into account to
the nearest one-thousandth of a share.
Subject to Section 5(e) below, the provisions of this Section
5(b), including by operation of paragraph (ii) or (iii) below, shall not operate
to increase the Exercise Price or reduce the number of shares of Common Stock
subject to purchase upon exercise of this Warrant.
(ii) If the Company shall issue, sell,
distribute or otherwise grant in any manner (including by assumption) any rights
to subscribe for or to purchase, or any warrants or options for the purchase of
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (such rights, warrants or options being herein called "Options" and
such convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such Options or the rights to convert
or exchange any such Convertible Securities in respect of such Options are
immediately exercisable or exercisable prior to the Expiration Date, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible Securities in respect
of such Options (determined by dividing (x) the aggregate amount, if any,
received or receivable by the Company as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
<PAGE>
payable to the Company upon the exercise of all such Options, plus, in the case
of Options to acquire Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon issuance or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options at such price) shall be
less than the Market Price immediately prior to the granting of such Options
then, for purposes of Section 5(b)(i), the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to have been issued as of the
date of granting of such Options and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as consideration of
such price per share, determined as provided above, therefor. Except as
otherwise provided in paragraph (iv) below, no additional adjustment of the
Exercise Price shall be made upon the actual exercise of such Options or upon
conversion or exchange of such Convertible Securities.
(iii) If the Company shall issue, sell or
otherwise distribute (including by assumption) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable or exercisable prior to the Expiration Date, and the price per share
for which Common Stock is issuable upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the aggregate amount received
or receivable by the Company as consideration for the issuance, sale or
distribution of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (y) the maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Market Price immediately prior to such issuance, sale or
distribution then, for purposes of Section 5(b)(i), the total maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the date of the
issuance, sale or distribution of such Convertible Securities thereafter shall
be deemed to be outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above, therefor.
Except as otherwise in paragraph (iv) below, no additional adjustment of the
Exercise Price shall be made upon the actual conversion or exchange of such
Convertible Securities.
(iv) If (x) the purchase price provided for
in any Option referred to in Section 5(b)(ii) or the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Securities
referred to in Sections 5 (b)(ii) or 5(b)(iii) or the rate at which any
Convertible Securities referred to in Sections 5(b)(ii) or 5(b)(iii) are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 5), or (y) any of such Options or Convertible Securities shall have
terminated, lapsed or expired, the Exercise Price then in effect shall forthwith
be readjusted (effective only with respect
<PAGE>
to any exercise of this Warrant after such readjustment) to the Exercise Price
which would then be in effect had the adjustment made upon the issuance, sale,
distribution or grant of such Options or Convertible Securities been made based
upon such changed purchase price, additional consideration or conversion rate,
as the case may be (in the case of any event referred to in clause (x) of this
paragraph (iv)) or had such adjustment not been made (in the case of any event
referred to in clause (y) of this paragraph (iv)).
(v) If the Company shall pay a dividend
or make any other distribution upon any capital stock of the Company payable in
Common Stock, Options or Convertible Securities, other than pursuant to a Common
Stock Reorganization (which is governed by Section 5(a)), then, for purposes of
this Section 5(b), such Common Stock, Options or Convertible Securities shall be
deemed to have been issued or sold without consideration.
(vi) If any shares of Common Stock, Options
or Convertible Securities shall be issued, sold or distributed for cash, the
consideration received thereof shall be deemed to be the amount received by the
Company therefor, without any deduction therefrom of any expenses incurred in
connection therewith. If any shares of Common Stock, Options or Convertible
Securities shall be issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair market value of such consideration at the time of
its receipt by the Company as determined in good faith by the Board of Directors
of the Company, without any deduction of any expenses incurred in connection
therewith. If any shares of Common Stock, Options or Convertible Securities
shall be issued in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair market value of such portion of the assets and business of the
non-surviving corporation as shall be attributable to such Common Stock, Options
or Convertible Securities, as the case may be, at the time of the merger as
determined in good faith by the Board of Directors of the Company. If any
Options shall be issued in connection with the issuance and sale of other
securities of the Company, together comprising one integral transaction in which
no specific consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued without consideration.
(c) Special Dividends. If the Company shall
issue or distribute to all holders of shares of Common Stock evidences of
indebtedness, any other securities of the Company or any cash, property or other
assets (excluding (i) a Common Stock Reorganization, (ii) a Common Stock
Distribution, (iii) quarterly cash dividends paid in the ordinary course of
business, or (iv) any purchase, redemption or other acquisition by the Company
of shares of Common Stock owned by any individual shareholder owning fewer than
100 shares), whether or not accompanied by a purchase, redemption or other
acquisition of shares of Common Stock (any such nonexcluded event being herein
called a "Special Dividend"), the (x) the Exercise Price shall be decreased,
effective immediately after the effective date of such Special Dividend, to a
price determined by multiplying the Exercise Price then in effect by a fraction,
the numerator of which shall be the Market Price
<PAGE>
immediately prior to such effective date less any cash and the then fair market
value, as determined in good faith by the Board of Directors of the Company, of
any evidences of indebtedness, securities or property or other assets issued or
distributed in such Special Dividend with respect to one share of Common Stock,
and the denominator of which shall be the Market Price immediately prior to such
effective date, and (y) the number of shares of Common Stock subject to purchase
upon exercise of this Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock subject to purchase immediately
before such Special Dividend by a fraction, the numerator of which shall be the
Exercise Price in effect immediately before such Special Dividend and the
denominator of which shall be the Exercise Price in effect immediately after
such Special Dividend. A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed to be a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock and, if the outstanding shares
of Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as part of such reclassification, a Common Stock Reorganization.
(d) Capital Reorganization. If there shall be
any consolidation or merger to which the Company is a party, other than a
consolidation or a merger of which the Company is the continuing corporation and
which does not result in any reclassification of, or change (other than a Common
Stock Reorganization) in, outstanding shares of Common Stock, or any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety, or any recapitalization of the Company (any such event being called a
"Capital Reorganization"), then, effective upon the effective date of such
Capital Reorganization, the Warrant holder shall no longer have the right to
purchase Common Stock, but shall have instead the right to purchase, upon
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property (including cash) which the Warrant Holder would have
owned or have been entitled to receive pursuant to such Capital Reorganization
if the Warrant had been exercised immediately prior to the effective date of
such Capital Reorganization. As a condition to effecting any Capital
Reorganization, the Company or the successor or surviving corporation, as the
case may be, shall execute and deliver to each Warrant Holder an agreement as to
the Warrant Holder's rights in accordance with this Section 5(d), providing, to
the extent of any right to purchase equity securities hereunder, for subsequent
adjustments as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5. The provisions of this Section 5(d) shall
similarly apply to successive Capital Reorganizations.
(e) Adjustment Rules.
-----------------
(i) Any adjustments pursuant to this
Section 5 shall be made successively whenever any event referred to herein shall
occur, except that, notwithstanding any other provision of this Section 5, no
adjustment shall be made to the number of Warrant Shares to be delivered to the
Warrant Holder (or to the Exercise Price) if such adjustment represents less
than
<PAGE>
1% of the number of Warrant Shares previously required to be so delivered, but
any lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to 1% or more of the number of Warrant Shares to
be so delivered.
(ii) No adjustments shall be made pursuant
to this Section 5 in respect of (x) the issuance of Warrant Shares upon exercise
of the Warrant; (y) the issuance, sale or grant or exercise before or after the
date hereof by the Company to any director, officer, consultant or employee of
the Company or any Affiliate of the Company of any Common Stock or of any
option, bonus or other award exercisable into Common Stock approved by the Board
of Directors of the Company or any duly authorized committee thereof; or (z) any
securities of the Company which are issued and outstanding as at the date hereof
or are issued pursuant to the Stock Purchase Agreement (including, without
limitation, the issuance of any Series E Preferred Stock) or the Consulting
Agreement.
(iii) If the Company shall take a record of
the holders of its Common Stock for any purpose referred to in this Section 5,
then (x) such record date shall be deemed to be the date of the issuance, sale,
distribution or grant in question and (y) if the Company shall legally abandon
such action prior to effecting such action, no adjustment shall be made pursuant
to this Section 5 in respect of such action.
(iv) Upon the expiration without being
exercised of any rights, options, warrants or conversion or exchange of any
rights, options, warrants or conversion or exchange privileges for which an
adjustment has been made pursuant to this Warrant, the Exercise Price and the
number of shares of Common Stock purchasable upon the exercise of each Warrant
shall, upon such expiration, be readjusted and shall thereafter, upon any future
exercise, be such as they would have been had they been originally adjusted (or
had the original adjustment not been required, as the case may be) as if (A) the
only shares of Common Stock so issued were the shares of such Common Stock, if
any, actually issued or sold upon the exercise of such rights, options, warrants
or conversion or exchange rights and (B) such shares of Common Stock, if any,
were issued or sold for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually received by the Company
for issuance, sale or grant of all such rights, options, warrants or conversion
or exchange rights whether or not exercised; provided, that no such readjustment
shall have the effect of increasing the Exercise Price by an amount, or
decreasing the number of shares purchasable upon exercise of each Warrant by a
number, in excess of the amount or number of the adjustment initially made in
respect to the issuance, sale or grant of such rights, options, warrants or
conversion or exchange rights.
(f) Proceedings Prior to Any Action Requiring
Adjustment. As a condition precedent to the taking of any action which would
require an adjustment pursuant to this Section 5, the Company shall take any
action which may be necessary, including obtaining
<PAGE>
regulatory approvals or exemptions, in order that the Company may thereafter
validly and legally issue as fully paid and nonassessable all shares of Common
Stock which the Warrant Holder is entitled to receive upon exercise of the
Warrant.
(g) Notice of Adjustment. Not less than 10 days prior
to the record date or effective date, as the case may be, of any action which
requires or might require an adjustment or readjustment pursuant to this Section
5, the Company shall give notice to each Warrant Holder of such event,
describing such event in reasonable detail and specifying the record date or
effective date, as the case may be, and, if determinable, the required
adjustment and computation thereof. If the required adjustment is not
determinable as the time of such notice, the Company shall give notice to each
Warrant Holder of such adjustment and computation as soon as reasonably
practicable after such adjustment becomes determinable.
6. Registration of Warrant Shares.
--------------------------------
Neither the Warrant nor the Warrant Shares have been
registered with the Commission under the Securities Act or qualified for sale
pursuant to any state blue sky law, and neither may be sold or transferred
without such registration or qualification, except pursuant to an exemption
therefrom. No rights shall be hereby granted which are in violation of
applicable securities laws or regulations.
7. Transfer of Warrant.
--------------------
This Warrant is not transferable until the Closing Date of the
Stock Purchase Agreement. After such date, this Warrant is only transferable to
directors, officers, employees and consultants of the Company; provided that no
transfer shall be made that (a) transfers Warrants exercisable into fewer than
5,000 Warrant Shares, (b) does not comply with all applicable federal and state
securities laws or (c) would require registration or qualification of the
Warrant pursuant to the Securities Act or any applicable state blue sky law; and
provided further that the Warrant Holder upon transfer of the Warrant must
deliver to the Company a duly executed Warrant Assignment in the form of Annex B
hereto, with funds sufficient to pay any transfer tax imposed in connection with
such assignment (if any) and upon surrender of this Warrant Certificate to the
Company. The Company shall execute and deliver a new Warrant Certificate or
Certificates in the form of this Warrant Certificate with appropriate changes to
reflect such Assignment, in the name or names of the assignee or assignees
specified in the fully executed Warrant Assignment or other instrument of
assignment and, if the Warrant Holder's entire interest is not being transferred
or assigned, in the name of the Warrant Holder, and this Warrant Certificate
shall promptly be cancelled. Any transfer or exchange of this Warrant
Certificate shall be without charge to the Warrant Holder (except as provided
above with respect to transfer taxes, if any) and any new Warrant Certificate or
Certificates issued shall be dated the date hereof. The terms "Warrant" and
"Warrant Holder" as used herein include all Warrants into which this Warrant (or
any successor
<PAGE>
Warrant) may be exchanged or issued in connection with the transfer or
assignment of this Warrant any successor Warrant and the holders of those
Warrants, respectively.
8. Registration of Common Stock; Rule 144.
---------------------------------------
The Company hereby agrees that, in accordance with the
provisions of the Registration Rights Agreement (as defined in the Stock
Purchase Agreement) it will file any reports required to be filed by it under
the Securities Act, the Exchange Act or the rules and regulations adopted by the
Commission thereunder and that it will use all reasonable efforts to cooperate
with each Warrant Holder and each holder of Warrant Shares in supplying such
information concerning the Company as may be necessary for such Warrant Holder
or holder to complete and file any information reporting forms currently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrants or Warrant
Shares. The Company also agrees that, in accordance with the provisions of the
Registration Rights Agreement (as defined in the Stock Purchase Agreement) it
will take such further action, and supply such information (including the
information specified by Rule 144A(d)(4) under the Securities Act) as any
Warrant Holder may reasonably request to the extent required from time to time
to enable the Warrant Holder to sell Warrant Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
or 144A under the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission.
Upon the request of the Warrant Holder, the Company will deliver to the Warrant
Holder a written statement that it has complied with such reporting
requirements.
Any other provision of this Warrant notwithstanding, the
Company shall not be obligated under any circumstances to cause this Warrant to
be listed or quoted on NASDAQ National Market System, any national securities
exchange or any other trading system or market, or to be registered under the
Securities Act.
9. Lost, Mutilated or Missing Warrant Certificates.
------------------------------------------------
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
the case of loss, theft or destruction, upon receipt of indemnification
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, the Company shall execute and
deliver a new Warrant Certificate of like tenor and representing the right to
purchase the same aggregate number of Warrant Shares. The recipient of any such
Warrant Certificate shall reimburse the Company for all reasonable expenses
incidental to the replacement of such lost, mutilated or missing Warrant
Certificate.
<PAGE>
10. Successors and Assigns.
------------------------
All the provisions of this Warrant by or for the benefit of
the Company or the Warrant Holder shall bind and inure to the benefit of their
respective successors and assigns, provided, however, TMC may not assign any of
its rights, duties or obligations hereunder, except as specifically provided
herein without the prior written consent of the Company.
11. Notices.
--------
Any notice or other communication hereunder shall be in
writing and shall be sufficient if sent by first-class mail or courier, postage
prepaid, and addressed as follows: (a) if to the Company, National Media
Corporation, 1835 Market Street, 11 penn Center, Suite 1100, Philadelphia, PA
19103 Attention: General Counsel; (b) if to the Warrant Holder, Temporary Media
Co., LLC, 15260 Ventura Blvd., Suite 500, Sherman Oaks, CA 91403-5339; and (c)
if to any party, addressed to such address as such party may hereafter specify
to the Company, in the case of any communication to be provided by the Company,
or to each Warrant Holder, in the case of any communication to be provided by
the Warrant Holder, for the purpose of notice hereunder.
12. Waivers; Amendments.
--------------------
Any provision of this Warrant may be amended, modified or
waived with (but only with) the written consent of the Company and the holder or
holders of Warrants representing at least 51% of the shares of Common Stock
issuable upon exercise of all outstanding Warrants; provided that no such
amendment, modification or waiver shall, without the written consent of the
Company and each Warrant Holder, (a) change the number of Warrant Shares
issuable upon exercise of the Warrants or the Exercise Price or (b) amend,
modify or waive the provisions of this Section 12. Any amendment, modification
or waiver effected in compliance with this Section 12 shall be binding upon the
Company and each Warrant Holder. The Company shall give notice as soon as
reasonably practicable to each Warrant Holder of any amendment, modification or
waiver effected in compliance with this Section 12. No failure or delay of the
Company or any Warrant Holder in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereon or the
exercise of any other right or power. No notice or demand on the Company in any
case shall entitle the Company to any other or future notice or demand in
similar or other circumstances. The rights and remedies of the Company and each
Warrant Holder hereunder are cumulative and not exclusive of any rights or
remedies which it would otherwise have.
<PAGE>
13. Miscellaneous.
--------------
(a) The Warrant shall not entitle the Warrant
Holder, prior to the exercise of the Warrant, to any rights as a shareholder of
the Company.
(b) The Company shall pay all reasonable
expenses of the Warrant Holder, including reasonable fees and disbursements of
counsel, in connection with the preparation of the Warrant, any waiver or
consent hereunder or any amendment or modification hereof.
(c) In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
(d) Without limiting the rights of the Company
and the Warrant Holder to pursue all other legal and equitable rights available
to such party for the other parties' failure to perform its obligations
hereunder, the Company and the Warrant Holder each hereto acknowledge and agree
that the remedy at law for any failure to perform any obligations hereunder
would be inadequate and that each shall be entitled to specific performance,
injunctive relief or other equitable remedies in the event of any such failure.
(e) THIS WARRANT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT AS OTHERWISE
REQUIRED BY MANDATORY PROVISIONS OF LAW.
(f) Any legal suit, action or proceeding arising
out of or relating to this Warrant will be instituted exclusively in the
Delaware Court of Chancery, County of New Castle, Delaware, or in the United
States District Court, District of Delaware, Wilmington, Delaware, all parties
waive any objection which they may have now or hereafter based upon forum non
conveniens or to the venue of any such suit, action or proceeding, and (c)
irrevocably consents to the jurisdiction of the Delaware State Court of
Chancery, County of New Castle and the United States District Court for the
District of Delaware in any such suit, action or proceeding. The parties further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the Delaware State Court of
Chancery, County of New Castle or in the United States District Court for the
District of Delaware and agrees that service of process upon such party, mailed
by certified mail to the such party's address, will be deemed in every respect
effective service of process upon such party, in any suit, action or proceeding.
FURTHER, BOTH THE COMPANY
<PAGE>
AND THE WARRANT HOLDER HEREBY WAIVE TRIAL BY JURY IN
ANY ACTION TO ENFORCE THIS WARRANT.
(g) The section headings used herein are for
convenience of reference only and shall not be construed in any way to affect
the interpretation of any provisions of the Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed its authorized officer, and its corporate seal to be hereunto
affixed, and attested by its Secretary, all as of the day and year first above
written.
NATIONAL MEDIA CORPORATION
By: ______________________________________
Name:
Title:
[Seal]
Attest:
- ----------------------------------
Asst. Secretary
<PAGE>
ANNEX A
Form of Notice of Exercise
, 19
-------------------- ---
To: National Media Corporation
Reference is made to the Common Stock Purchase Warrant dated August ,
--
1998. Terms defined therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the Warrant,
hereby irrevocably elects and agrees to purchase shares of Common Stock,
-------
and makes payment herewith in full therefor at the Exercise Price of
$ in the following form:
---------------
- -----------------------------------------------------------.
[If said number of shares is less than all of the shares purchasable hereunder,
the undersigned hereby requests that a new Warrant Certificate representing the
remaining balance of the shares be registered in the name of
, whose address is
- ------------------------------ -----------------------
-----------------------
-----------------------]
The undersigned hereby represents that it is exercising the Warrant for its
own account for investment purposes and not with the view to any sale or
distribution and that the Warrant Holder will not offer, sell or otherwise
dispose of the Warrant or any underlying Warrant Shares in violation of
applicable securities laws.
TEMPORARY MEDIA CO., LLC
By:
---------------------------------
Name: Stephen C. Lehman
Title: Co-Managing Member
15260 Ventura Blvd., Suite 500
Sherman Oaks, CA 91403-5339
<PAGE>
ANNEX B
Form of Warrant Assignment
Reference is made to the Common Stock Purchase Warrant dated August ,
---
1998, issued by National Media Corporation. Terms defined therein are used
herein as therein defined.
FOR VALUE RECEIVED (the "Assignor") hereby sells,
--------------------
assigns and transfers all of the rights of the Assignor as set forth in the
Common Stock Purchase Warrant dated August , 1998, with respect to the number
--
of Warrant Shares covered thereby as set forth below, to the Assignee(s) as set
forth below:
<TABLE>
<CAPTION>
Name(s) of Number of
Assignee(s) Address(es) Warrant Shares
- ----------- ----------- --------------
<S> <C> <C>
- --------------- -------------------- --------------------
- --------------- -------------------- --------------------
</TABLE>
All notices to be given by the Company to the Assignor as Warrant Holder
shall be sent to the Assignee(s) at the above listed address(es), and, if the
number of shares being hereby assigned is less than all of the shares covered by
the Warrant held by the Assignor, then also to the Assignor.
In accordance with Section 7 of the Warrant Certificate, the Assignor
requests that the Company execute and deliver a new Warrant Certificate or
Warrant Certificates in the name or names of the assignee or assignees, as is
appropriate, or, if the number of shares being hereby assigned is less than all
of the shares covered by the Warrant held by the Assignor, new Warrant
Certificates in the name or names of the assignee or the assignees, as is
appropriate, and in the name of the Assignor.
The undersigned represents that the Assignee has represented to the
Assignor that the Assignee is acquiring the Warrant for its own account or the
account of an Affiliate for investment
<PAGE>
purposes and not with the view to any sale or distribution, and that the
Assignee will not offer, sell or otherwise dispose of the Warrant or the Warrant
Shares except under circumstances as will not result in a violation of
applicable securities laws.
Dated: , 19
----------------- ---
TEMPORARY MEDIA CO., LLC
By:
----------------------------------
Name: Stephen C. Lehman
Title: Co-Managing Member
15260 Ventura Blvd., Suite 500
Sherman Oaks, CA 91403-5339
<PAGE>
EXHIBIT E
FORM OF SERIES A WARRANT
<PAGE>
EXHIBIT 4.3
Certificate of Designation
<PAGE>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES E PREFERRED STOCK
of
NATIONAL MEDIA CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
National Media Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies that the
following resolutions were adopted by the Board of Directors of the Corporation
pursuant to authority of the Board of Directors as required by Section 151 of
the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Certificate of Incorporation and
Bylaws, each as amended and restated through the date hereof, the Board of
Directors hereby authorizes a series of the Corporation's previously authorized
Preferred Stock, par value $.01 per share (the "Preferred Stock"), and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, privileges, powers and restrictions thereof as follows:
<PAGE>
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 22,000 shares of
Preferred Stock, is the Series E Preferred Stock (the "Series E Preferred
Stock") and the face amount shall be One Thousand U.S. Dollars ($1,000.00) per
share (the "Face Amount").
II. PREMIUM
The holders of shares of Series E Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available for the payment of a premium (the "Premium") a payment equal
to 4% of the Face Amount of each share of Series E Preferred Stock on that date
which is on the thirtieth day of the month one year after this Certificate has
been filed.
At the election of the Corporation, the Premium may be paid in cash or
by the issuance of a number of shares of Common Stock equal to the amount of
Premium divided by the average of the Closing Price of the Common Stock on the
thirty consecutive trading days immediately prior to the date of payment.
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:
A. "Conversion Price" means $1.50 per share of Series E Preferred
Stock, subject to adjustment as provided herein.
B. "Issuance Date" means the date of the issuance of shares of Series E
Preferred Stock as contemplated by that certain Stock Purchase Agreement dated
as of August 11, 1998, between the Corporation and NM Acquisition Co., LLC (the
"Stock Purchase Agreement").
IV. CONVERSION
A. Conversion at the Option of the Holder. Subject to any restrictions
set forth on the certificate(s) therefor, each holder of shares of Series E
Preferred Stock may, at any time and from time to time, convert (a "Conversion")
each of its shares of Series E Preferred Stock into a number of fully paid and
nonassessable shares of the Corporation's Common Stock ("Common Stock")
determined in accordance with the following formula:
1,000
----------------
Conversion Price
<PAGE>
B. Mechanics of Conversion. In order to effect a Conversion, a holder
shall: (x) fax (or otherwise deliver) a copy of the fully executed notice of
conversion in the form attached hereto (a "Notice of Conversion") to the
Corporation or the transfer agent for the Common Stock and (y) surrender or
cause to be surrendered the original certificates representing the Series E
Preferred Stock being converted (the "Preferred Stock Certificates"), duly
endorsed, along with a copy of the Notice of Conversion as soon as practicable
thereafter to the Corporation or the transfer agent. Upon receipt by the
Corporation of a facsimile copy of a Notice of Conversion from a holder, the
Corporation shall immediately send, via facsimile, a confirmation to such holder
stating that the Notice of Conversion has been received, the date upon which the
Corporation expects to deliver the Common Stock issuable upon such conversion
and the name and telephone number of a contact person at the Corporation
regarding the conversion. The Corporation shall not be obligated to issue shares
of Common Stock upon a conversion unless either the Preferred Stock Certificates
are delivered to the Corporation or the transfer agent as provided above, or the
holder notifies the Corporation or the transfer agent that such certificates
have been lost, stolen or destroyed and delivers the documentation to the
Company required by Article XIV.B hereof.
(i) Delivery of Common Stock Upon Conversion. Upon the
surrender of Preferred Stock Certificates from a holder of Series E Preferred
Stock accompanied by a Notice of Conversion, the Corporation shall, no later
than the later of (a) the second business day following the receipt of the
Notice of Conversion and (b) the business day following the date of such
surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of indemnity pursuant to Article XIV.B) (the "Delivery Period"), issue
and deliver to the holder or its nominee (x) that number of shares of Common
Stock issuable upon conversion of such shares of Series E Preferred Stock being
converted and (y) a certificate representing the number of shares of Series E
Preferred Stock not being converted, if any. If the Corporation's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend and the holder thereof is not obligated to return such certificate
for the placement of a legend thereon, the Corporation shall cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion to
the holder by crediting the account of the holder or its nominee with DTC
through its Deposit Withdrawal Agent Commission system ("DTC Transfer"). If the
aforementioned conditions to a DTC Transfer are not satisfied, the Corporation
shall deliver to the holder physical certificates representing the Common Stock
issuable upon conversion. Further, a holder may instruct the Corporation to
deliver to the holder physical certificates representing the Common Stock
issuable upon conversion in lieu of delivering such shares by way of DTC
Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of the shares
of Common Stock upon the conversion of the Series E Preferred Stock.
<PAGE>
(iii) No Fractional Shares. If any conversion of Series E
Preferred Stock would result in the issuance of a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon conversion of the Series E Preferred Stock shall be
the next higher whole number of shares.
(iv) Conversion Disputes. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price, the
Corporation shall submit the disputed calculations to an independent outside
accountant via facsimile within two (2) business days of receipt of the Notice
of Conversion. The accountant, at the Corporation's sole expense, shall audit
the calculations and notify the Corporation and the holder of the results no
later than two (2) business days from the date it receives the disputed
calculations. The accountant's calculation shall be deemed conclusive, absent
manifest error. The Corporation shall then issue the appropriate number of
shares of Common Stock in accordance with subparagraph (i) above.
V. RESERVATION OF SHARES OF COMMON STOCK
Reserved Amount. Upon the initial issuance of the shares of Series E
Preferred Stock, the Corporation shall reserve sufficient shares of the
authorized but unissued shares of Common Stock for issuance upon conversion of
all issued Series E Preferred Stock and thereafter the number of authorized but
unissued shares of Common Stock so reserved (the "Reserved Amount") shall not be
decreased and shall at all times be sufficient to provide for the conversion of
the Series E Preferred Stock outstanding at the then current Conversion Price
thereof.
VI. FAILURE TO SATISFY CONVERSIONS
Conversion Default Payments. If, at any time, (x) a holder of shares of
Series E Preferred Stock submits a Notice of Conversion and the Corporation
fails for any reason to deliver, on or prior to the fourth (4th) business day
following the expiration of the Delivery Period for such conversion, such number
of freely tradeable shares of Common Stock to which such holder is entitled upon
such conversion, or (y) the Corporation provides notice to any holder of Series
E Preferred Stock at any time of its intention not to issue shares of Common
Stock which are registered in accordance with the Corporation's obligations
under the Registration Rights Agreement between the Corporation and NM
Acquisition Co., LLC dated August 11, 1998 upon exercise by any holder of its
conversion rights in accordance with the terms of this Certificate of
Designation (each of (x) and (y) being a "Conversion Default"), then the
Corporation shall pay to the affected holder, in the case of a Conversion
Default described in clause (x) above, and to all holders, in the case of a
Conversion Default described in clause (y) above, payments for the first ten
(10) business days following the expiration of the Delivery Period, in the case
of a Conversion Default described in clause (x), and for the first ten (10)
business days following a Conversion Default described in clause (y), an amount
<PAGE>
equal to $500 per day. In the event any Conversion Default continues beyond such
ten (10) business day period, the Corporation shall pay to the holder an
additional amount equal to:
(.24) x (D/365) x (the Default Amount)
where:
"D" means the number of days after the expiration of the ten (10)
business day period described above through and including the Default Cure Date;
"Default Amount" means the total Face Amount of all shares of Series E
Preferred Stock held by such holder; and
"Default Cure Date" means (i) with respect to a Conversion Default
described in clause (x) of its definition, the date the Corporation effects the
conversion of the full number of shares of Series E Preferred Stock and (ii)
with respect to a Conversion Default described in clause (y) of its definition,
the date the Corporation begins to issue freely tradeable shares of Common Stock
in satisfaction of all conversions of Series E Preferred Stock in accordance
with Article IV.A.
The payments to which a holder shall be entitled pursuant to this
Paragraph A are referred to herein as "Conversion Default Payments." A holder
may elect to receive accrued Conversion Default Payments in cash or to convert
all or any portion of such accrued Conversion Default Payments, at any time,
into Common Stock at the lowest Conversion Price in effect during the period
beginning on the date of the Conversion Default through the Conversion Date with
respect to such Conversion Default Payments. In the event a holder elects to
receive any Conversion Default Payments in cash, it shall so notify the
Corporation in writing. Such payment shall be made in accordance with and be
subject to the provisions of Article XIV.C. In the event a holder elects to
convert all or any portion of the Conversion Default Payments into Common Stock,
the holder shall indicate on a Notice of Conversion such portion of the
Conversion Default Payments which such holder elects to so convert and such
conversion shall otherwise be effected in accordance with the provisions of
Article IV.
VII. REQUIRED CONVERSION
Provided all shares of Common Stock issuable upon conversion of all
outstanding shares of Series E Preferred Stock are then (i) authorized and
reserved for issuance, (ii) registered under the Securities Act of 1933, as
amended (the "Securities Act") for resale by the holders of such shares of
Series E Preferred Stock or such shares may be immediately sold to the public
without registration under Rule 144(k) under the Securities Act and (iii)
eligible to be traded on either the NYSE, the American Stock Exchange or the
NASDAQ National Market, each share of Series E Preferred Stock issued and
outstanding on the third (3rd) anniversary of the Issuance Date (the "Maturity
Date")
<PAGE>
automatically shall be converted into shares of Common Stock on such date in
accordance with the conversion formula set forth in Paragraph A of Article IV
(the "Required Conversion at Maturity"). If the Required Conversion at Maturity
occurs, the Corporation and the holders of Series E Preferred Stock shall follow
the applicable conversion procedures set forth in Paragraph B of this Article
IV; provided, however, that the holders of Series E Preferred Stock are not
required to deliver a Notice of Conversion to the Corporation or its transfer
agent.
VIII. INTENTIONALLY OMITTED
IX. RANK
All shares of the Series E Preferred Stock shall rank (i) prior to the
Corporation's Common Stock and Series A Junior Participating Preferred Stock;
(ii) prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series E Preferred Stock
obtained in accordance with Article XIII hereof, such class or series of capital
stock specifically, by its terms, ranks senior to or pari passu with the Series
E Preferred Stock) (collectively with the Common Stock, "Junior Securities");
(iii) pari passu with the Corporation's Series D Preferred Stock and any other
class or series of capital stock of the Corporation hereafter created (with the
consent of the holders of Series E Preferred Stock obtained in accordance with
Article XIII hereof) specifically ranking, by its terms, on parity with the
Series E Preferred Stock (the "Pari Passu Securities"); and (iv) junior to (a)
the Series B Convertible Preferred Stock of the Corporation and (b) any class or
series of capital stock of the Corporation hereafter created (with the consent
of the holders of Series E Preferred Stock obtained in accordance with Article
XIII hereof) specifically ranking, by its terms, senior to the Series E
Preferred Stock (the "Senior Securities"), in each case as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
X. LIQUIDATION PREFERENCE
A. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of sixty (60) consecutive
days and, on account of any such
<PAGE>
event, the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, including, but not
limited to, the sale or transfer of all or substantially all of the
Corporation's assets in one transaction or in a series of related transactions
(a "Liquidation Event"), no distribution shall be made to the holders of any
Junior Securities upon liquidation, dissolution or winding up unless prior
thereto the holders of shares of Series E Preferred Stock shall have received
the Liquidation Preference with respect to each share. If, upon the occurrence
of a Liquidation Event, the assets and funds available for distribution among
the holders of the Series E Preferred Stock and holders of Pari Passu Securities
shall be insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for distribution to the Series E Preferred Stock and the Pari
Passu Securities shall be distributed ratably among such shares in proportion to
the ratio that the Liquidation Preference payable on each such share bears to
the aggregate Liquidation Preference payable on all such shares.
B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.
C. The "Liquidation Preference" with respect to a share of Series E
Preferred Stock means an amount equal to the Face Amount thereof. The
Liquidation Preference with respect to any Pari Passu Securities shall be as set
forth in the Certificate of Designation filed in respect thereof.
XI. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. Stock Splits, Stock Dividends, Etc. If at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
<PAGE>
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially all of the assets of the
Corporation or (iv) any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property (each of
(i) - (iv) above being a "Corporate Change"), then the holders of Series E
Preferred Stock shall thereafter have the right to receive upon Conversion, in
lieu of the shares of Common Stock otherwise issuable, such shares of stock,
securities and/or other property as would have been issued or payable in such
Corporate Change with respect to or in exchange for the number of shares of
Common Stock which would have been issuable upon Conversion had such Corporate
Change not taken place, and in any such case, appropriate provisions shall be
made with respect to the rights and interests of the holders of the Series E
Preferred Stock to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of the number
of shares of Common Stock issuable upon conversion of the Series E Preferred
Stock) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
conversion thereof. The Corporation shall not effect any Corporate Change unless
(i) each holder of Series E Preferred Stock has received written notice of such
transaction at least thirty (30) days prior thereto, but in no event later than
ten (10) days prior to the record date for the determination of shareholders
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this Certificate of Designation. The above provisions shall apply
regardless of whether or not there would have been a sufficient number of shares
of Common Stock authorized and available for issuance upon conversion of the
shares of Series E Preferred Stock outstanding as of the date of such
transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
C. Adjustment Due to Distribution. If at any time after the Issuance
Date the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"), then the holders of Series E Preferred Stock shall be entitled,
upon any conversion of shares of Series E Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such
holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
D. Purchase Rights. If at any time after the Issuance Date, the
Corporation issues any securities which are convertible into or exchangeable for
Common Stock or rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of Common Stock, then the
holders of Series E Preferred Stock will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could
<PAGE>
have acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Series E Preferred Stock immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
E. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series E Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
E Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series E Preferred Stock.
XII. VOTING RIGHTS
A. Number of Votes. Except as otherwise required by law and the
provisions of this Article XII, the holders of Series E Preferred Stock shall be
entitled to notice of any shareholders' meeting and to vote together with the
holders of Common Stock as a single class of capital stock upon the election of
directors and upon any other matter submitted to the shareholders for a vote, on
the following basis:
(i) Holders of Common Stock shall have one vote per share; and
(ii) Holders of Series E Preferred Stock shall have that
number of votes per share as is equal to the number of shares of Common Stock
into which each such share of Series E Preferred Stock held by such holder is
convertible at the record date for the determination of the shareholders
entitled to vote on such matters or, if no such record date is established, at
the date such vote is taken or any written consent of shareholders is solicited.
XIII. PROTECTION PROVISIONS
So long as any shares of Series E Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by the Business Corporation Law) of the holders of (i) all
of the then outstanding shares of Series E Preferred Stock with respect to
subsection (a) below or (ii) at least 67% of the then outstanding shares of
Series E Preferred Stock with respect to subsections (b) through (h) below:
<PAGE>
(a) alter or change the rights, preferences or privileges of
the Series E Preferred Stock;
(b) alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the Series E
Preferred Stock;
(c) create any new class or series of capital stock having a
preference over the Series E Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article IX hereof, "Senior Securities");
(d) create any new class or series of capital stock ranking
pari passu with the Series E Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article IX hereof, "Pari Passu Securities");
(e) increase the authorized number of shares of Series E
Preferred Stock;
(f) issue any shares of Senior Securities or Pari Passu
Securities;
(g) issue any shares of Series E Preferred Stock other than
pursuant to the Stock Purchase Agreement; or
(h) redeem, or declare or pay any cash dividend or
distribution on, any Junior Securities.
Notwithstanding the foregoing, no change pursuant to this Article XIII shall be
effective to the extent that, by its terms, it applies to less than all of the
holders of shares of Series E Preferred Stock then outstanding.
XIV. MISCELLANEOUS
A. Cancellation of Series E Preferred Stock. If any shares of Series E
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series E Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Corporation, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Corporation shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the
<PAGE>
Corporation shall not be obligated to reissue such lost or stolen Preferred
Stock Certificate(s) if the holder contemporaneously requests the Corporation to
convert such Series E Preferred Stock.
C. Payment of Cash; Defaults. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designation (as a
Conversion Default Payment, such cash payment shall be made to the holder within
five (5) business days after delivery by such holder of a notice specifying that
the holder elects to receive such payment in cash and the method (e.g., by
check, wire transfer) in which such payment should be made. If such payment is
not delivered within such five (5) business day period, such holder shall
thereafter be entitled to interest on the unpaid amount at a per annum rate
equal to the lower of twenty-four percent (24%) and the highest interest rate
permitted by applicable law until such amount is paid in full to the holder.
D. Status as Stockholder. Upon submission of a Notice of Conversion by
a holder of Series E Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed
such holder's allocated portion of the Reserved Amount) shall be deemed
converted into shares of Common Stock and (ii) the holder's rights as a holder
of such converted shares of Series E Preferred Stock shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such holder because of a failure by the Corporation to comply with the terms
of this Certificate of Designation. Notwithstanding the foregoing, if a holder
has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect to
a Conversion of Series E Preferred Stock for any reason, then (unless the holder
otherwise elects to retain its status as a holder of Common Stock by so
notifying the Corporation within five (5) business days after the expiration of
such ten (10) business day period after expiration of the Delivery Period) the
holder shall regain the rights of a holder of Series E Preferred Stock with
respect to such unconverted shares of Series E Preferred Stock and the
Corporation shall, as soon as practicable, return such unconverted shares to the
holder. In all cases, the holder shall retain all of its rights and remedies
(including, without limitation, the right to receive Conversion Default Payments
pursuant to Article VI to the extent required thereby for such Conversion
Default and any subsequent Conversion Default) for the Corporation's failure to
convert Series E Preferred Stock.
E. Remedies Cumulative. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Certificate of Designation. The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of Series E Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the holders
of Series E Preferred Stock shall be entitled, in addition to all other
available remedies, to an injunction
<PAGE>
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation this __ day of August __, 1998.
NATIONAL MEDIA CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series E Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________
shares of Series E Preferred Stock (the "Conversion"), represented by stock
certificate Nos(s). ___________ (the "Preferred Stock Certificates") into shares
of common stock ("Common Stock") of National Media Corporation (the
"Corporation") according to the conditions of the Certificate of Designations,
Preferences and Rights of Series E Convertible Preferred Stock (the "Certificate
of Designation"), as of the date written below. If securities are to be issued
in the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
holder for any conversion, except for transfer taxes, if any. A copy of each
Preferred Stock Certificate is attached hereto (or evidence of loss, theft or
destruction thereof).
The Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee (which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC Transfer").
The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Series E Preferred Stock shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933, as amended (the "Act"), or
pursuant to an exemption from registration under the Act.
/ / In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Conversion by way of DTC Transfer, the undersigned
hereby requests that the Corporation
<PAGE>
issue and deliver to the undersigned physical certificates representing
such shares of Common Stock.
Date of Conversion:
------------------------------
Applicable Conversion Price:
---------------------
Amount of Conversion Default Payments
to be Converted, if any:
-------------------------
Number of Shares of
Common Stock to be Issued:
-----------------------
Signature:
---------------------------------------
Name:
--------------------------------------------
Address:
-----------------------------------------
-----------------------------------------
<PAGE>
EXHIBIT 4.4
Amendment No. 7 to Registration Rights Agreement
------------------------------------------------
<PAGE>
AMENDMENT NO. 7 TO RIGHTS AGREEMENT
AMENDMENT NO. 7 TO RIGHTS AGREEMENT ("Amendment No. 7") between
NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Company") and
ChaseMellon Shareholder Services, LLC, a New Jersey limited liability company,
as Rights Agent (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on January 3, 1994, the Company and the Rights Agent entered
into that certain Rights Agreement (as amended by Amendments Nos. 1 through 6 to
Rights Agreement, the "Rights Agreement"); and
WHEREAS, pursuant to Section 27 of the Rights Agreement, this Amendment
No. 7 may be entered into by the Company and the Rights Agent without approval
of any holders of Rights.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto hereby agree as follows:
1. The definition of "Acquiring Person" set forth in Section 1(a) of
the Rights Agreement is hereby amended by adding to the second sentence thereof,
after the words "(ix) the execution or consummation of the transactions
contemplated by that certain Stock Option Agreement (ValueVision), dated January
5, 1998, between ValueVision and the Company, or (x)" the following new
language:
"the execution and consummation of the transactions contemplated by that
certain Stock Purchase Agreement (the "ACO Stock Purchase Agreement")
dated August 11, 1998 between the Company and NM Acquisition Co., LLC
("ACO"), the grant or exercise of any warrant or option issued or
transferred in connection therewith or the issuance or conversion of any
Series D Preferred Stock or Series E Preferred Stock issued or
transferred in connection therewith, or (xi)."
2. Section 3(a) of the Rights Agreement is hereby amended by adding as a
new sentence (to be inserted after language added by Amendment No. 6 to the
Rights Agreement, dated January 5, 1998) the following:
"Notwithstanding the foregoing, no Distribution Date shall occur as a
result of the execution and consummation of the transactions
contemplated by the ACO Stock Purchase Agreement, the grant or exercise
of any warrant or option issued or
<PAGE>
transferred in connection therewith or the issuance or conversion of any
Series D Preferred Stock or Series E Preferred Stock issued or
transferred in connection therewith."
3. Capitalized terms used but not defined in this Amendment No. 7 shall
have the respective meanings ascribed thereto in the Rights Agreement.
4. Except as expressly amended by this Amendment No. 7, the Rights
Agreement shall remain in full force and effect as the same was in effect
immediately prior to the effectiveness of this Amendment No. 7.
5. This Amendment No. 7 shall be governed and construed on the same
basis as the Rights Agreement, as set forth therein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7
to the Rights Agreement to be executed by their respective officers thereunto
duly authorized as of August 11, 1998.
NATIONAL MEDIA CORPORATION
By:
----------------------------------------
Name: Brian J. Sisko
Title: Senior Vice President and
General Counsel
CHASEMELLON SHAREHOLDER SERVICES, LLC
By:
-----------------------------------------
Name: Robert Kavanagh
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.1
Stock Purchase Agreement
<PAGE>
NATIONAL MEDIA CORPORATION
Series E Preferred Stock
STOCK PURCHASE AGREEMENT
Dated as of
August 11, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS................................................. 1
Section 1.1 Definitions.......................................................................... 1
Section 1.2 Accounting Terms and Determinations.................................................. 9
Section 1.3 Computation of Time Periods.......................................................... 9
Section 1.4 Construction......................................................................... 9
Section 1.5 Exhibits and Schedules............................................................... 9
Section 1.6 No Presumption Against Any Party..................................................... 9
ARTICLE II
THE PURCHASES................................................ 10
Section 2.1 Initial Purchase..................................................................... 10
Section 2.2 Further Purchase..................................................................... 10
Section 2.3 Transaction Initiation Fee........................................................... 11
Section 2.4 Register of Securities............................................................... 11
Section 2.5 Restrictions on Transfer............................................................. 11
Section 2.6 Removal of Transfer Restrictions..................................................... 13
Section 2.7 Additional Representations and Warranties by ACO..................................... 13
Section 2.8 No Brokers or Finders................................................................ 14
Section 2.9 Information in Proxy Statement....................................................... 14
ARTICLE III
CONDITIONS.................................................. 15
Section 3.1 Conditions to Each Party's Obligation to Effect the Purchase......................... 15
Section 3.2 Further Conditions to ACO's Obligation to Purchase................................... 16
Section 3.3 Conditions to the Company's Obligations to Effect the Purchase....................... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY THE COMPANY................................ 19
Section 4.1 Organization of the Company.......................................................... 19
Section 4.2 The Company Capital Structure........................................................ 19
Section 4.3 Authority; No Conflict; Required Filings and Consents................................ 21
Section 4.4 SEC Filings; Financial Statements.................................................... 22
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.5 No Undisclosed Liabilities........................................................... 23
Section 4.6 Absence of Certain Changes or Events................................................. 23
Section 4.7 Taxes................................................................................ 23
Section 4.8 Properties........................................................................... 24
Section 4.9 Intellectual Property................................................................ 24
Section 4.10 Agreements, Contracts and Commitments................................................ 25
Section 4.11 Litigation and Regulatory Matters.................................................... 25
Section 4.12 Environmental Matters................................................................ 25
Section 4.13 Employee Benefit Plans............................................................... 26
Section 4.14 Compliance With Laws................................................................. 29
Section 4.15 Registration Statement; Proxy Statement.............................................. 29
Section 4.16 Labor Matters........................................................................ 30
Section 4.17 Insurance............................................................................ 30
Section 4.18 Broker Fees, etc..................................................................... 30
Section 4.19 No Existing Discussions.............................................................. 30
Section 4.20 Section 203 of the DGCL and Sections 2538, 2555 and 2564 of the Pennsylvania
Business Corporation Law Not Applicable.............................................. 30
Section 4.21 The Company Rights Plan.............................................................. 31
Section 4.22 Board Recommendation................................................................. 31
Section 4.23 Required Company Vote................................................................ 31
Section 4.24 Full Disclosure...................................................................... 31
ARTICLE V
COVENANTS.................................................. 31
Section 5.1 Information.......................................................................... 32
Section 5.2 Fiscal Plans......................................................................... 34
Section 5.3 Payment of Obligations............................................................... 34
Section 5.4 Maintenance of Property; Insurance................................................... 34
Section 5.5 Books and Records; Inspection........................................................ 34
Section 5.6 Conduct of Business; Maintenance of Subsidiaries; Compliance with Law................ 35
Section 5.7 Debt................................................................................. 35
Section 5.8 Consolidations, Mergers and Sales of Assets.......................................... 35
Section 5.9 Restricted Payments.................................................................. 36
Section 5.10 Limitations on Investments........................................................... 36
Section 5.11 Transactions with Affiliates......................................................... 36
Section 5.12 Replacement of Certificates.......................................................... 36
Section 5.13 Compensation of Board................................................................ 36
Section 5.14 Organizational Documents............................................................. 37
Section 5.15 Securities Law Filings............................................................... 37
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.16 Compliance With Certificate and Bylaws............................................... 37
Section 5.17 Use of Proceeds...................................................................... 37
Section 5.18 Employees............................................................................ 37
Section 5.19 Transition........................................................................... 38
Section 5.20 Exclusivity.......................................................................... 38
Section 5.21 Registration......................................................................... 38
Section 5.22 Reasonable Best Efforts.............................................................. 39
Section 5.23 Public Announcements................................................................. 39
ARTICLE VI
DEFAULTS................................................... 39
Section 6.1 Defaults............................................................................. 39
ARTICLE VII
TERMINATION................................................. 40
Section 7.1 Termination.......................................................................... 40
Section 7.2 Effect of Termination................................................................ 41
ARTICLE VIII
MISCELLANEOUS................................................ 42
Section 8.1 Notices.............................................................................. 42
Section 8.2 No Waivers........................................................................... 42
Section 8.3 Cumulative Remedies.................................................................. 42
Section 8.4 Expenses; Documentary Taxes; Indemnification......................................... 42
Section 8.5 Amendments and Waivers............................................................... 43
Section 8.6 Successors and Assigns............................................................... 43
Section 8.7 Survival of Representations and Warranties........................................... 43
Section 8.8 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial...................... 43
Section 8.9 Counterparts; Facsimile Signatures................................................... 44
Section 8.10 Entire Agreement..................................................................... 44
Section 8.11 Confidentiality...................................................................... 45
Schedule 1 Company Disclosure Schedule................................................................... 47
Exhibit A Amendment No. 7 to Rights Agreement........................................................... 48
Exhibit B Certificate of Designation of Series E Stock.................................................. 49
Exhibit C Compliance Certificate........................................................................ 50
Exhibit D Stockholders Voting Agreement................................................................. 51
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit E Consulting Agreement.......................................................................... 52
Exhibit F Costalas Waiver Agreement..................................................................... 53
Exhibit G Hammer Waiver Agreement....................................................................... 54
Exhibit H Registration Rights Agreement................................................................. 55
Exhibit I Series D Stock Purchase Agreement............................................................. 56
Exhibit J VVI Agreement................................................................................. 57
Exhibit K Verratti Waiver Agreement..................................................................... 58
Exhibit L Form of Opinion of Company Counsel............................................................ 59
Exhibit M Series B Consent Agreement.................................................................... 60
Exhibit N First Union Bank Consent Agreement............................................................ 61
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of August 11, 1998 is between
NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Company") and NM
ACQUISITION CO., LLC, a Delaware limited liability company ("ACO").
In consideration of the covenants contained herein, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section a Definitions. As used herein, the following capitalized terms
have the following meanings (the following definitions being applicable in both
singular and plural forms):
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"ACO Board Nominees" means Stephen Lehman, Eric Weiss, Andrew Schuon,
and any other person ACO nominates from time to time as a director by written
notice to the Company who is reasonably acceptable to the Company's outside
directors.
"Acquisition Proposal" means any offer or proposal for, or indication
of interest in, any acquisition of, any interest in the Company, whether by way
of a merger, consolidation or other transaction involving any equity interest
in, or substantial portion of the assets of, the Company or the acquisition of
any capital stock of the Company other than (a) pursuant to any Investment
Document; or (b) through the exercise or conversion of any shares of preferred
stock, options, warrants or other equity or debt securities of the Company which
are outstanding at the date of this Agreement or pursuant to any existing option
plan.
"Affiliate" means as to any Person (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person, (ii) any spouse, immediate family member or other
relative who has the same principal residence of any Person described in (i)
above, (iii) any trust in which any such Persons described in clauses (i) or
(ii) above has a beneficial interest in excess of 10% of the total beneficial
interests in either the principal or income or both of such trust, and (iv) any
corporation or other organization of which any such Persons described in clause
(i), (ii) or (iii) above collectively own more than 50% of the equity of such
entity. For purposes of this definition, (x) the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise and (y) beneficial ownership of
10% or more of the voting common equity (on a fully diluted basis) or warrants
or
<PAGE>
other rights to purchase such equity (whether or not currently exercisable)
of a Person shall be deemed to be control of such Person.
"Agreement" means this Stock Purchase Agreement.
"Amendment No. 7 to Rights Agreement" means an agreement between the
Company and Chase Mellon Shareholder Services, Inc. in the form of Exhibit A.
"Bankruptcy and Equity Exception" means (a) bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors rights and (b) general
equitable principles.
"Base Financials" means the consolidated balance sheet of the Company
and its Subsidiaries as of March 31, 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for the fiscal year
then ended, reported on by Ernst & Young LLP on June 29, 1998.
"Business Day" means any day except a Saturday, Sunday, or other day on
which commercial banks in New York City are authorized by law to close.
"Certificate of Designations for Series E Stock" means the Company's
Certificate of Designation in the form of Exhibit B.
"Closing Date" has the meaning set forth in Section 2.1.
"Commission" means the Securities and Exchange Commission or any other
Federal agency administering the Securities Act at the time.
"Common Stock" means the Company's currently authorized class of common
stock, $.01 par value, and stock of any other class or other consideration into
which such currently authorized common stock may hereafter have been changed.
"Company" has the meaning set forth in the introduction to this
Agreement.
"Company Rights Plan" means the Rights Agreement dated January 3, 1994
(as amended by Amendments Nos. 1 through 6 to Rights Agreement and Amendment No.
7 to Rights Agreement) between the Company and ChaseMellon Shareholder Services,
Inc.
"Company Disclosure Schedule" means Schedule 1.
"Compliance Certificate" means a certificate in the form of Exhibit C.
<PAGE>
"Consolidated Capital Expenditures" means, for any period, the capital
expenditures of the Company and its Subsidiaries for such period, as the same
are (or would in accordance with GAAP applied on a basis consistent with the
Company's historical financial statements be) set forth in a consolidated
statement of cash flows of the Company and its Subsidiaries for such period.
"Consulting Agreement" means an agreement between the Company and TMC,
in the form of Exhibit E.
"Conversion Stock" means the unissued Common Stock: (a) into which the
Series E Stock may be converted; (b) into which the Company's Series D Preferred
Stock held by ACO may be converted; (c) which is subject to the TMC Option; or
(d) which is subject to the TMC Warrant.
"Costalas Waiver Agreement" means an agreement between the Company and
Constantinos Costalas, substantially in the form of Exhibit F.
"CVI" means Capital Ventures International, a Cayman Islands partnership.
"Debt" of any Person means at any date, without duplication and without
regard to whether matured or unmatured, absolute or contingent: (i) all
obligations of such Person for borrowed money, including unpaid, accrued
interest thereon; (ii) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business; (iv) all
obligations of such Person as lessee under capital leases; (v) all obligations
of such Person to reimburse or prepay any bank or other Person in respect of
amounts paid under a letter of credit, banker's acceptance, or similar
instrument, whether drawn or undrawn; (vi) all obligations of such Person to
purchase securities other than shares of the Company's Series D Preferred Stock
which arise out of or in connection with the sale of the same or substantially
similar securities; (vii) all obligations of such Person in connection with any
agreement to purchase, redeem (other than shares of the Company's Series D
Preferred Stock), exchange, convert or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock, now or hereafter outstanding, except to the extent that such obligations
remain performable solely at the option of such Person; (viii) all obligations
to repurchase assets previously sold (including any obligation to repurchase any
accounts or chattel paper under any factoring, receivables purchase, or similar
arrangement); (ix) obligations of such Person under hedging facilities and
foreign exchange or forward sale contracts or similar arrangements; and (x) all
Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
<PAGE>
"DGCL" means the Delaware General Corporation Law.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Equity Security" means any stock or similar security of the Company or
any security (whether stock or Debt) convertible or exchangeable, with or
without consideration, into any stock or similar security, or any security
(whether stock or Debt) with an attached warrant, stock appreciation right or
right to subscribe to or purchase any stock or similar security, or any such
warrant or right.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Group" means all members of a controlled group of corporations
and all trades or businesses (whether incorporated) under common control which,
together with the Company, are treated as a single employer under Section 414 of
the IRC.
"ERISA Material Plan" means any ERISA Plan or ERISA Plans having
aggregate ERISA Unfunded Liabilities in excess of $100,000.
"ERISA Plan" means, at any time, an employee pension benefit plan of
the Company or any member of the ERISA Group which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the IRC.
"ERISA Unfunded Liabilities" means, with respect to any ERISA Plan at
any time, the amount (if any) by which: (i) the present value of all vested
nonforfeitable benefits under such ERISA Plan exceeds, (ii) the fair market
value of all ERISA Plan assets allocable to such benefits (exclusive of accrued
but unpaid contributions), all determined as of the then most recent valuation
date for such ERISA Plan, but only to the extent that such excess represents a
potential liability of a member of the ERISA Group to the PBGC or the ERISA Plan
under Title IV of ERISA.
"Event of Default" has the meaning set forth in Section 6.1.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"First Union National Bank Consent Agreement" means the Letter
Agreement, dated July 15, 1995 by and between ACO and First Union National Bank,
attached as Exhibit N (as such may be amended from time to time).
"GAAP" means generally accepted accounting principles in the United
States consistently applied.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing, securing, or
otherwise providing assurances of the payment of any Debt of any other Person
and includes: (a) any Lien or any asset of such Person securing any such Debt
(and without regard to whether such Person has assumed personal liability with
respect thereto), and (b) any obligation, direct or indirect, contingent or
otherwise, of such Person: (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt (whether arising by virtue of
partnership arrangements, by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial condition, or
otherwise); or (ii) entered into for the purpose of assuring in any other manner
the holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hammer Waiver Agreement" means an agreement between the Company and
Frederick Hammer substantially in the form of Exhibit G.
"Investment" means any investment by any Person in any other Person,
whether by means of share purchase, capital contribution, loan, time deposit, or
otherwise.
"Investment Documents" means this Agreement, the Consulting Agreement,
the Amendment No. 7 to Rights Agreement, the Costalas Waiver Agreement, the
Hammer Waiver Agreement, the Verratti Waiver Agreement, the Series B Consent
Agreement, the First Union National Bank Consent Agreement, the Registration
Rights Agreement, the Series D Stock Purchase Agreement, the Certificate of
Designation of Series E Stock and the ValueVision Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
<PAGE>
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, or encumbrance of any kind in respect of such asset
(or any agreement to give any of the foregoing, whether or not contingent on the
occurrence of any future event). For the purposes of this Agreement, the Company
or any Subsidiary of the Company shall be deemed to own an asset subject to a
Lien when it has acquired or holds such asset subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease, or other
title retention agreement relating to such asset.
"Material Adverse Change" means a material adverse change in the
financial condition, business or properties of the Company and its Subsidiaries,
taken as a whole, not including any such change which is the result of any
action taken by or at the instruction of Steve Lehman, as acting CEO of the
Company, or TMC.
"Notice of Assignment" has the meaning set forth in Section 7.5.
"Permitted Liens" shall mean (a) Liens for taxes and assessments or
governmental charge or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings; (c) Liens incidental to the conduct of the business of
the Company or any Subsidiary (including leases of property, real and personal)
which were not incurred in connection with the borrowing of money or the
obtaining of advance or credits and which do not in the aggregate materially
detract from the value of its property or materially impair the use thereof in
the operation of its business; and (b) any Liens related to any Debt owed by the
Company (or any of its Subsidiaries) to First Union National Bank or Barclays
Bank.
"Person" means an individual, a limited liability company, a
corporation, a partnership, an unincorporated association, a trust, or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Proxy Statement" means the information furnished by the Company to its
stock holders, pursuant to Rules 14a-3 and 4 under the Exchange Act, which
pertains to the transactions contemplated by the Investment Documents.
"Qualification" means, with respect to any report made by the Company's
independent auditors covering financial statements, a qualification to such
report (such as an explanatory paragraph or emphasis paragraph therein setting
forth adverse or qualifying language): (i) resulting from a limitation on the
scope of examination of such financial statements or the underlying data, or
(ii) which could be eliminated by changes in financial statements or notes
thereto covered by such report (such as by the creation of or increase in a
reserve or a decrease in the carrying value of assets) and which if so
eliminated by the making of any such change and after
<PAGE>
giving effect thereto would occasion a Default; provided that neither of the
following shall constitute a Qualification: (a) a consistency exception relating
to a change in accounting principles with which the independent public
accountants for the Person whose financial statements are being certified have
concurred, or (b) a qualification relating to the outcome or disposition of
threatened litigation, pending litigation being contested in good faith, pending
or threatened claims or other contingencies, the impact of which litigation,
claims or contingencies cannot be determined with sufficient certainty to permit
quantification in such financial statements.
"Registration Rights Agreement" means an agreement between the Company
and ACO in the form of Exhibit H.
"Restricted Payment" means: (a) any dividend or other distribution on
or payment in respect of any shares of the Company's capital stock (except
dividends payable in respect of capital stock solely in shares of its capital
stock and payment of any premium in respect of the Company's Series D Preferred
Stock), or (b) any payment or other distribution on account of the purchase,
redemption (other than with respect to the Company's Series D Preferred Stock),
retirement, acquisition, or obligations in respect of: (i) any shares of the
Company's capital stock or (ii) any option, warrant, or other right to acquire
shares of the Company's capital stock. Notwithstanding the foregoing, any
distribution or payment pursuant to the Company's 401(k) Plan or any issuance or
exercise of options pursuant to an existing option plan shall not be deemed to
be a Restricted Payment.
"Restricted Stock" means (a) Conversion Stock and (b) any securities
issued or issuable with respect to such Conversion Stock by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization; provided that
shares of Common Stock shall only be treated as Restricted Stock if and so long
as they have not been (i) sold to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, or (ii) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect to such Common Stock are removed upon the
consummation of such sale and the seller and purchaser of such Common Stock
receive an opinion of counsel for the Company, which shall be in form and
content reasonably satisfactory to the seller and buyer and their respective
counsel, to the effect that such Common Stock in the hands of the purchaser is
freely transferable without restriction or registration under the Securities Act
in any public or private transaction.
"RGC" means RGC International Investors LDC, a Cayman Islands limited
duration company.
"Securities Act" means the Securities Act of 1933, or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
<PAGE>
Reference to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such successor Federal
statute.
"Series D Stock Purchase Agreement" means an agreement between the
Company, ACO, CVI and RGC in the form of Exhibit I.
"Series E Stock" means the Series E Convertible Preferred Stock of the
Company, having the rights, preferences, and privileges set forth in the
Certificate of Designation for Series E Stock.
"Shareholders' Voting Agreement" means an agreement among ACO and each
of the Company's directors substantially in the form of Exhibit D.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tax" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, gains,
franchise, withholding, payroll, recapture, employment, excise, unemployment
insurance, social security, business license, occupation, business organization,
stamp, environmental and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts. For purposes of this
Agreement, "Tax" also includes any obligations under any agreements or
arrangements with any other Person with respect to Taxes of such other Person
(including pursuant to Treas. Reg. ss. 1.1502.5 or comparable provisions of
state, local or foreign tax law) and including any liability for Taxes of any
predecessor entity.
"TMC" means Temporary Media Co., LLC, a Delaware limited liability
company.
"TMC Option" means an option in the form of Exhibit A to the Consulting
Agreement.
"TMC Warrant" means a warrant in the form of Exhibit B to the
Consulting Agreement.
"Transaction Initiation Fee" means cash in the amount of (i) ACO's
reasonable expense arising directly out of the negotiating of this Agreement,
and its investigations regarding the Company and its legal and accounting advice
with respect to the transactions contemplated hereby, up to a maximum of
$500,000 in aggregate; (ii) plus 4.9% of the difference, if any, between the
aggregate equity value attributed to the Company for the purposes of the
Acquisition Proposal and the aggregate equity value attributed to the Company
for the purposes of this Agreement up to a maximum amount of $2,500,000 for both
(i) and (ii). For the purposes of this Agreement, such
<PAGE>
difference between the "aggregate equity values" shall be calculated by: (a)
determining the final price per share of Common Stock contemplated by the
Acquisition Proposal; (b) subtracting the mean price per share of Common Stock
on July 10, 1998 and (c) multiplying that difference by the total number of
shares of Common Stock issued or issuable on that day on a fully diluted basis,
but excluding therefrom all shares of Common Stock issuable pursuant to the TMC
Option or the TMC Warrant the exercise price of which is less than the purchase
price of a share of Common Stock on that day.
"Verratti Waiver Agreement" means an agreement between the Company and
Robert Verratti substantially in the form of Exhibit K.
"VVI" means ValueVision International, Inc., a Minnesota corporation.
"VVI Agreement" means an agreement between the Company, VVI and ACO in
the form of Exhibit J.
"Wholly-Owned Subsidiary" means as to any Person or Subsidiary, all of
the shares of capital stock or other equity interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
such Person.
Section b Accounting Terms and Determinations. Unless otherwise
specified herein (a) all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP
and (b) references to fiscal periods are to those of the Company. When used
herein, the term "financial statements" shall include the notes and schedules
thereto.
Section c Computation of Time Periods. In this Agreement, with respect
to the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding." Periods of days referred to in this Agreement
shall be counted in calendar days unless otherwise stated.
Section d Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, references to any gender include any other gender,
the part includes the whole, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, section, subsection,
clause, exhibit and schedule references are to this Agreement, unless otherwise
specified. Any reference to this Agreement or the other Investment Documents
includes any and all permitted alterations, amendments, changes, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
<PAGE>
Section e Exhibits and Schedules. Any reference to an exhibit or
schedule shall be deemed to be a reference to an exhibit or schedule hereto.
Section f No Presumption Against Any Party. Neither this Agreement nor
any other Investment Document nor any uncertainty or ambiguity herein or therein
shall be construed or resolved using any presumption against any party hereto or
thereto, whether under any rule of construction or otherwise. On the contrary,
this Agreement and the other Investment Documents have been reviewed by each of
the parties and their counsel and, in the case of any ambiguity or uncertainty,
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
ARTICLE II
THE PURCHASES
Section 1. Initial Purchase. Subject to the terms and conditions of
this Agreement:
(a) The Company hereby agrees to sell to ACO and ACO hereby agrees to
purchase from the Company, 20,000 shares of Series E Stock, at a purchase price
equal to $1,000 per share (the "Initial Purchase"), provided that ACO shall be
entitled to set off against the purchase price any amounts payable by the
Company pursuant to Section 8.4, as reasonably substantiated by ACO to the
Company on or before the Closing Date; and
(b) Contemporaneously with the execution of the Consulting Agreement,
the Company shall issue the TMC Option and the TMC Warrant to TMC, without any
additional consideration to be paid therefor by TMC.
The closing of the Initial Purchase shall be held at the office of Buchalter,
Nemer, Fields & Younger, 601 South Figueroa Street, Suite 2400, Los Angeles,
California, as soon as practicable after all conditions to Closing have been
satisfied or waived (the "Closing Date"). On the Closing Date, the Company will
deliver to ACO one or more Series E Stock certificates, registered in ACO's name
in any denominations as ACO may specify by timely notice to the Company (or, in
the absence of such notice, one such share certificate registered in ACO's
name), duly executed and dated as of the Closing Date, against payment of the
purchase price therefor by wire transfer of immediately available funds to the
account of the Company at such bank or other financial institution as the
Company shall notify ACO. Contemporaneously with the execution of the Consulting
Agreement, the Company shall deliver to TMC the TMC Warrant and the TMC Option,
registered in its name, as duly executed and dated the Closing Date.
<PAGE>
Section 2 Further Purchase. Subject to the terms and conditions of this
Agreement, the Company shall have the right to sell to ACO and ACO hereby agrees
to purchase from the Company at the request of the Company, up to 2,000 shares
of Series E Stock, at a purchase price equal to $1,000 per share (the "Further
Purchase"), provided that: (a) such request is made prior to the date on which
the Proxy Statement is first mailed to the Company's Stockholders; (b) the
Initial Purchase has been consummated; and (c) ACO shall be entitled to set off
against the purchase price any amounts payable by the Company pursuant to
Section 8.4, as reasonably substantiated by ACO to the Company on or before the
Closing Date.
The closing of the Further Purchase shall be held at the office of Buchalter,
Nemer, Fields & Younger, 601 South Figueroa Street, Suite 2400, Los Angeles,
California, on the date requested by the Company, provided that such date is 60
days or more after such request is made (the "Further Closing Date"). On the
Further Closing Date, the Company will deliver to ACO one or more Series E Stock
certificates, registered in ACO's name in any denominations as ACO may specify
by timely notice to the Company (or, in the absence of such notice, one such
share certificate registered in ACO's name), duly executed and dated as of the
Further Closing Date, against payment of the purchase price therefor by wire
transfer of immediately available funds to the account of the Company at such
bank or other financial institution as the Company shall notify ACO.
Section 3 Transaction Initiation Fee. If the Company enters into any
understanding or agreement with any Person pursuant to an Acquisition Proposal,
during the term hereof or within four months after the termination of this
Agreement pursuant to Section 7.1(d) or (e), the Company shall promptly pay the
Transaction Initiation Fee to ACO. The Company acknowledges and agrees that (a)
ACO has expended and will expend a considerable amount of time and effort in
connection with the transactions contemplated by this Agreement, (b) ACO has
incurred and will incur significant expenses in connection with the transactions
contemplated by this Agreement, (c) the relationship of the parties is not
marked by any self-dealing, (d) the Transaction Initiation Fee provides ACO with
a reasonable incentive to make the offer contained in the transactions
contemplated by this Agreement, and (e) ACO's costs described above are and will
be difficult to predict and ascertain and that the Transaction Initiation Fee is
a good faith attempt by ACO to estimate the amount of such costs.
Section 4 Register of Securities. The Company or its duly appointed
agent shall maintain a separate register for the shares of Series E Stock and
Common Stock, in which it shall register any issuance or subsequent sale of any
such shares accomplished in accordance with the terms of the Investment
Documents. All transfers of the Series E Stock shall be recorded on the register
maintained by the Company or its agent, and the Company shall be entitled to
regard the registered holder of the Series E Stock as the actual holder of the
Securities so registered until the Company or its agent is required to record a
transfer of such Series E Stock on its register. Subject to Section 2.4(c), the
Company or its agent shall be required to record any such transfer when it
<PAGE>
receives the Security to be transferred duly and properly endorsed by the
registered holder thereof or by its attorney duly authorized in writing.
Section 5 Restrictions on Transfer.
(i) ACO understands and agrees that the Series E Stock it will be
acquiring have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and that accordingly they will not be fully transferable
except as permitted under various exemptions contained in the Securities Act, or
upon satisfaction of the registration and prospectus delivery requirements of
the Securities Act. ACO acknowledges that it must bear the economic risk of its
investment in the Series E Stock for an indefinite period of time (subject,
however, to the Company's obligation to effect the registration of the
Conversion Stock under the Securities Act in accordance with the Registration
Rights Agreement) since they have not been registered under the Securities Act
and therefore cannot be sold unless they are subsequently registered or an
exemption from registration is available.
(ii) ACO hereby represents and warrants to the Company that it is
acquiring the Series E Stock it has agreed to purchase for investment purposes
only, for its own account, and not as nominee or agent for any other Person, and
not with the view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act.
(iii) ACO hereby agrees with the Company as follows:
(A) The certificates evidencing the Series E Stock it has
agreed to purchase, and each certificate issued in transfer thereof, will bear
the following legend:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933 and have been
acquired for investment purposes only and not with a view to
the distribution thereof, and such securities may not be
sold, pledged or transferred unless there is an effective
registration statement or Regulation A notification under
such Act covering such securities or the Company receives an
opinion of counsel (which may be counsel for the Company),
reasonably satisfactory in form and content to the Company,
stating that such sale or transfer is exempt from the
registration and prospectus delivery requirements of such
Act."
(B) The certificates representing such Securities, and each
certificate issued in transfer thereof, will also bear any legend required under
any applicable state securities law.
<PAGE>
(C) Absent an effective Conversion Stock registration
statement under the Securities Act, covering the disposition of the Conversion
Stock which ACO acquires, ACO will not sell, transfer, assign, pledge,
hypothecate or otherwise dispose of any or all of the Conversion Stock without
first providing the Company with an opinion of counsel (which may be counsel for
the Company), reasonably satisfactory in form and content to the Company, to the
effect that such sale, transfer, assignment, pledge, hypothecation or other
disposition will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities laws, except that no such
opinion shall be required with respect to a sale or transfer effected in
accordance with Rule 144(k) under the Securities Act.
(D) ACO consents to the Company's making a notation on its
records or giving instructions to any transfer agent of the Common Stock or
Series E Stock in order to implement the restrictions on transfer of the Series
E Stock mentioned in this subsection (c).
Section 6 Removal of Transfer Restrictions. Any legend endorsed on a
certificate evidencing a Security pursuant to Section 2.4(c)(i) hereof and the
stop transfer instructions and record notations with respect to such Security
shall be removed and the Company shall issue a certificate without such legend
to the holder of such Security (a) if such Security is registered under the
Securities Act, or (b) if such Security may be sold under Rule 144(k) of the
Commission under the Securities Act or (c) if such holder provides the Company
with an opinion of counsel (which may be counsel for the Company) reasonably
acceptable to the Company to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act.
Section 7 Additional Representations and Warranties by ACO. ACO
represents and warrants to the Company as follows:
(i) ACO is a limited liability company duly organized, validly existing
and in good standing under the laws of Delaware, and is qualified to do business
as a foreign corporation in each jurisdiction in which the failure to be so
qualified would be a Material Adverse Change (if ACO were the Company) with
respect to ACO's business, condition or results of operations. ACO has all
required legal power and authority to carry on its business as presently
conducted, to enter into and perform this Agreement and the agreements
contemplated hereby to which it is a party and to carry out the transactions
contemplated hereby and thereby.
(ii) This Agreement constitutes the legal, valid and binding obligation
of ACO and is enforceable against ACO in accordance with its terms, except as
such enforcement is limited by bankruptcy, insolvency, and other similar laws
affecting the enforcement of creditors' rights generally.
(iii) ACO is an Accredited Investor and is experienced in evaluating
companies such as the Company, is able to fend for itself in the transactions
contemplated by this Agreement and has
<PAGE>
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its investment. It has had access, during
the course of the transaction and prior to its purchase of Series E Stock, to
such information as is sufficient to make an informed decision with respect to
its purchase of the Series E Stock and it has had, during the course of the
transaction and prior to its purchase of Series E Stock, the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the offering and to obtain additional information necessary to
verify the accuracy of any information furnished to it or to which it had
access.
(iv) ACO knows of no public solicitation or advertisement of an offer
in connection with the Series E Stock; ACO's jurisdiction of formation or
incorporation and the principal place of business as set forth in the signature
page hereof are accurate.
(v) Stephen Lehman, Daniel Yukelson and a Nevada corporation controlled
by Eric Weiss are the only members of TMC. TMC is the only Manager of ACO. The
provisions of ACO's Operating Agreement regarding the management of ACO shall be
substantially as disclosed in the draft operating agreement delivered to the
Company on August 10, 1998.
(vi) Stephen Lehman, Jacor Communications and Gruber McBain are and
through the Closing will be the only members of ACO holding a membership
interest of 10% or greater therein.
(vii) ACO has or has arranged for sufficient funds to consummate the
transactions contemplated by the Investment Documents.
(viii) ACO will hold and will not transfer, encumber or otherwise
dispose of any shares of the Company's Series D Preferred Stock (or Common Stock
received in connection with the conversion thereof) until after the Closing
Date.
Section 8 No Brokers or Finders. ACO represents and warrants to the
Company that, as a result of ACO's actions, no person other than BT Alex. Brown
Incorporated has, or as a result of the transaction as contemplated herein will
have, any right or valid claim against the Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity.
Section 9 Information in Proxy Statement. The information to be
supplied by ACO or about ACO by ACO's agents for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to
stockholders of the Company, at the time of the Company stockholders' meeting to
approve the transactions contemplated by this Agreement (the "Stockholders'
Meeting") and as of the Closing Date, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, omit to state any material fact
necessary in order to make the statements made in such proxy
<PAGE>
statement not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders' Meeting which has become false or
misleading. If at any time prior to the Closing Date any event relating to ACO
or any of its Affiliates, officers or directors should be discovered by ACO
which should be set forth in a supplement to the Proxy Statement, then ACO shall
promptly inform the Company. Such information shall include all necessary
information regarding the ACO Board Nominees.
ARTICLE III
CONDITIONS
Section 1 Conditions to Each Party's Obligation to Effect the Purchase.
The respective obligations of each party to this Agreement to effect the Initial
Purchase and (if applicable) the Further Purchase (collectively, the
"Purchases") shall be subject to the satisfaction or waiver in writing by each
of the Company and ACO prior to the Closing Date of the following conditions:
(i) Receipt by each party hereto of counterparts hereof signed by
each of the other parties hereto;
(ii) The transactions contemplated by this Agreement (and other matters
contained in the Proxy Statement) shall have been approved in the manner
required under the rules of the New York Stock Exchange and the DGCL, as the
case may be, by the holders of the issued and outstanding shares of capital
stock of the Company.
(iii) The waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 as amended (the "HSR Act") shall have expired
or been terminated, provided that ACO and the Company shall use best efforts to
make any necessary filings under the HSR Act within 45 days after the date of
this Agreement.
(iv) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
court, administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") the failure to which to file, obtain or
occur is reasonably likely to cause a Material Adverse Change, shall have been
filed or obtained or have occurred.
(v) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction or statute, rule, regulation which is
<PAGE>
in effect and which has the effect of making the transactions contemplated by
this Agreement illegal or otherwise prohibiting consummation of the transactions
contemplated by this Agreement.
(vi) The Company shall have received, on or prior to the date of the
Proxy Statement, an opinion, from an investment banking firm chosen by the
Company, and reasonably acceptable to ACO, to the effect that the transactions
contemplated by this Agreement are fair to the holders of Common Stock from a
financial point of view (the "Fairness Opinion") and such opinion shall be
confirmed as of the Closing Date.
Section 2 Further Conditions to ACO's Obligation to Purchase. The
obligation of ACO to purchase and pay for the Series E Stock in the Purchases is
subject to the following conditions having been satisfied on or before the
Closing Date or Further Closing Date (as applicable):
(i) Receipt by ACO of an opinion of Klehr, Harrison, Harvey, Branzburg
& Ellers LLP, counsel to the Company, dated as of the Closing Date or the
Further Closing Date (as applicable), and substantially to the effect of Exhibit
L;
(ii) Receipt by ACO of a fully completed and duly executed Compliance
Certificate;
(iii) On the Closing Date or the Further Closing Date (as applicable),
the Company shall have duly issued and delivered to ACO a certificate evidencing
the Series E Stock purchased by ACO as provided by Section 2.1;
(iv) The Certificate of Designation for Series E Stock shall have been
filed with the Delaware Secretary of State and a copy of the Certificate
certified by such Secretary of State shall have been delivered to ACO;
(v) The Company shall have obtained all material registrations,
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution, delivery and performance of this Agreement and
the performance of the Certificate, including without limitation the offer,
sale, issue and delivery of the Securities;
(vi) Receipt by ACO from the Company of a payment in such amount as ACO
may reasonably request on account of expenses incurred by ACO and its attorneys
in connection with the negotiation and preparation of this Agreement and related
matters and for which ACO is entitled to reimbursement pursuant to Section 7.3;
(vii) Receipt by ACO on the Closing Date or the Further Closing Date
(as applicable) of all documents it may reasonably request relating to the
existence, status, and capacity of the Company and the corporate authority for,
and the validity, force, and effect of the Investment
<PAGE>
Documents and any other matters relevant hereto or thereto, all in form and
substance satisfactory to ACO;
(viii) Receipt by ACO of evidence reasonably satisfactory to ACO that
the purchase price for the Series E Stock will be applied pursuant to Section
5.17;
(ix) The fact that, immediately before and after giving effect to the
consummation of such Purchase, no material Default shall have occurred and be
continuing;
(x) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date or the Further Closing Date (as applicable) unless expressly made
as of another date;
(xi) The Company shall have performed in all material respects all
material obligations required to be performed by it under this Agreement on or
prior to the Closing Date or the Further Closing Date (as applicable);
(xii) Each of the following shall have been executed by all of the
parties named therein (other than ACO or TMC (as appropriate)) and shall not
have been terminated or purported to have been terminated by any of the parties
named therein (other than ACO or TMC (as appropriate)):
(A) the Amendment No. 7 to Rights Agreement;
(B) the Stockholders Voting Agreement;
(C) the Consulting Agreement;
(D) the Costalas Waiver Agreement;
(E) the Hammer Waiver Agreement;
(F) the Series D Stock Purchase Agreement;
(G) the VVI Agreement;
(H) the Verratti Waiver Agreement;
(I) the Registration Rights Agreement;
(J) the Series B Consent Agreement; and
<PAGE>
(K) the First Union National Bank Consent Agreement.
(xiii) The Company's Common Stock shall not have been delisted by the
New York Stock Exchange, Inc.; and
(xiv) The ACO Board Nominees shall constitute a majority of the
Company's directors and Stephen Lehman shall be the Company's acting Chief
Executive Officer and Jack Kirby shall not have been removed by the Company as a
Company director without cause.
Section 3 Conditions to the Company's Obligations to Effect the
Purchase. The obligation of the Company to sell and issue the Series E Stock in
the Purchase is subject to the following conditions having been satisfied on or
before the Closing Date or the Further Closing Date (as applicable):
(i) The Company shall have received the Purchase Price for the Series E
Stock as provided by Sections 2.1 and/or 2.2, as the case may be;
(ii) The representations and warranties of ACO contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date or the Further Closing Date (as applicable), unless expressly made
as of another date;
(iii) ACO shall have performed in all material respect all material
obligations required to be performed by it under this Agreement at or prior to
the Closing Date or the Further Closing Date (as applicable); and
(iv) Each of the following shall have been executed by all of the
parties named therein (other than the Company) and shall not have been
terminated or purported to have been terminated by any of the parties named
therein (other than the Company):
(A) the Amendment No. 7 to Rights Agreement;
(B) the Stockholders Voting Agreement;
(C) the Consulting Agreement;
(D) the Costalas Waiver Agreement;
(E) the Hammer Waiver Agreement;
(F) the Series D Stock Purchase Agreement;
<PAGE>
(G) the VVI Agreement;
(H) the Verratti Waiver Agreement;
(I) the Registration Rights Agreement;
(J) the Series B Consent Agreement; and
(K) the First Union Bank Consent Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants to ACO that the statements
contained in this Article IV are true and correct, except as set forth on the
disclosure schedule delivered by the Company to ACO on or before the date of
this Agreement (the "Company Disclosure Schedule") or as disclosed in the
Company SEC Reports (as defined in Section 4.4). The Company Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV and the disclosure in any paragraph
shall qualify other paragraphs in this Article IV only to the extent that it is
reasonably apparent from a reading of such document that it also qualifies or
applies to such other paragraphs.
Section 1 Organization of the Company. Each of the Company and the
Company's Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would cause a Material Adverse Change. Except as
set forth on the Company Disclosure Schedule or in the Company SEC Reports (as
defined in Section 4.4) filed prior to the date hereof, neither the Company nor
any of its Subsidiaries directly or indirectly owns (other than ownership
interests in the Company or in one or more of its Subsidiaries) any equity or
similar interest in, or any interest that is mandatorily convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by the Company and comprising less than five
percent (5%) of the outstanding stock of such company. A true, correct and
complete copy of the Certificate of Incorporation and other similar
organizational documents of the Company and each of the Company's Material
Subsidiaries (as defined below) has been delivered to ACO. "The Company's
Material Subsidiaries" shall mean those subsidiaries of the Company set forth on
the Company Disclosure Schedule, which
<PAGE>
Subsidiaries constitute all of the Company's "significant subsidiaries" as
defined in Rule 1-02 of Regulation S-X under the Securities Act.
Section 2 The Company Capital Structure.
(i) The authorized capital stock of the Company consists of 75,000,000
shares of Common Stock, $.01 par value, and 10,000,000 shares of Preferred
Stock, $.01 par value. As of the date of this Agreement, (i) 25,453,752 shares
of Common Stock are issued and outstanding, all of which are validly issued,
fully paid and nonassessable, and (ii) 887,229 shares of Common Stock which are
held in the treasury of the Company or by Subsidiaries of the Company. The
Company Disclosure Schedule shows the number of shares of Common Stock reserved
for future issuance pursuant to stock options granted and outstanding as of the
date hereof, the plans under which such options were granted and award
agreements pursuant to which "non-plan" options were granted (collectively, the"
Company Stock Plans"), and the entities or persons to whom such options were
granted. The Company Disclosure Schedule also shows the agreements under which
the warrants to purchase an aggregate of 7,093,413 shares of Common Stock
granted and outstanding as of the date hereof were issued and to whom such
warrants were granted. As of the date hereof, the only convertible securities of
the Company which are issued and outstanding are: (i) the TMC Warrant and the
TMC Option, (ii) an aggregate number of 81,250 shares of Series B Convertible
Preferred Stock, par value $.01 per share, of the Company, which are currently
convertible into 812,500 shares of Common Stock and which are currently entitled
to vote on all matters submitted to the stockholders of the Company (with the
exception of the election of directors) on an "as converted" basis (the "Series
B Convertible Preferred Stock") (iii) 19,900 shares of Series D Convertible
Preferred Stock, par value $.01 per share, of the Company which are currently
convertible into a minimum of 18,543,972 shares of Common Stock, plus the number
of shares of Common Stock equal to the quotient of the Accrued Premium (as
defined in the Certificate of Designations (as defined below)) divided by
$1.073125 (the "Series D Convertible Preferred Stock" and, together with the
Series B Convertible Preferred Stock the "Company Convertible Preferred Stock")
and (iv) such other convertible securities as are disclosed on the Company
Disclosure Schedule. Based on the Certificate of Designations, the amount of the
Accrued Premium (as defined in the Certificate of Designations) is $392,547.94
as at the date of this Agreement. All shares of Common Stock, into which Series
D Convertible Preferred Stock is convertible, or which are issuable upon
exercise of the Revised National Media Stock Purchase Warrant - C or the
National Media Stock Purchase Warrant - D are duly registered with the
Commission. All shares of Common Stock subject to issuance as specified above
shall be, when issued, validly issued, fully paid and nonassessable. Except as
set forth on the Company Disclosure Schedule and with respect to the Series D
Preferred Stock, there are no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. Except as set forth on
<PAGE>
the Company Disclosure Schedule, all of the outstanding shares of capital stock
of each of the Company's Subsidiaries are duly authorized, validly issued, fully
paid for and nonassessable and all such shares (other than directors' qualifying
shares in the case of foreign Subsidiaries) are beneficially owned by the
Company or another Subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations of the Company's voting rights, charges
or other encumbrances of any nature other than Permitted Liens.
(ii) Except as set forth in this Section 4.2 or as reserved for future
grants of options under the Company Stock Plans, the TMC Warrant or the TMC
Option, and except for the Series A Junior Participating Preferred Stock issued
and issuable under the Company Rights Plan, or as disclosed on the Company
Disclosure Schedule, (i) there are no equity securities of any class of the
Company or any of its Subsidiaries, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding; (ii) except as set forth in the Certificate of Designations,
Preferences and Rights of the Series D Convertible Preferred Stock (the
"Certificate of Designations") and the Registration Rights Agreement dated as of
September 4, 1997, as amended, by Amendment No. 1 thereto, dated April 14, 1998
among the Company and the holders of the Series D Convertible Preferred Stock,
there are no options, warrants, equity securities, stock appreciation rights,
calls, rights, commitments or agreements of any character to which the Company
or any of its Subsidiaries is a party or by which it is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company or
any of its Subsidiaries or obligating the Company or any of its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement; and (iii) to the best
knowledge of the Company, there are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of the
Company.
Section 3 Authority; No Conflict; Required Filings and Consents.
(i) The Company has all requisite corporate power and authority to
enter into this Agreement and each of the Investment Documents to which it is a
party and to consummate the transactions contemplated by this Agreement and each
of the Investment Documents to which it is a party. The execution and delivery
of this Agreement and each of the Investment Documents to which it is a party
and the consummation of the transactions contemplated by this Agreement and each
of the Investment Documents to which it is a party by the Company have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval and adoption of this Agreement by the Company's
stockholders under the DGCL and the rules of the New York Stock Exchange. This
Agreement and each of the Investment Documents to which it is a party have been
duly executed and delivered by the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to the Bankruptcy and Equity Exception.
<PAGE>
(ii) Except as set forth on the Company Disclosure Schedule, the
execution and delivery of this Agreement and each of the Investment Documents to
which it is a party by the Company does not, and the consummation of the
transactions contemplated by this Agreement and each of the Investment Documents
to which it is a party will not, (i) conflict with, or result in any violation
or breach of, any provision of the Certificate of Designation for Series E
Stock, the Certificate of Incorporation or Bylaws of the Company or any of its
Subsidiaries, (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound (including the Series D Convertible Preferred Stock), or
(iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to cause a Material Adverse
Change.
(iii) Except as set forth on the Company Disclosure Schedule, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity (as defined above) is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and each of the Investment Documents to
which it is a party or the consummation of the transactions contemplated hereby
or thereby, except for (i) the filing of the pre-merger notification report
under the Hart-Scott-Rodino Antitrust Improvements Act, (ii) the Proxy Statement
requirements imposed pursuant to the Exchange Act or by the Commission, (iii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state or foreign securities
laws, and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
cause a Material Adverse Change.
Section 4 SEC Filings; Financial Statements.
(i) The Company has filed and made available to ACO all forms, reports
and documents filed or required to be filed by the Company with the SEC since
January 1, 1995 (collectively, the "Company SEC Reports"). The Company SEC
Reports (i) except as set forth on the Company Disclosure Schedule, at the time
filed, complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such Company SEC Reports or omit to state a material fact necessary in order to
make the statements in such Company SEC Reports, in the light of the
<PAGE>
circumstances under which they were made, not misleading. None of the Company's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(ii) Except as disclosed on the Company Disclosure Schedule, each of
the consolidated financial statements (including, in each case, any related
notes) contained in the Company SEC Reports complied as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, in
conformity with the requirements of Form 10-Q under the Exchange Act) and fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the applicable dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
Section 5 No Undisclosed Liabilities. Except as disclosed in the
Company SEC Reports filed prior to the date hereof or on the Company Disclosure
Schedule, and except for normal or recurring liabilities incurred since March
31, 1998 in the ordinary course of business consistent with past practices, the
Company and its Subsidiaries do not have any liabilities, either accrued,
contingent or otherwise (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due) or to become due, which
individually or in the aggregate, are reasonably likely to cause a Material
Adverse Change.
Section 6 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date hereof or on the Company
Disclosure Schedule, since the date of the Base Financials, the Company and its
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(i) any Material Adverse Change (other than changes that are the effect or
result of economic factors affecting the economy as a whole or the industry (as
described in the Company's Form 10-K for the fiscal year ended March 31, 1998 as
amended (the "Company 10-K") in which the Company competes) or any development
or combination of developments of which the management of the Company is aware
that, individually or in the aggregate has caused or is reasonably likely to
cause a Material Adverse Change (other than changes that are the effect or
result of economic factors affecting the economy as a whole or the industry (as
described in the Company 10-K) in which the Company competes); (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to the
Company or any of its Subsidiaries having a Material Adverse Change; (iii) any
material change by the Company or its Subsidiaries in their respective
accounting methods, principles or practices to which ACO has not previously
consented in writing; or (iv) any revaluation by the Company or its Subsidiaries
of any of their assets having a Material Adverse Change.
<PAGE>
Section 7 Taxes.
(i) Except as set forth on the Company Disclosure Schedule or the
Company SEC Reports, the Company and each of its Subsidiaries have (i) filed all
federal, state, local and foreign Tax returns and reports required to be filed
by them prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or in
the aggregate, to cause a Material Adverse Change. There are no audits in
process or known by the Company to be pending or contemplated with respect to
the Company's Tax returns. Neither the Internal Revenue Service ("IRS") nor any
other taxing authority has asserted any claim for Taxes, or to the actual
knowledge of the executive officers of the Company, is threatening to assert any
claims for Taxes, which claims, individually or in the aggregate, are reasonably
likely to cause a Material Adverse Change. The Company and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts that are not
reasonably likely, individually or in the aggregate, to cause a Material Adverse
Change. Neither the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the IRC, except for any such elections that are not
reasonably likely, individually or in the aggregate, to cause a Material Adverse
Change. There are no liens for Taxes upon the assets of the Company or any of
its Subsidiaries (other than liens for Taxes that are not yet due or that are
being contested in good faith by appropriate proceedings), except for liens that
are not reasonably likely, individually or in the aggregate, to cause a Material
Adverse Change. No extension of a statute of limitations relating to any Taxes
is in effect with respect to the Company and its Subsidiaries.
(ii) Neither the Company nor any of its Subsidiaries has been a member
of an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated, combined or unitary
income tax return under comparable provisions of state, local or foreign tax
law) for any taxable period beginning on or after April 1, 1991, other than a
group the common parent of which was the Company or any Subsidiary of the
Company.
(iii) Neither the Company nor any of its Subsidiaries has any
obligation under any agreement or arrangement with any other person with respect
to Taxes of such other person (including pursuant to Treas. Reg. Section
1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity, except for
obligations that are not reasonably likely, individually or in the aggregate, to
cause a Material Adverse Change.
<PAGE>
(iv) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the IRC during the applicable period specified in Section 897(c)(1)(A)(ii) of
the IRC.
Section 8 Properties.
(i) Neither the Company nor any of its Subsidiaries is in default under
any of their respective leases for real property, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
cause a Material Adverse Change.
(ii) Neither the Company nor any of its Subsidiaries owns any real
property.
Section 9 Intellectual Property. Other than as set forth on the Company
Disclosure Schedule, each of the Company and its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
trademarks, trade names, service marks, copyrights, and any applications for
such trademarks, trade names, service marks and copyrights, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or materials that are necessary to conduct the business of each of
the Company and its Subsidiaries as currently conducted, subject to such
exceptions that would not be reasonably likely to cause a Material Adverse
Change. Other than as set forth on the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any knowledge of any assertion or claim
challenging the validity of any of such intellectual property, except such
assertions or claims that, individually or in the aggregate, are not reasonably
likely to cause a Material Adverse Change.
Section 10 Agreements, Contracts and Commitments. Except as set forth
on the Company Disclosure Schedule or the Company SEC Reports, neither the
Company nor any of its Subsidiaries has breached, or received in writing any
claim or notice that it has breached, any of the terms or conditions of any
material agreement, contract or commitment filed or required to be filed as an
exhibit to the Company SEC Reports (the "Company Material Contracts") in such a
manner as, individually or in the aggregate, is reasonably likely to cause a
Material Adverse Change. To the Company's knowledge, each Company Material
Contract that has not expired by its terms is in full force and effect.
Section 11 Litigation and Regulatory Matters. Except as described in
the Company SEC Reports filed prior to the date hereof or as set forth on the
Company Disclosure Schedule, there is no action, suit or proceeding, claim,
arbitration or investigation against the Company or any of its Subsidiaries
pending or as to which the Company or any of its Subsidiaries has received any
written notice of assertion, which, individually or in the aggregate, is
reasonably likely to cause a Material Adverse Change or a material adverse
effect on the ability of the Company to consummate the transactions contemplated
by this Agreement.
<PAGE>
Section 12 Environmental Matters. To the knowledge of the Company and
its Subsidiaries, except as disclosed in the Company SEC Reports filed prior to
the date hereof and except for such matters that, individually or in the
aggregate, are not reasonably likely to cause a Material Adverse Change: (i) the
Company and its Subsidiaries are in material compliance with all applicable
Environmental Laws; (ii) the properties currently owned or operated by the
Company and its Subsidiaries (including soils, groundwater, surface water,
buildings, equipment or other structures) are not contaminated with any
hazardous substances; (iii) the properties formerly owned or operated by the
Company or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by the Company or any of
its Subsidiaries; (iv) neither the Company nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither the Company nor any of its Subsidiaries has been
associated with any release or threat of release of any hazardous substance;
(vi) neither the Company nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of or liable under any
Environmental Law; (vii) neither the Company nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity (as defined above) or is subject to any indemnity or other
agreement with any third party relating to liability under any Environmental Law
or relating to hazardous substances; and (viii) there are no circumstances or
conditions involving the Company or any of its Subsidiaries that could
reasonably be expected to result in any claims, liability, investigations, costs
or restrictions on the ownership, use or transfer of any property of the Company
pursuant to any Environmental Law.
Section 13 Employee Benefit Plans.
(i) The Company has listed on the Company Disclosure Schedule all
employee benefit plans and all benefit arrangements, (i) which are maintained,
contributed to or required to be contributed to by the Company or any entity
that, together with the Company as of the relevant measuring date under ERISA,
is or was required to be treated as a single employer under Section 414 of the
IRC ("Company ERISA Affiliate") or under which the Company or any the Company
ERISA Affiliate may incur any liability, and (ii) which cover the employees,
former employees, directors or former directors of the Company or any Company
ERISA Affiliate ("Company Employee Plans").
(ii) A true and complete copy of each written Company Employee Plan
that covers employees or former employees of the Company or any Subsidiary of
the Company, including each amendment thereto and any trust agreement, insurance
contract, collective bargaining agreement, or other funding or investment
arrangements for the benefits under such Company Employee Plan, has been
delivered to ACO. In addition, with respect to each such Company Employee Plan
to the extent applicable, the Company has delivered to ACO the most recently
filed Federal Forms 5500 (solely with respect to the Company 401(k) Plan), the
most recent summary plan description (including any summaries of material
modifications), the most recent IRS determination letter, if
<PAGE>
applicable, the most recent actuarial report or valuation, if applicable, and
all material employee communications with respect to each such Company Employee
Plan.
(iii) Except as set forth on the Company Disclosure Schedule:
(A) Neither the Company nor any Company ERISA Affiliate
sponsors, maintains, contributes to, or has any obligation to contribute to any
Employee Benefit Plan regulated under Title IV of ERISA, other
than a "multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of
ERISA, ("Pension Plan"); with respect to any Pension Plan previously sponsored,
maintained or contributed to by the Company or any Company ERISA Affiliate or
with respect to which the Company or any Company ERISA Affiliate previously
incurred an obligation to contribute:
(1) As of the last day of the last plan year of
each such Pension Plan and as of the Closing Date, the "amount of unfunded
benefit liabilities" as defined in Section 4001(a)(18) of ERISA (but excluding
from the definition of "current value" of "assets" of such Pension Plan, accrued
but unpaid contributions) did not and will not exceed zero.
(2) No such Pension Plan has been terminated so as to
subject, directly or
indirectly, the Company or any Company ERISA Affiliate to any liability,
contingent or otherwise, or the imposition of any lien under Title IV of ERISA;
(3) No proceeding has been initiated by any
person, including the Pension Benefit Guarantee Corporation ("PBGC"), to
terminate any such Pension Plan;
(4) No liability to PBGC exists or is reasonably
expected to be incurred with
respect to any such Pension Plan that could subject, directly or indirectly, the
Company or any Company ERISA Affiliate to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of ERISA, whether to the
PBGC or to any other person;
(5) No "reportable event," as defined in Section
4043 of ERISA (to the extent the reporting of such event to PBGC has not been
waived) has occurred and is continuing with respect to any such Pension Plan;
(6) No such Pension Plan which is subject to
Section 302 of ERISA or Section 412 of the IRC has incurred an "accumulated
funding deficiency," within the meaning of Section 302 of ERISA and 412 of the
IRC, whether or not such deficiency has been waived;
(7) Neither the Company nor any Company ERISA
Affiliate has, at any time, (i) ceased operations at a facility so as to become
subject to the provisions of Section 4068(e) of ERISA, (ii) withdrawn as a
substantial employer so as to become subject to the provisions of Section 4063
of ERISA, or (iii) ceased making contributions on or before the Closing Date to
any
<PAGE>
Pension Plan subject to Section 4064(a) of ERISA to which the Company or any
Company ERISA Affiliate made contributions during the five years prior to the
Closing Date.
(B) neither the Company nor any Company ERISA Affiliate
sponsors has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any "multiemployer plan," as defined in Sections
3(37) and 4001(a)(3) of ERISA;
(C) neither the Company nor any Company ERISA Affiliate
sponsors has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any employee benefit plan that provides or will
provide benefits described in Section 3(1) of ERISA to any former employee or
retiree of the Company or any Company ERISA Affiliate, except as required under
Part 6 of Title I of ERISA and Section 4980B of the IRC;
(D) all Company Employee Plans that cover or have covered
employees or former employees of the Company have been maintained and operated,
and currently are, in compliance in all material respects with their terms, the
requirements prescribed by any and all applicable laws (including ERISA and the
IRC), orders, or governmental rules and regulations in effect with respect
thereto, and the Company and the Company ERISA Affiliates have performed all
material obligations required to be performed by them thereunder, are not in any
material respect in default under or in violation of, and have no knowledge of
any default or violation by any other party to, any of the Company Employee
Plans;
(E) each Company Employee Plan that covers or has covered
employees or former employees of the Company and is intended to qualify under
Section 401(a) of the IRC and each trust established pursuant to each such
Company Employee Plan that is intended to qualify under Section 501(a) of the
IRC is the subject of a favorable determination letter from the IRS, a copy of
which has been delivered to ACO, and, to the Company's knowledge, nothing has
occurred which may reasonably be expected to impair such determination or
otherwise adversely affect the tax-qualified status of such Company Employee
Plan;
(F) the Company and the Company ERISA Affiliates have made
full and timely payment of all amounts required to be contributed under the
terms of each Company Employee Plan and applicable law or required to be paid as
expenses under such Company Employee Plan; and
(G) other than claims for benefits in the ordinary course,
there is no claim, suit, action, dispute, arbitration or legal, administrative
or other proceeding or governmental investigation or audit pending, or, to the
knowledge of the Company, threatened, alleging any breach of the terms of any
Company Employee Plan or of any fiduciary duty thereunder or violation of any
applicable law with respect to any such Company Employee Plan.
<PAGE>
(iv) With respect to the Company Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
could be subject to any liability that is reasonably likely to cause a Material
Adverse Change under ERISA, the IRC or any other applicable law.
(v) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or on the Company Disclosure Schedule, and except as
provided for in this Agreement, neither the Company nor any of its Subsidiaries
is a party to any oral or written (i) agreement with any officer or other key
employee of the Company or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature contemplated by this
Agreement, (ii) agreement with any officer of the Company providing any term of
employment or compensation guarantee extending for a period longer than one year
from the date hereof and for the payment of compensation in excess of $100,000
per annum, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. None of the execution or delivery of this Agreement or any of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereunder or thereunder will trigger any "change in
control" or similar provisions resulting in an acceleration of benefits or
compensation thereunder with respect to any agreements with any officer or other
key employee of the Company or any of its Subsidiaries except for such
applicable agreements as set forth on the Company Disclosure Schedule (the"
Company Parachute Agreements"). Except as set forth on the Company Disclosure
Schedule or pursuant to the Costalas Waiver Agreement, the Hammer Waiver
Agreement and the Verratti Waiver Agreement, there are no amounts payable under
the Company Parachute Agreements as a result of the transactions contemplated by
this Agreement.
Section 14 Compliance With Laws. Except as disclosed on the Company
Disclosure Schedule, each of the Company and its Subsidiaries has complied with,
is not in violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, foreign law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which, individually or in
the aggregate, have not caused and are not reasonably likely to cause a Material
Adverse Change.
Section 15 Registration Statement; Proxy Statement. The information to
be supplied by the Company or its Subsidiaries or about the Company or its
Subsidiaries by the Company's agents for inclusion in the Registration Statement
(as defined in the Registration Rights Agreement) shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in the Registration Statement
<PAGE>
or necessary in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not misleading. The
information to be supplied by the Company or its Subsidiaries or about the
Company or its Subsidiaries by the Company's agents for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to
stockholders of the Company, at the time of the Company stockholders' meeting to
approve the transactions contemplated by this Agreement (the "Stockholders'
Meeting") and as of the Closing Date, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, omit to state any material fact
necessary in order to make the statements made in such proxy statement not false
or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which has become false or misleading. If
at any time prior to the Closing Date any event relating to the Company or any
of its Affiliates, officers or directors should be discovered by the Company
which should be set forth in a supplement to the Proxy Statement, the Company
shall promptly inform ACO.
Section 16 Labor Matters. Except as disclosed in the Company Disclosure
Schedule or the Company SEC Reports filed prior to the date hereof, neither the
Company nor any of its Subsidiaries is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor, as of the date hereof, is the
Company or any of its Subsidiaries the subject of any material proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization nor, as of the date of this Agreement, is there pending or,
to the knowledge of the executive officers of the Company, threatened, any
material labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving the Company or any of its Subsidiaries.
Section 17 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of the Company and its Subsidiaries
and their respective properties and assets, and are in character and amount at
least equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to cause a Material Adverse Change.
Section 18 Broker Fees, etc. Other than (i) any amounts claimed by
Lehman Brothers pursuant to arrangements previously disclosed to ACO and (ii)
amounts paid in respect of the Fairness Opinion (as defined in Section 3.1(f)),
no broker, investment banker, financial advisor or other person is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement.
<PAGE>
Section 19 No Existing Discussions. As of the date hereof, neither the
Company nor any of its Affiliates is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal.
Section 20 Section 203 of the DGCL and Sections 2538, 2555 and 2564 of
the Pennsylvania Business Corporation Law Not Applicable. The Board of Directors
of the Company has taken all actions necessary under the DGCL and the
Pennsylvania Business Corporation Law ("PBCL"), including approving the
transactions contemplated by this Agreement and each of the Investment Documents
to which it is a party, to ensure that Section 203 of the DGCL applicable to a
"business combination" (as defined in Section 203 of the DGCL) and Sections
2538, 2555 and 2564 of the PBCL applicable to a "business combination", "control
share transactions" and "transactions with interested shareholders" do not, and
will not, apply to the transactions contemplated hereunder and thereunder. No
other "fair price," "moratorium," "control share acquisition" or other similar
anti-takeover statute or regulation is applicable to the Company or (by reason
of the Company's participation therein) the transactions contemplated by this
Agreement or the other Investment Documents to which it is a party.
Section 21 The Company Rights Plan. Under the terms of the Company
Rights Plan, the transactions contemplated by this Agreement will not cause a
Distribution Date to occur or in any other way cause the rights issued pursuant
to the Company Rights Plan to become exercisable.
Section 22 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has (i) determined that this Agreement and
the transactions contemplated hereby, taken together, are fair to and in the
best interests of the stockholders of the Company, and (ii) resolved to
recommend that the stockholders of the Company approve and adopt this Agreement
and the transactions contemplated herein.
Section 23 Required Company Vote. Assuming the execution of all
Investment Documents, the affirmative vote of the majority of the outstanding
shares of Common Stock is the only vote of the holders of any class or series of
the Company's securities necessary to approve and adopt this Agreement and the
transactions contemplated hereby.
Section 24 Full Disclosure. All written information heretofore
furnished by the Company or any Subsidiary of the Company to ACO for purposes of
or in connection with this Agreement or any transaction contemplated hereby was,
as of the time such information was furnished, or the date of such information,
as the case may be, and all such information hereafter furnished by the Company
or any Subsidiary of the Company to ACO will be as of the time such information
is furnished, or the date of such information, as the case may be, true and
accurate in all material respects or, in the case of forecasts or projections,
based on reasonable expectations and estimates believed by the Company to be
accurate. Other than as disclosed in the Company SEC Reports, the Company has
disclosed to ACO any and all facts known to any executive officer of the Company
<PAGE>
which will or are likely to (to the extent the Company can now reasonably
foresee) cause a Material Adverse Change.
ARTICLE V
COVENANTS
The Company agrees that, so long as ACO or TMC continues to be the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Act) of
at least 1,000 shares of Series E Stock or 100,000 shares of Restricted Stock,
unless ACO otherwise consents in writing (which consent shall not, in the case
of Sections 5.2, 5.6(a), 5.7, 5.8, 5.9, 5.10, 5.11, and 5.12 be unreasonably
withheld or delayed):
Section 1 Information. The Company will deliver the following
information to ACO:
(i) As soon as available and in any event within 105 days after the end
of each fiscal year, an audited consolidated balance sheet of the Company and
its Subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, of cash flows, and of changes in stockholders' equity for
such fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and reported on without
Qualification by Ernst & Young LLP or other public accountants of nationally
recognized standing reasonably acceptable to ACO;
(ii) Simultaneously with the delivery of each set of financial
statements referenced in subsection (a) of this Section 5.1, a consolidating
balance sheet in reasonable detail of the Company and its Subsidiaries as of the
end of such fiscal year and the related consolidating statement of income for
such fiscal year, setting forth, in each case, in comparative form the figures
for the previous fiscal year, all certified by the chief financial officer, the
treasurer, or chief accounting officer of the Company.
(iii) As soon as available and in any event within 50 days after the
end of each of the first three fiscal quarters of each fiscal year, a
consolidated and/or consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, and the related consolidated
and consolidating statements of income, cash flows, changes in stockholders'
equity for such fiscal quarter and/or for the portion of the fiscal year ended
at the end of such fiscal quarter, setting forth in each case in comparative
form the figures for the corresponding fiscal quarter and the corresponding
portion of the previous fiscal year, all certified (subject to normal year-end
audit adjustments) as to fairness of presentation and consistency by the chief
financial officer, the treasurer, or the chief accounting officer of the
Company;
<PAGE>
(iv) Within 60 days after the beginning of each fiscal year, a
financial forecast, budget, cash flow projection and general business plan for
the Company and its Subsidiaries for such fiscal year, as approved by the
Company's board of directors and certified by the chief financial officer, the
treasurer, or chief accounting officer of the Company;
(v) Simultaneously with the delivery of each set of financial
statements referenced in subsections (a) and (c) of this Section 5.1, a fully
completed Compliance Certificate of the chief financial officer, the treasurer,
or chief accounting officer of the Company;
(vi) Simultaneously with the delivery of each set of financial
statements referenced in subsection (a) of this Section 5.1, a statement of the
firm of independent public accountants that reported on such statements;
(vii) Forthwith upon an executive officer of the Company learning of
the occurrence of any Default, a certificate of the chief financial officer, the
treasurer, or the chief accounting officer of the Company setting forth the
details thereof and the action that the Company is taking or proposes to take
with respect thereto;
(viii) Promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) that the Company or any of its Subsidiaries shall have filed with
the Commission;
(ix) Within 14 days after any member of the ERISA Group (i) gives or is
required to give notice to PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any ERISA Material Plan which might constitute
grounds for a termination of such ERISA Plan under Title IV of ERISA, or knows
that the plan administrator of any such ERISA Plan has given or is required to
give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to PBGC, (ii) receives notice of
complete or partial withdrawal liability in a material amount under Title IV of
ERISA, a copy of such notice, or (iii) receives notice from PBGC under Title IV
of ERISA of an intent to terminate or appoint a trustee to administer any ERISA
Material Plan, a copy of such notice;
(x) As soon as reasonably practicable after an executive officer of the
Company obtains knowledge of the commencement of, or of a threat (with respect
to which there is a reasonable possibility of assertion) of the commencement of,
an action, suit, or proceeding against the Company or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency, or official in
which there is a reasonable possibility of an adverse decision which could
reasonably be expected to cause a Material Adverse Change, or which in any
manner questions the validity of any Investment Document or any of the
transactions contemplated hereby, information as to the nature of such pending
or threatened action, suit, or proceeding;
<PAGE>
(xi) Promptly upon receipt thereof, copies of each report submitted to
the Board of Directors (or the Audit Committee thereof) of the Company by
independent public accountants in connection with any annual, interim, or
special audit made by them of the consolidated financial statements of the
Company and its Subsidiaries including each report submitted to the Board of
Directors (or the Audit Committee thereof) of the Company concerning its
accounting practices and systems and any final "management letter" submitted by
such accountants to management in connection with the annual audit of the
Company and its Subsidiaries; and
(xii) From time to time, such additional information regarding the
business, properties, financial position, results of operations, or prospects of
the Company or any of its Subsidiaries as ACO may reasonably request.
Section 2 Fiscal Plans. On or before the earlier of the Closing Date
and termination of this Agreement, the Board of Directors of the Company will
not adopt any budget or other fiscal plan for the Company without the prior
written approval of such budget or other fiscal plan by ACO.
Section 3 Payment of Obligations. Except where failure to do so will
not cause a Material Adverse Change, the Company will, and will cause each of
its Subsidiaries to, pay and discharge, as the same shall become due and
payable, all their respective material obligations and liabilities, including:
(i) all claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords, and other like Persons which, in any such case, if unpaid, might by
law give rise to a Lien upon any of its material assets, (ii) all material
lawful taxes, assessments, and governmental charges or levies upon it or its
assets, except to the extent that any such obligation or liability may be
diligently contested in good faith by appropriate proceedings, and the Company
will maintain, and will cause each of its Subsidiaries to maintain, in
accordance with GAAP, appropriate reserves for the accrual of any such
obligation or liability; and (iii) all Debts as and when due.
Section 4 Maintenance of Property; Insurance.
(i) Except where failure to do so will not cause a Material Adverse
Change, the Company will keep, and will cause each of its Subsidiaries to keep,
all material property useful and necessary in its business in good working order
and condition, reasonable wear and tear excepted.
(ii) Except where failure to do so will not cause a Material Adverse
Change, maintain adequate reserves (consistent with past practices) in order to
provide for any potential patent infringement actions involving the Company.
(iii) Except where failure to do so will not cause a Material Adverse
Change, the Company will, and will cause each Subsidiary of the Company to,
maintain or cause to be maintained with financially sound and reputable
insurance companies insurance (including insurance against claims and
liabilities arising out of the manufacture or distribution of any products) with
<PAGE>
respect to its properties and business against such casualties and contingencies
and of such types and in such amounts as is customary in the case of similar
businesses.
Section 5 Books and Records; Inspection. The Company will keep, and
will cause each of its Subsidiaries to keep, proper books of record and account
in which full, true, and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its business and activities. The
Company will permit ACO and its representatives to have access to and to examine
its properties, books and records (and to copy and make extracts therefrom) at
such reasonable times and intervals as ACO may request and to discuss its
affairs, finances and accounts with its officers and auditors, all to such
reasonable extent and at such reasonable times and intervals as ACO may request.
Section 6 Conduct of Business; Maintenance of Subsidiaries; Compliance
with Law.
(i) On or before the earlier of the Closing Date and termination of
this Agreement, subject to this Section 5, the Company will, and will cause each
of its Subsidiaries to, engage in its business in the same general manner as now
conducted by the Company and its Subsidiaries, will conduct its operations so as
to implement the most recent Annual Operating Plan adopted by the Company and
provided to ACO.
(ii) On or before the earlier of the Closing Date and termination of
this Agreement, the Company will preserve, renew, and keep in full force and
effect, and will cause each of its Subsidiaries to preserve, renew, and keep in
full force and effect, its corporate existence and all material rights,
privileges, and franchises necessary or desirable in the normal conduct of
business.
(iii) On or before the earlier of the Closing Date and termination of
this Agreement, except for any minority interest existing on the Closing Date
and disclosed on the Company Disclosure Schedule, the Company will cause each of
its Subsidiaries to be a Wholly-Owned Subsidiary.
(iv) The Company will comply, and will cause each Subsidiary of the
Company to comply, in all material respects with all material applicable laws,
ordinances, rules, regulations and requirements of governmental authorities
(including environmental laws and ERISA and the rules and regulations
thereunder).
Section 7 Debt. On or before the earlier of the Closing Date and
termination of this Agreement, the Company will not, and will not permit any of
its Subsidiaries to, incur or at any time be liable with respect to any Debt
except:
(i) Debt identified in the Company Disclosure Schedule including any
extension, renewal, refunding, or refinancing thereof, provided that (x) such
extension, renewal, refunding, or refinancing is on terms no less favorable, in
the reasonable opinion of the management of the
<PAGE>
Company, than the Debt so extended, renewed, refunded or refinanced and (y) the
amount of such Debt shall not be increased;
(ii) Debt of a Subsidiary of the Company owing to the Company or to
a Wholly-Owned Subsidiary; and
(iii) Additional Debt, not otherwise permitted under this Section, in
an aggregate principal amount outstanding at any time not in excess of
$2,000,000.
Section 8 Consolidations, Mergers and Sales of Assets.
(i) On or before the earlier of the Closing Date and termination of
this Agreement, the Company will not, and will not permit any Subsidiary of the
Company to, consolidate with or merge with or into any other Person, unless: (i)
(A) the Company is the surviving corporation, (B) immediately after giving
effect thereto, no Default shall have occurred and be continuing, and (C) ACO
consents in writing, which consent shall not unreasonably be withheld; or (ii)
the Company pays the Transaction Initiation Fee to ACO.
(ii) On or before the earlier of the Closing Date and termination of
this Agreement, neither the Company nor any of its Subsidiaries will make any
Disposition of any material part of their consolidated assets.
Section 9 Restricted Payments. On or before the earlier of the Closing
Date and termination of this Agreement, the Company will not declare or make, or
permit any of its Subsidiaries to declare or make, any Restricted Payment.
Section 10 Limitations on Investments. On or before the earlier of the
Closing Date and termination of this Agreement, the Company will not, and will
not permit any of its Subsidiaries to, make or acquire any Investment in any
Person other than:
(i) Investments in Persons which immediately before and after
giving effect to such Investment are Wholly-Owned Subsidiaries; and
(ii) Investments made by the Company or any Subsidiary of the Company
in connection with its cash management policies and practices conducted in the
ordinary course of business, consistent with reasonable business practice,
provided that, in each case, such Investment matures within one year from the
date of acquisition thereof by the Company or such Subsidiary.
Section 11 Transactions with Affiliates. Except as set forth on the
Company Disclosure Schedule, pursuant to any Investment Document, or as required
under any contract or obligation entered into before the date of this Agreement,
the Company will not, and will not permit any of its
<PAGE>
Subsidiaries to, directly or indirectly: (i) make any Investment in an Affiliate
of the Company; (ii) sell, lease, or otherwise transfer any assets to an
Affiliate of the Company; (iii) purchase or acquire assets from an Affiliate of
the Company; or (iv) enter into any other transaction directly or indirectly
with or for the benefit of an Affiliate of the Company (including Guarantees and
assumptions of obligations of an Affiliate); provided that the Company and any
Wholly-Owned Subsidiary may enter into any such transaction with each other.
Section 12 Replacement of Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of any certificate representing any of the Securities, and in the
case of loss, theft or destruction, upon receipt of indemnity in reasonable form
and scope, the Company will issue a new certificate representing such Securities
in lieu of such lost, stolen, destroyed, or mutilated certificate.
Section 13 Compensation of Board. The Company shall compensate the ACO
Board Nominees consistently with other Company directors providing similar
services.
Section 14 Organizational Documents. On or before the earlier of the
Closing Date and termination of this Agreement, other than pursuant to this
Agreement, the Company will not make any change in its Certificate of
Incorporation, the Certificate or its bylaws, including without limiting the
foregoing, any change in the authorized number of directors.
Section 15 Securities Law Filings. The Company will make any filings
necessary to perfect in a timely fashion exemptions from (i) the registration
and prospectus delivery requirements of the Securities Act and (ii) the
registration or qualification requirements of all applicable securities or blue
sky laws of any state or other jurisdiction, for the issuance of the Securities
to ACO.
Section 16 Compliance With Certificate and Bylaws. The Company will
perform and observe all of its obligations to the holders of Securities set
forth in the Certificate and the Company's Bylaws.
Section 17 Use of Proceeds. Concurrently with the Closing, the Company
will apply the proceeds received by it from the Purchase as follows:
(i) Approximately $16.5 million (as specified in First Union National
Bank Consent Agreement) to First Union National Bank, in repayment of the
Company's line of credit, including interest and fees, pursuant to the First
Union National Bank Consent Agreement;
(ii) all payments to be made pursuant to Section 8.4;
(iii) payment of costs and fees payable by the Company in connection
with the transactions contemplated by the Investment Documents as provided
herein and therein; and
<PAGE>
(iv) the balance to be used for working capital and for general
corporate purposes not inconsistent with the provisions of this Agreement.
Section 18 Employees.
(i) On or before the earlier of the Closing Date and termination of
this Agreement, without the written consent of ACO (which consent will not be
unreasonably withheld), neither the Company nor any of its Subsidiaries shall
(except as set forth in any Investment Document) adopt or amend (except as may
be required by law) any bonus, profit sharing, compensation, stock option
(including by accelerating of altering the vesting thereof) pension, retirement,
deferred compensation, severance, change-in-control, fringe benefits, employment
or other employee benefit plan, agreement, trust, fund or other arrangement for
the benefit or welfare of any employee, director or former director or employee,
increase the compensation, bonus or fringe benefits of any director, employee or
former director or employee or pay any benefit not required by any existing
plan, arrangement or agreement, except that the Company will be permitted to (i)
provide for any payment deemed necessary by management to certain employees on
terms reasonably acceptable to ACO and (ii) grant merit increases in salaries of
employees (other than officers) at regular scheduled times in customary amounts
consistent with past practices.
(ii) On or before the earlier of the Closing Date and termination of
this Agreement, neither the Company nor any of its Subsidiaries shall grant any
new or modified severance or termination arrangement or increase or accelerate
any benefits payable under its severance or termination pay policies in effect
on the date of this Agreement.
Section 19 Transition. On or before the earlier of the Closing Date and
termination of this Agreement, in order to permit the coordination of their
related operations on a timely basis, the Company shall consult with ACO on all
strategic and material operational matters. The Company shall make available to
ACO at the Company's facilities office space in order to assist it in observing
all operations and reviewing all matters concerning the Company's affairs.
Without in any way limiting the foregoing sentence, ACO, its officers,
employees, counsel, financial advisors and other representatives shall, upon
reasonable notice to the Company, be entitled to review the operations and visit
the facilities of the Company and its Subsidiaries at all times as may be deemed
reasonably necessary by ACO.
Section 20 Exclusivity. On or before the earlier of the Closing Date
and termination of this Agreement, the Company agrees that, the Company and its
officers, directors, employees, representatives and agents shall not, and each
of them shall cause their Affiliates and representatives to not, directly or
indirectly, (x) take any action to encourage, solicit or initiate any
Acquisition Proposal or (y) respond to, continue, initiate or engage in
discussions or negotiations concerning any Acquisition Proposal with, or
disclose in connection with any Acquisition Proposal any non-public information
relating to the Company or its assets or afford access to the properties, books
or records
<PAGE>
of the Company or any of its Subsidiaries to any Person (except ACO and its
representatives), except that the Company may engage in negotiations with, or
disclose such non-public information to, or provide such access to any person
who has made an unsolicited Acquisition Proposal if the Board of Directors of
the Company, after consultation with outside counsel to the Company, determines
that its fiduciary duties under applicable law require such actions. Subject to
such fiduciary duties, the Company shall, and shall cause its Affiliates and
representatives to, immediately discontinue and not resume or otherwise continue
any discussions with respect to any Acquisition Proposal existing on or
commenced prior to the date hereof (other than, in each case, with ACO and its
representatives). In addition, the Company shall provide ACO with notice of any
Acquisition Proposal received by the Company not later than 24 hours after
receipt.
Section 21 Registration. The Company shall use best efforts to ensure
that all Conversion Stock held by ACO is continuously registered with the
Commission in accordance with the terms and conditions of the Registration
Rights Agreement.
Section 22 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other party in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement. The parties shall use their reasonable best efforts and cooperate
with one another (i) in promptly determining whether any filings are required to
be made or consents, approvals, waivers, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
and (ii) in promptly making any such filings, in furnishing information required
in connection therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. ACO and the Company shall mutually
cooperate in order to facilitate the achievement of the benefits reasonably
anticipated from the transactions contemplated by this Agreement. Following the
execution of this Agreement, ACO and the Company shall cooperate to prepare,
file, cause to be approved by the SEC and mail to the Company's stockholders, in
as expeditious manner as possible, the Proxy Statement in accordance with
Regulation 14A of the Securities Exchange Act of 1934, as amended, which Proxy
Statement shall contain proposals related to, at a minimum, (i) an increase in
the number of authorized shares of Common Stock of the Company; (ii) approval of
the transactions contemplated by this Agreement pursuant to the rules of the New
York Stock Exchange, Inc. and (iii) such other matters as the Company shall
determine.
Section 23 Public Announcements. ACO and the Company shall consult with
each other before holding any press conferences or analyst calls and before
issuing any press releases. The parties will provide each other the opportunity
to review and comment upon any press release with
<PAGE>
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
ARTICLE VI
DEFAULTS
Section 1 Defaults. If one or more of the following events ("Events of
Default") shall have occurred and be continuing other than as a result of any
action caused or taken by ACO, its affiliates (including TMC) or the ACO Board
Nominees:
(i) The Company shall fail to observe or perform any of its material
covenants or agreements contained in this Agreement or any other Investment
Document;
(ii) Any material representation, warranty, certification, or statement
made by or on behalf of the Company in any Investment Document, or in any
certificate, financial statement or other document delivered pursuant thereto,
shall have been incorrect or misleading in any material adverse respect when
made (or deemed made);
(iii) The Company or any Subsidiary of the Company shall commence a
voluntary case or other proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(iv) An involuntary case or other proceeding shall be commenced against
the Company or any Subsidiary of the Company seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed for a period of 60
days; or an order for relief shall be entered against the Company or any
Subsidiary of the Company under the Federal bankruptcy laws as now or hereafter
in effect;
then, and in every such event, (x) ACO may, by notice to the Company, terminate
any outstanding obligation of ACO to Purchase, and any such obligation to
Purchase shall thereupon terminate, and (y) ACO may proceed to protect and
enforce its rights by suit in equity or action at law, whether for
<PAGE>
the specific performance of any term contained in this Agreement or the
Certificate or for an injunction against the breach of any such term or in aid
of the exercise of any power granted in this Agreement or the Certificate, or to
enforce any other legal or equitable right of ACO or to take any one or more of
such actions.
ARTICLE VII
TERMINATION
Section 1 Termination. This Agreement may be terminated at any time
prior to the Closing Date (with respect to Sections 7.1(b) through 7.1(f), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the transactions
contemplated by this Agreement by the stockholders of the Company:
(i) by mutual written consent of ACO and the Company; or
(ii) by either ACO or the Company if the transactions contemplated by
this Agreement shall not have been consummated by November 15, 1998 or, upon
receipt of a letter from NMC to ACO extending the termination date of the
Transaction because NMC is awaiting regulatory or shareholder approval, by
December 31, 1998 (the "Outside Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulting in the failure of the Purchase to occur on or before such
date;
(iii) by either ACO or the Company if a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement;
(iv) by ACO, if there has been a material breach of any representation,
warranty, covenant or agreement under this Agreement by the Company, which
breach shall not have been cured within 20 business days following receipt by
the Company of written notice of such breach from ACO; provided that such breach
was not caused by Steve Lehman, as acting CEO of the Company, TMC or an ACO
Board Nominee;
(v) by the Company if the Company accepts an Acquisition Proposal (and
pays to ACO the Transaction Initiation Fee pursuant to Section 2.2); or
(vi) by the Company, if there has been a material breach of any
representation, warranty, covenant or agreement under this Agreement by the ACO,
which breach shall not have been cured
<PAGE>
within 20 business days following receipt by the ACO of written notice of such
breach from the Company.
Section 2 Effect of Termination.
(i) In the event of a termination of this Agreement pursuant to Section
7.1(d) or (e), there shall be no liability or obligation on the part of ACO, the
Company or their respective officers, directors, or stockholders or members,
except as set forth in Sections 8.4 (Expenses; Documentary Taxes;
Indemnification) and 2.2 (Transaction Initiation Fee), provided that any such
termination shall not limit liability for a wilful breach of this Agreement.
(ii) In the event of a termination of this Agreement by the Company
pursuant to Section 7.1(f), (i) TMC shall forfeit the TMC Option and the TMC
Warrant and such shall be cancelled and of no further force and effect; and (ii)
the fixed "floor" conversion price of $1.073125 per share shall remain in full
force and effect with respect to all shares of Series D Preferred Stock and
warrants over shares of Series D Stock purchased by ACO.
(iii) Other than as set forth in Section 7.2(a) and in Section 8.8,
neither party hereto shall be limited in pursuing any and all remedies available
to such party at law or in equity.
ARTICLE VIII
MISCELLANEOUS
Section 1 Notices. All notices, requests, and other communications to
any party under this Agreement shall be in writing and shall be given to such
party at its address or facsimile number set forth on the signature pages hereof
or such other address facsimile number as such party may hereafter specify for
the purpose by notice to the other parties. Each such notice, request or other
communication shall be effective: (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in accordance with this Section
8.1 and the party sending the facsimile has telephonically confirmed its
receipt, (b) if given by registered or certified mail, return receipt requested,
72 hours after such communication is deposited in the mails with postage
prepaid, addressed as aforesaid or (c) if given by any other means, when
delivered at the address specified in accordance with this Section 8.1.
Section 2 No Waivers. No failure or delay by ACO or the Company in
exercising any right, power, or privilege under this Agreement shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege.
<PAGE>
Section 3 Cumulative Remedies. None of the rights, powers or remedies
conferred upon ACO or the Company pursuant to this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to every other right, power or remedy, whether conferred hereby or by
the Certificate of Designation for Series E Stock (as to ACO) or now or
hereafter available at law, in equity, by statute or otherwise.
Section 4 Expenses; Documentary Taxes; Indemnification.
(i) Subject to Section 7.4(c), the Company shall pay: (A) all
reasonable fees and disbursements of ACO's counsel in connection with the
negotiation and preparation of this Agreement and all related documents, (B) all
other reasonable out-of-pocket expenses of ACO, and (iii) upon any Event of
Default, all out-of-pocket expenses incurred by ACO, including reasonable fees
and disbursements of counsel, in connection with the such Event of Default and
enforcement proceedings resulting therefrom.
(ii) Subject to Section 7.4(c), the Company shall indemnify ACO against
any transfer taxes, documentary taxes, assessments, or charges made by any
governmental authority by reason of the execution and delivery of the Investment
Documents.
(iii) The Company shall not be required to make any payment to ACO
pursuant to this Section 8.4 if the Company has paid the Transaction Initiation
Fee to ACO pursuant to Section 2.2.
Section 5 Amendments and Waivers. Any provision of this Agreement and
the obligations or rights of the Company or ACO in respect of the Common Stock,
Series E Stock or Series D Stock of the Company may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the party or
parties whose performance is conditional with respect such right or obligation,
whereupon such amendment or waiver shall be binding on the Company and ACO.
Section 6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer any of its
rights or obligations hereunder without the consent of ACO. ACO may not assign
its rights or obligations under this Agreement except (a) with the consent of
the Company or (b) to TMC only after the Closing Date. Upon any such assignment,
ACO shall notify the Company, which notice shall specify the precise nature of
the rights which have been so assigned.
Section 7 Survival of Representations and Warranties. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
Purchase.
<PAGE>
Section 8 Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
(i) GOVERNING LAW. THIS AGREEMENT AND THE OTHER INVESTMENT DOCUMENTS
(EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY SET FORTH THEREIN) SHALL BE DEEMED TO
HAVE BEEN MADE IN THE STATE OF DELAWARE AND THE VALIDITY, CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(ii) JURISDICTION AND VENUE. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT OR THE OTHER INVESTMENT DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE DELAWARE COURT OF CHANCERY, COUNTY OF NEW CASTLE,
DELAWARE, OR, IF JURISDICTION IS NOT AVAILABLE IN SUCH COURT, IN ANY OTHER
DELAWARE STATE COURT. TO THE EXTENT THEY MAY LEGALLY DO SO, THE PARTIES HERETO
HEREBY WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SUBSECTION (b) AND STIPULATE THAT SUCH COURTS SHALL HAVE IN
PERSONAM JURISDICTION AND VENUE OVER EACH SUCH PARTY FOR THE PURPOSE OF
LITIGATING ANY SUCH DISPUTE, CONTROVERSY, OR PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT, OR THE OTHER INVESTMENT DOCUMENTS. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, SERVICE OF PROCESS SUFFICIENT FOR PERSONAL JURISDICTION
IN ANY ACTION AGAINST THE COMPANY MAY BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED FOR NOTICES PURSUANT TO
SECTION 8.1.
(iii) WAIVER OF TRIAL BY JURY. TO THE MAXIMUM EXTENT THEY MAY LEGALLY
DO SO, THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING
UNDER OR WITH RESPECT TO THIS AGREEMENT, OR THE OTHER INVESTMENT DOCUMENTS, OR
IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE
PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, THE OTHER INVESTMENT DOCUMENTS,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO, THE PARTIES TO THIS AGREEMENT
HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING
SHALL BE DECIDED BY A
<PAGE>
COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SUBSECTION (c) WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR
RIGHT TO TRIAL BY JURY.
Section 9 Counterparts; Facsimile Signatures. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. Delivery of an executed counterpart of the signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement, and any party delivering an executed counterpart
of the signature page to this Agreement by facsimile to any other party shall
thereafter also promptly deliver a manually executed counterpart of this
Agreement to such other party, but the failure to deliver such manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
Section 10 Entire Agreement. This Agreement and the other Investment
Documents (a) integrate all the terms and conditions set forth in or incidental
to the Investment Documents, (b) supersede all oral negotiations and prior
writings (including, without limiting the foregoing, the letter of intent dated
July 10, 1998 between ACO and the Company together with the Annexes thereto)
with respect to the subject matter hereof, and (c) are intended by the parties
as the final expression of the agreement with respect to the terms and
conditions set forth in the Investment Documents and as the complete and
exclusive statement of the terms agreed to by the parties.
Section 11 Confidentiality. Each of the Company and ACO agree to
maintain confidentiality of the terms of this Agreement and all information
disclosed in connection herewith including, without limitation, pursuant to
Article 5 hereof, subject to the applicable rules and regulations under the
Securities Act of 1933 and the Securities Exchange Act of 1934; provided,
however, that the Company and ACO may disclose such information to its legal and
financial advisors and lenders and to the parties to the Investment Documents,
provided that such advisors, lenders and parties to the Investment Documents
are, prior to receipt of such information, informed
<PAGE>
of the confidential nature of such information and agree to be bound by the
nondisclosure provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the day and year
first above written.
COMPANY: NATIONAL MEDIA CORPORATION,
a Delaware corporation
By
------------------------------------------
Name:
Title:
Address for Notices:
Attn: General Counsel
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, PA 19103
Telephone: (215) 988-4600
Facsimile: (215) 988-4869
<PAGE>
ACO: NM ACQUISITION CO., LLC,
a Delaware limited liability company
By its Manager,
TEMPORARY MEDIA, CO., LLC,
a Delaware limited liability company
By
-----------------------------------------
Name: Eric Weiss
Title: Managing Member
Address for Notice:
Attn: Stuart D. Buchalter, Esq.
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, Suite 2400
Los Angeles, California 90017
Telephone: (213) 891-0700
Facsimile: (213) 896-0400
<PAGE>
EXHIBIT 10.2
Consulting Agreement
--------------------
<PAGE>
Exhibit 10.2
CONSULTING AGREEMENT
This Consulting Agreement (the "Consulting Agreement") is made and
entered into this 11th day of August, 1998, by and between Temporary Media Co.,
LLC, a Delaware limited liability company ("TMC") and National Media
Corporation, a Delaware corporation ("Company") with respect to the following
facts:
NM Acquisition Co., LLC, a Delaware limited liability company ("ACO")
and the Company have entered into a Letter of Intent, dated July 10, 1998, as
amended July 15, 1998 ("LOI"), pursuant to which TMC is to provide, among other
things, Consulting Services (hereinafter defined) to the Company as described
below.
ACO and the Company are entering into a Stock Purchase Agreement dated
as of the date hereof (the "Stock Purchase Agreement").
Capitalized terms used but not defined herein shall have the meanings
set forth in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Company and TMC agree as follows:
1. ENGAGEMENT.
-----------
1.1 Term. Subject to the terms of this Consulting Agreement,
the Company hereby engages TMC for a period of six (6) months beginning on the
date of this Agreement and ending on the date six (6) months thereafter unless
terminated earlier pursuant to the terms hereof (the "Term") and TMC hereby
accepts such engagement.
1.2 Consulting Services. TMC will provide such reasonable
assistance and advice as the Company may reasonably request, including but not
limited to the following (the "Consulting Services"):
providing executive management consulting services in its good
faith and to the best of its abilities, which shall include devoting at
least an aggregate of one-hundred (100) hours per week by Eric R. Weiss
("Weiss"), Daniel M. Yukelson ("Yukelson") and Stephen C. Lehman
("Lehman"), a minimum of forty (40) of such hours will be devoted by
Lehman, who will be designated as "Acting CEO" of the Company; Lehman
shall have the duties, responsibilities and authority normally
associated with the office and position of chief executive officer of a
corporation and as are reasonably required by the Board of Directors.
Such duties shall include, but not be limited to the following: (i)
general and active
<PAGE>
management of the business of the Company, (ii) ensuring that all
orders and resolutions of the Board of Directors are carried into
effect, (iii) hiring and firing of all Company personnel in
consultation with the Company's Compensation Committee, (iv) general
oversight of all contracts to which the Company is, or is contemplating
becoming, a party (including past, present and future contracts), (v)
control and oversight of all Company employees, (vi) general oversight
of the content of all programming, (vii) general oversight of the
Company's programming schedule and, (viii) general oversight of all
other areas of the Company. Lehman shall report to the Chairman of the
Company's Board of Directors.
1.3 Independent Contractor Status. It is understood and agreed
that TMC will provide the services under this Consultant Agreement as an
independent contractor and that during the performance of the services under
this Consulting Agreement, TMC's officers, directors, employees and members will
not be considered employees of the Company within the meaning or the
applications of any federal, state or local laws or regulations including, but
not limited to, laws or regulations covering unemployment insurance, old age
benefits worker's compensation, industrial accident, labor or taxes of any kind.
TMC's officers, directors, employees and members shall not be entitled to
benefits that may be afforded from time to time to the Company's officers,
directors and employees including without limitation, vacation, holidays, sick
leave, worker's compensation and unemployment insurance. Further, the Company
shall not be responsible for withholding or paying any taxes or social security
on behalf of TMC's officers, directors, employees and members. TMC shall be
fully responsible for any such withholding or paying of taxes or social
security.
2. CONSULTING FEES AND EXPENSES.
2.1 Retainer. During the Term of this Consulting Agreement,
the Company shall pay TMC the sum of $80,000.00 per month, payable on the first
day of each calendar month, as a retainer for services described in Section 1.2
above. Notwithstanding the above, the first such payment shall be made as of the
date hereof and shall be prorated based upon the number of days remaining in the
month of August.
2.2 Additional Compensation. (a) As additional compensation
hereunder, the Company shall grant to TMC a five year option to purchase up to
212,500 shares of the Company's common stock, par value $0.01 ("Shares") at an
exercise price of $1.32 per Share (substantially in the form attached hereto as
Exhibit "A"). One-sixth (1/6) of such options shall vest on each of the 30th,
60th, 90th, 120th, 150th and 180th day following the date hereof provided this
Consulting Agreement is in effect as of such date; provided, however, (i) all
such options shall immediately vest upon the earlier of (a) the date the
transactions contemplated by the Stock Purchase Agreement are closed (the
"Closing Date"), or (b) termination of the Consulting Agreement pursuant to
paragraph 4C below; and (ii) all non-vested options shall be cancelled if and
when the Company's stockholders vote not to approve the matters contained in the
Proxy Statement (as defined in the Stock Purchase Agreement) or this Consulting
Agreement is terminated pursuant to Section 4E.
<PAGE>
(b) Contingent Warrant. The Company shall grant to TMC a five
year fully vested but contingent warrant (substantially in the form attached
hereto as Exhibit "B") to purchase up to 3,762,500 Shares ("Contingent
Warrant"), as follows:
A. A warrant to purchase 2,412,500 Shares exercisable
on and from the Closing as to 1,912,500 Shares, at an exercise price of
$1.32 and, upon the price of the Company's Shares first trading in
excess of $3.00 per Share for a period of fifteen (15) consecutive
trading days following the date hereof (the "Price Threshold"), the
remaining 500,000 Shares shall become exercisable at an exercise price
of $3.00 per Share.
B. A warrant to purchase 150,000 Shares at an
exercise price of $1.50 per Share, exercisable on and from the Closing
Date. Such warrants shall be distributed to BT Alex Brown.
C. A warrant to purchase 200,000 Shares, at an
exercise price of $1.50 per Share, provided such warrant shall not be
exercisable until the Price Threshold is achieved.
D. A warrant to purchase 1,000,000 Shares
exercisable on and from the Closing at an exercise price of $1.32 per Share,
provided that such warrant (i) if transferred, may be transferred by TMC to any
officer, director, employee or consultant of the Company other than Lehman,
Yukelson, Weiss or any employee of TMC, (a "Permitted Transferee") and (ii) may
only be exercised by a Permitted Transferee and not by TMC.
2.3 Expense Reimbursement. The Company shall reimburse TMC for
reasonable and actual out-of-pocket business expenses incurred by TMC in the
performance of its responsibilities hereunder, provided TMC shall first furnish
proper voucher and expense accounts setting forth the information required by
the United States Treasury Department for deductible business expenses.
3. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
TMC against and from any and all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees and disbursements and other
expenses incurred by TMC in connection with the preparation for, or defense of,
any claim, action or proceeding, whether or not, resulting in any liability) to
which TMC may become liable arising out of TMC's acting for the Company pursuant
to this Consulting Agreement provided that the Company shall not be liable
hereunder to the extent any loss, claim, damage, liability or expense is found
to have resulted from TMC's gross negligence, bad faith, material breach of this
Consulting Agreement, actions outside the scope of the authority granted
hereunder or in contravention of specific Board of Directors instructions. The
indemnification provided for herein is in no way deemed exclusive and is thus,
in addition to indemnification provided by the Company's Bylaws and applicable
law. The provisions of this
<PAGE>
Section 3 shall remain operative and in full force and effect regardless of any
termination of this Consulting Agreement.
4. TERMINATION. The Consulting Agreement will terminate upon the
earliest to occur:
A. the expiration of the Term;
B. a negative vote by the Company's stockholders regarding the
matters contained in the Proxy Statement (as defined in the Stock
Purchase Agreement).
C. the Company becomes obligated to pay the Transaction
Initiation Fee (as defined in the Stock Purchase Agreement).
D. the signing of employment agreements by the Company
with each of Messrs. Lehman, Weiss and Yukelson.
E. the material breach by TMC of its duties and obligations
hereunder, after receipt by TMC of written notice of such breach and
the failure of TMC to cure such breach, if curable, within thirty (30)
days of receipt of such notice.
If the Consulting Agreement is terminated pursuant to (C)
above, the Company shall pay to TMC a sum equal the amount which would have been
payable to TMC if the Consulting Agreement had continued in full force and
effect for an additional six month term plus the unexpired portion of the Term,
provided that the maximum amount payable to TMC pursuant to the Consulting
Agreement shall be $720,000. If the Consulting Agreement is terminated pursuant
to (B) above, the Company shall pay to TMC a sum equal to the amount which would
have been payable to TMC if the Consulting Agreement had remained in full force
and effect for the Term.
5. NOTICES. All notices, requests, demands and other communications
provided for by this Consulting Agreement shall be in writing and shall be
deemed to have been given upon the deposit thereof for mailing at any general or
branch United States Post Office enclosed in a registered or certified postpaid
envelope and addressed as follows:
To the Company: National Media Corporation
1835 Market Street
11 Penn Center, Suite 1100
Philadelphia, PA 19103
Attention: General Counsel
<PAGE>
With Copies to: Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102-3120
Attention: Stephen Burdumy, Esq.
To TMC: Temporary Media Co., LLC
c/o Buchalter, Nemer, Fields & Younger
A Professional Corporation
601 South Figueroa, 24th Floor
Los Angeles, CA 90071-5704
Attention: Stuart D. Buchalter, Esq.
With Copies to: Buchalter, Nemer, Fields & Younger
A Professional Corporation
601 South Figueroa, 24th Floor
Los Angeles, CA 90071-5704
Attention: Stuart D. Buchalter, Esq.
6. MISCELLANEOUS.
(a) GOVERNING LAW. THIS AGREEMENT AND THE OTHER INVESTMENT
DOCUMENTS (EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY SET FORTH THEREIN) SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF DELAWARE AND THE VALIDITY,
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(b) JURISDICTION AND VENUE. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT OR THE OTHER INVESTMENT DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE DELAWARE COURT OF CHANCERY, COUNTY OF NEW CASTLE,
DELAWARE, OR IF JURISDICTION IS NOT AVAILABLE IN SUCH COURT, IN ANY OTHER
DELAWARE STATE COURT. TO THE EXTENT THEY MAY LEGALLY DO SO, THE PARTIES HERETO
HEREBY WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SUBSECTION (b) AND STIPULATE THAT SUCH COURTS SHALL HAVE IN
PERSONAM JURISDICTION AND VENUE OVER EACH SUCH
<PAGE>
PARTY FOR THE PURPOSE OF LITIGATING ANY SUCH DISPUTE, CONTROVERSY, OR PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR THE OTHER INVESTMENT DOCUMENTS.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, SERVICE OF PROCESS SUFFICIENT FOR
PERSONAL JURISDICTION IN ANY ACTION AGAINST THE COMPANY MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED
FOR NOTICES PURSUANT TO SECTION 8.1.
(c) WAIVER OF TRIAL BY JURY. TO THE MAXIMUM EXTENT THEY MAY
LEGALLY DO SO, THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY WAIVE ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING
ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR THE OTHER INVESTMENT
DOCUMENTS, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE
DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, THE OTHER
INVESTMENT DOCUMENTS, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO,
THE PARTIES TO THIS AGREEMENT HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION,
CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SUBSECTION (c) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER
PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.
6.1 Severability. If any provision of this Consulting
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remaining provisions will continue in full force and effect
without being impaired or invalidated in any way.
6.2 Entire Agreement; Amendment. This Consulting Agreement,
the Stock Purchase Agreement and the other agreements and documents entered in
connection therewith, contain a complete statement of all the arrangements
between the parties with respect to their subject matter, supersedes all
existing agreements between them with respect to the subject matter and may not
be changed or terminated orally. Any amendment or modification must be in
writing and signed by the party to be charged.
<PAGE>
6.3 Successors and Assigns. All the provisions of the
Consulting Agreement shall bind and inure to the benefit of the successors and
assigns of the parties hereto.
6.4 Nonassignability. Neither party may assign any of its
rights, duties or obligations hereunder, except as specifically provided herein,
without the express written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement the date first set forth above.
NATIONAL MEDIA CORPORATION
------------------------------------
Name:
------------------------------
Title:
TEMPORARY MEDIA CO., LLC
- ---------------------------------
Name: Eric R. Weiss
Title: Managing Member
<PAGE>
EXHIBIT 10.3
Registration Rights Agreement
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
11, 1998, between NATIONAL MEDIA CORPORATION, a Delaware corporation (the
"Company"), and NM ACQUISITION CO., LLC, a Delaware limited liability company
("ACO").
In consideration of the covenants contained herein, the parties hereto
hereby agree as follows:
1. Definitions and Construction.
(a) Definitions. For purposes of this Agreement:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's currently authorized class
of common stock, $0.01 par value, and stock of any other class or other
consideration into which such currently authorized common stock may hereafter
have been changed.
"Equity Security" means any stock or similar security of the
Company or any security (whether stock of debt) convertible or exchangeable,
with or without consideration, into any stock or similar security, or any
security (whether stock or debt) with an attached warrant, stock appreciation
right or right to subscribe to or purchase any stock or similar security, or any
such warrant or right.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" means ACO or any assignee of ACO's rights hereunder,
pursuant to Section 6, who or which owns or has the right to acquire any
Restricted Stock.
"Person" means an individual, a limited liability company, a
corporation, a partnership, an unincorporated association, a trust, or any other
entity or organization, including a government or political subdivision or any
agency or instrumentality thereof.
"register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar documents in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
"Registration Statement" means a registration form under the
Securities Act subsequently adopted by the Commission, pursuant to which all
Restricted Stock is registered with the Commission.
<PAGE>
"Restricted Stock" has the meaning set forth in the Stock
Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Purchase Agreement" means the Stock Purchase Agreement,
dated as of August 11, 1998, between the Company and ACO.
(b) Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, references to any gender include any other gender,
the part includes the whole, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, section, subsection,
clause, exhibit and schedule references are to this Agreement, unless otherwise
specified. Any reference to this Agreement or any other document includes any
and all permitted alterations, amendments, changes, extensions, modifications,
renewals, or supplements thereto or thereof, as applicable.
2. Company Registration. As soon as practicable after the Closing Date
(as defined in the Stock Purchase Agreement) or, in the event of a Further
Closing, as soon as practicable after the date thereof, the Company shall:
(a) Prepare and file with the Commission a Registration
Statement with respect to all Restricted Stock and use its best efforts to cause
such Registration Statement to become effective and to keep such Registration
Statement effective for a period of up to two years ending on the earlier of (i)
the second anniversary of the Closing Date and (ii) the first date upon which
there is no longer any Holder.
(b) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the dispositions of any
Restricted Stock.
(c) Furnish to Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of any Restricted Stock owned by them.
(d) Use its best efforts to register and qualify the
Restricted Stock under such other securities or Blue Sky laws of such states or
other jurisdictions as shall be reasonably requested
<PAGE>
by any Holders, provided that the Company is not thereby obligated to qualify to
do business in such state or jurisdiction.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such underwriting agreement.
(f) Notify each Holder, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Cause all Restricted Stock to be listed on each securities
exchange on which similar securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Restricted
Stock and a CUSIP number for all Restricted Stock, in each case not later than
the effective date of the Registration Statement referred to in Section 2(a).
(i) Use its best efforts to furnish to each Holder on the date
that such Restricted Stock is delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, if such Restricted
Stock is being sold through underwriters: (i) an opinion, dated such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders, if permissible under
applicable accounting rules and regulations.
3. Expenses of Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the Holders shall be borne by the Company.
4. Underwriting Requirements. Except for the Registration Rights
Agreement dated as of December 19, 1994, by and among the Company and the
persons whose signatures appear on the signature page thereof, the Registration
Rights Agreement dated as of September 4, 1997, as
<PAGE>
amended April 14, 1998, by and among the Company and the Initial Investors (as
defined therein), and that certain Securities Purchase Agreement dated September
30, 1994 by and among the Company and the persons whose signatures appear on the
signature page thereof, each as amended prior to the date of this Agreement
(collectively, the "Series B and D Registration Rights Agreements"), in
connection with any offering involving an underwriting of shares of the
Company's capital stock, the Company shall include any of the Holders'
Restricted Stock in such underwriting if such Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company (or by other persons entitled to select the underwriters), but only
in such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Restricted Stock, requested by stockholders to be included
in such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Restricted Stock, which
the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders).
5. Indemnification. With respect to all Restricted Stock:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder or underwriter (as defined in the Securities Act,
or the Exchange Act), against any losses, claims, damages, or liabilities (joint
or several) to which such Holder or underwriter may become subject under the
Securities Act or the Exchange Act, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereof;
(ii) the omission or alleged omission to state therein a material fact required
to be stated thereof, or necessary to make the statements therein not
misleading; or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any rule or regulation promulgated under the
Securities Act or the Exchange Act; and the Company will pay to each such Holder
or underwriter any legal or other expenses reasonably incurred by each such
Holder or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided that the indemnity agreement
contained in this subsection 5(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in
<PAGE>
conformity with information furnished expressly for use in connection with such
registration by such Holder or underwriter.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, each Person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities pursuant to such Registration Statement,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Securities Act or the
Exchange Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay any legal or other expenses reasonably incurred by any Person intended
to be indemnified pursuant to this subsection 5(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided that the indemnity agreement contained in this subsection 5(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
Holder, which consent shall not be unreasonably withheld; provided further, that
in no event shall any indemnity by a Holder under this subsection 5(b) exceed
the fair market value of all of such Holder's Restricted Stock.
(c) Promptly after receipt of notice, by an indemnified party
under this Section 5, of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided that an indemnified party (together with
all other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 5, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 5.
(d) If the indemnification provided for in this Section 5 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability,
<PAGE>
claim, damage or expense referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. This relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 5 shall survive the completion of any offering of Restricted Stock
pursuant to a Registration Statement. No indemnifying party, in the defense of
any such claim or litigation, shall, except with the consent of each indemnified
party, consent to the entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the party
opposing such indemnified party of a release from all liability with respect to
such claim or litigation.
6. Assignment of Registration Rights. The rights to cause the Company
to register Restricted Stock pursuant to this Agreement may be assigned (but
only with all related obligations) by a Holder to any person to whom the Holder
transfers any Restricted Stock in accordance with the terms of any applicable
agreement provided that the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the Restricted Stock with respect to which such
registration rights are being assigned.
7. Future Registration Rights. Subject to the Series B and D
Registration Rights Agreements and other than pursuant to this Agreement, the
Company shall not after the date hereof agree with any holder of Equity
Securities (other than an underwriter in connection with a public offering) to
register any Equity Securities under the Securities Act unless such agreement
specifically provides that (a) the holder of such Equity Securities may not
participate in any demand registration without the consent of a majority of all
Restricted Stock held by Holders unless (i) the sale of the Restricted Stock is
to be underwritten on a firm commitment basis and the managing underwriter
concludes that the public offering or sale of such Equity Securities would not
interfere with the successful public offering and sale of all Restricted Stock
to be sold and (ii) the Holders shall have the right to participate, to the
extent they may request, in any registration statement initiated under a demand
<PAGE>
registration right exercised by the holder of such Equity Securities, except
that if the managing underwriter of a public offering made pursuant to such a
demand registration limits the number of shares of Common Stock to be sold the
participation of the Holders and the holders of all other Common Stock (other
than the Equity Securities held by such holder of Equity Securities) shall be
pro rata based upon the number of shares of Common Stock and Restricted Stock
owned, and (b) all Equity Securities excluded from any registration as a result
of the foregoing limitations may not be publicly offered or sold for a period of
at least ninety (90) days after the closing of any public offering of Restricted
Stock registered pursuant to this Agreement.
8. Miscellaneous
(a) Notices. All notices, requests, and other communications
to any party under this Agreement shall be in writing and shall be given to such
party at its address or facsimile number set forth on the signature pages hereof
(or in the case of a subsequent Holder, addressed to such address or facsimile
number as such Holder may hereafter specify to the Company) or such other
address or facsimile number as such party may hereafter specify for the purpose
by notice to the other parties. Each such notice, request or other communication
shall be effective: (i) if given by facsimile, when the party sending the
facsimile has telephonically confirmed its receipt, (ii) if given by registered
or certified mail, return receipt requested, 72 hours after such communication
is deposited in the mails with postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when delivered at the address specified in this
Section.
(b) No Waivers; Rights and Remedies Cumulative. No failure or
delay by any person in exercising any right, power, or privilege under this
Agreement shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege. The rights and remedies provided in
this Agreement are cumulative and not exclusive of any rights or remedies
provided by law.
(c) Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF DELAWARE AND THE VALIDITY,
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(ii) JURISDICTION AND VENUE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, THE PARTIES HERETO AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT OR THE OTHER
<PAGE>
INVESTMENT DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE DELAWARE COURT OF
CHANCERY, COUNTY OF NEW CASTLE, DELAWARE, OR IF JURISDICTION IS NOT AVAILABLE IN
SUCH COURT, IN ANY OTHER DELAWARE STATE COURT. TO THE EXTENT THEY MAY LEGALLY DO
SO, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SUBSECTION (ii) AND STIPULATE THAT
SUCH COURTS SHALL HAVE IN PERSONAM JURISDICTION AND VENUE OVER EACH SUCH PARTY
FOR THE PURPOSE OF LITIGATING ANY SUCH DISPUTE, CONTROVERSY, OR PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR THE OTHER INVESTMENT DOCUMENTS.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, SERVICE OF PROCESS SUFFICIENT FOR
PERSONAL JURISDICTION IN ANY ACTION AGAINST THE COMPANY MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED
FOR NOTICES PURSUANT TO THIS AGREEMENT.
(iii) WAIVER OF TRIAL BY JURY. TO THE MAXIMUM EXTENT THEY
MAY LEGALLY DO SO, THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY WAIVE ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR THE OTHER
INVESTMENT DOCUMENTS, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL
TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, THE OTHER
INVESTMENT DOCUMENTS, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO,
THE PARTIES TO THIS AGREEMENT HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION,
CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SUBSECTION (iii) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER
PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.
(d) Counterparts; Facsimile Signatures. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. Delivery of an executed counterpart of the signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement, and any party delivering an executed counterpart
of the signature page to this Agreement by facsimile to any other party shall
thereafter also promptly deliver a manually executed counterpart of this
Agreement to such other party, but the failure to deliver such
<PAGE>
manually executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
(e) Other Rights. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(f) Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Holders of at
least a majority of the Registrable Securities; provided that this Agreement may
be amended with the consent of the Holders of less than all Registrable
Securities only in a manner which affects all Registrable Securities in the same
fashion. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
(g) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
(h) Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other
<PAGE>
party in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the day and year
first above written.
COMPANY: NATIONAL MEDIA CORPORATION,
a Delaware corporation
By
-------------------------------------------
Name:
Title:
Address for Notices:
Attn: General Counsel
Eleven Penn Center
Suite 1100
1835 Market Street
Philadelphia, PA 19103
Telephone: (215) 988-4600
Facsimile: (215) 988-4869
<PAGE>
ACO: NM ACQUISITION CO., LLC,
a Delaware limited liability company
By its Manager,
TEMPORARY MEDIA CO., LLC,
a Delaware limited liability company
By
---------------------------------
Name: Eric Weiss
Title: Managing Member
Address for Notice:
Attn: Stuart D. Buchalter, Esq.
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, Suite 2400
Los Angeles, CA 90017-5704
Telephone: (213) 891-0700
Facsimile: (213) 896-0400
<PAGE>
EXHIBIT 10.4
Letter Agreement
<PAGE>
CAPITAL VENTURES INTERNATIONAL c/o
Heights Capital Management, Inc.
425 California Street, Suite 1100
San Francisco, CA 94104
RGC INTERNATIONAL INVESTORS, LDC c/o
Rose Glen Capital Management, L.P.
3 Bala Plaza East
251 St. Asaph's Road, Suite 200
Bala Cynwyd, PA 19103
August 10, 1998
NM Acquisition Co., LLC
Attn: Eric Weiss
c/o Buchalter, Nemer, Fields & Younger
601 South Figueroa Street
Suite 2400
Los Angeles, CA 90017
Attn: Stuart Buchalter
National Media Corporation
Eleven Penn Center
1835 Market Street
Suite 1100
Philadelphia, PA 19103
Attn: Board of Directors
Gentlemen:
Each of Capital Ventures International, a Cayman Islands company
("CVI"), and RGC International Investors, LDC, a Cayman Islands limited duration
company ("RGC") and together with CVI, the "Series D Holders"), NM Acquisition
Co., LLC, a Delaware limited liability company ("ACO"), and, to the extent set
forth on the signature page hereof, National Media Corporation, a
<PAGE>
Delaware corporation ("NMC"), by its execution of this letter (the "Agreement"),
hereby agrees as follows:
1. Description of Shares and Warrants.
(a) CVI is the owner of 15,000 shares of the Series D
Convertible Preferred Stock, par value $.01 per share, issued by NMC (the
"Series D Shares"); 375,000 warrants issued by NMC to the Series D Holders and
governed by the National Media Corporation Stock Purchase Warrants-D dated
January 5, 1998 (the "Series D Warrants") and 742,060 warrants issued by NMC to
the Series D Holders and governed by the Revised National Media Corporation
Stock Purchase Warrants-C dated September 18, 1997 (the "Series C Warrants")
exercisable into shares of NMC Common Stock, par value $.01 per share ("NMC
Common Stock").
(b) RGC is the owner of 4,900 Series D Shares, 125,000 Series
D Warrants and 247,353 Series C Warrants.
(c) Pursuant to Section 4(b) of this Agreement, each Series D
Share will be convertible into shares of NMC Common Stock at a fixed conversion
price equal to $1.073125 per share of NMC Common Stock (subject to adjustment
pursuant to the terms thereof) and each Series D Warrant and Series C Warrant is
exercisable for one share of NMC Common stock at a fixed exercise price of
$1.073125 (subject to adjustment pursuant to the terms thereof).
(d) The Series D Shares were issued to the Series D Holders by
NMC in exchange for previously issued Series C Convertible Preferred Stock of
NMC. Each of CVI and RGC represents and warrants to its knowledge (without
investigation), and NMC hereby represents and warrants, that the shares of NMC
Common Stock underlying the Series D Shares, the Series C Warrants and the
Series D Warrants were the subject of a Registration Statement on Form S-3 dated
March 18, 1998 filed by NMC on March 18, 1998 with the Securities and Exchange
Commission ("SEC"), which Registration Statement was declared effective by the
SEC on April 9, 1998 (the "Series D Registration Statement").
2. Representations and Warranties.
(a) Representations and Warranties of Series D Holders. Each
Series D Holder represents and warrants to ACO as follows:
(i) On the Closing Date, such Series D Holder
will have conveyed to ACO valid title with respect to its Series D Shares,
Series C Warrants and Series D Warrants sold
<PAGE>
to ACO pursuant to Section 3 of this Agreement, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
pursuant to this Agreement.
(ii) Such Series D Holder has duly authorized, executed
and delivered this Agreement and this Agreement constitutes a valid and binding
agreement on the part of such Series D Holder, enforceable against such Series D
Holder in accordance with its terms, except as the enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. The certificates representing the Sold Securities
(as defined below) to be sold by such Series D Holder to ACO hereunder will have
been duly endorsed and delivered on its behalf, and such Series D Holder has
instructed the Secretary of NMC to transfer the record ownership of such Sold
Securities to ACO on the securities transfer ledgers of NMC and to issue new
stock certificates or warrants, as the case may be, for such Sold Securities in
ACO's name as record owner thereof.
(iii) Such Series D Holder has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and such Series D
Holder has full legal right, power and authority to enter into and perform its
obligations under this Agreement and to sell, assign, transfer and deliver the
Sold Securities to be sold by it to ACO under this Agreement. All consents,
approvals, authorizations and orders (including any required by state "Blue Sky"
laws) required for the execution and delivery by such Series D Holder of this
Agreement, and the sale and delivery of the Sold Securities to be sold by such
Series D Holder to ACO under this Agreement have been obtained and are in full
force and effect.
(b) Representations and Warranties of ACO. ACO represents and
warrants to each of the Series D Holders as follows:
(i) ACO has been duly organized and is validly
existing as a limited liability company under the Delaware Limited Liability
Company Act; ACO has full legal right, power and authority to enter into and
perform its obligations under this Agreement and to purchase the Sold Securities
pursuant to under this Agreement.
(ii) ACO has duly authorized, executed and
delivered this Agreement and this Agreement constitutes a valid and binding
agreement on the part of ACO, enforceable against it in accordance with its
terms, except as the enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
<PAGE>
(iii) All consents, approvals, authorizations and
orders required for the execution, delivery and performance by ACO of this
Agreement, and its purchase of the Sold Securities have been obtained and are in
full force and effect.
(iv) ACO is an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Act"). ACO has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in NMC, and ACO and its members are able to bear the
economic risk of the investment in NMC and at the present time ACO and its
members could afford a complete loss of ACO's investment in the Sold Securities.
ACO recognizes that its investment in NMC involves substantial risks, including
a risk of total loss of its investment. ACO acknowledges that neither of the
Series D Holders has made any representations or warranties with respect to NMC
or its business, condition (financial or otherwise) or prospects, and ACO has
not relied on either of the Series D Holders for any information or advice with
respect to its investment in the Sold Securities.
(v) The Sold Securities are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of any such Sold Securities or the NMC Common Stock underlying such
Sold Securities within the meaning of the Act or applicable state securities
laws. By such representation, ACO means that it is acquiring the Sold Securities
for its own account for investment and that no one else has any beneficial
ownership of the Sold Securities other than the members of ACO.
(vi) ACO has retained no finder or broker in
connection with the transactions contemplated by this Agreement, and ACO hereby
agrees to indemnify and to hold harmless the other parties hereto from and
against any liability for any commission or other compensation in the nature of
a finder's fee of any broker or other person (and the costs and expenses of
defending against such liability or asserted liability) for which ACO, any of
its members, employees and representatives is responsible.
3. Purchase, Sale and Delivery of Sold Securities.
(a) The closing of the purchase and sale of the Sold
Securities shall take place at 10:00 a.m. (PDT) on August 12, 1998 (the "Closing
Date") at the offices of Buchalter, Nemer, Fields & Younger, 601 South Figueroa
Street, Suite 2400, Los Angeles, California, or such other date, time and place
as the parties hereto shall mutually designate.
<PAGE>
(b) On the basis of the representations, warranties and
agreements contained herein, ACO has agreed to purchase and
(i) ACO will purchase and CVI will sell to ACO
7,500 Series D Shares (the "CVI Sold Shares"), 250,000 Series D Warrants and
494,707 Series C Warrants (the "CVI Sold Warrants" and together with the CVI
Sold Shares, the "CVI Sold Securities") in exchange for the aggregate purchase
price of U.S. $7,500,000 (the "CVI Purchase Price"); and
(ii) ACO will purchase and RGC will sell to ACO 2,500
Series D Shares (the "RGC Sold Shares"), 83,333 Series D Warrants and 164,902
Series C Warrants (the "RGC Sold Warrants" and together with RGC Sold Shares the
"RGC Sold Securities") in exchange for the aggregate purchase price of U.S.
$2,500,000 (the "RGC Purchase Price"). The CVI Sold Securities and the RGC Sold
Securities are collectively referred to herein as the "Sold Securities".
(c) Delivery of one or more certificates as contemplated in
Subsection 3(d) below representing the Sold Securities to be purchased and sold
pursuant to this Section 3 will be made on the Closing Date against payment of
the CVI Purchase Price by ACO by bank wire transfer of immediately available
funds, to a bank account identified by CVI and payment of the RGC Purchase Price
by ACO by bank wire transfer of immediately available funds to a bank account
identified by RGC.
(d) In addition, on the Closing Date, each Series D Holder
will deliver to NMC all of the certificates representing Series D Shares to be
sold by it to ACO hereunder; NMC shall issue to ACO certificates representing
such shares and affix a legend to each such certificate (and to certificates
subsequently issued in exchange for such certificates), as follows:
"The conversion terms contained in the Certificate of
Designation for the Series D Convertible Preferred
Shares are subject to a contract between all of the
holders of such shares and National Media Corporation
(the "Company") dated August 10, 1998 (the
"Agreement") which provides that the conversion price
shall be $1.073125, subject to adjustment and
termination under certain circumstances. Each person
who acquires an interest in the shares represented by
this Certificate takes subject to this modification
and is required by the Agreement to have each
certificate for Shares marked with this legend, and
each such
<PAGE>
person may inspect the relevant portion of
the Agreement at the office of the Company."
Promptly after the Closing Date, NMC shall deliver to each Series D Holder new
certificates representing its Post Closing Shares, as defined below, containing
the above legend in exchange for such Series D Holder's existing certificates
representing such shares.
(e) The parties agree that, as of the Closing Date and
thereafter, NMC shall add an amount equal to the Retained Premium (as defined
below) to the amount of premium (the "Premium") that has accrued with respect to
each Post Closing Share owned by CVI and RGC. The parties agree that the CVI
Sold Shares and the RGC Sold Shares are being sold to ACO without any accrued
Premium, but that Premium on all Series D Stock shall accrue from the Closing
Date. For the purposes hereof, "Retained Premium" shall mean (a) with respect to
CVI, the aggregate amount of all Premium which has accrued from April 14, 1998
with respect to the CVI Sold Shares through and including the Closing Date
divided by the number of Post Closing Shares owned by CVI immediately after
consummation of the sale pursuant to Section 3 hereof, and (b) with respect to
RGC, the aggregate amount of all Premium which has accrued from April 14, 1998
with respect to the RGC Sold Shares through and including the Closing Date
divided by the number of Post Closing Shares owned by RGC immediately after
consummation of the sale pursuant to Section 3 hereof.
(f) Subject to the closing of the Transaction, each of RGC and
CVI waive their right to claim any accrued Premium for any period prior to April
14, 1998. In the event that the Transaction does not close on or before December
31, 1998 the waiver contained in this Section 3(f) shall be void ab initio.
4. Further Agreements.
(a) Board Observer Rights. For so long as CVI owns in the
aggregate at least 500 Post Closing Shares or at least 500,000 shares of NMC
Common Stock acquired upon conversion of Post Closing Shares or exercise of
Series C Warrants or Series D Warrants, NMC shall afford an "Observer Right" to
a designee of CVI (the "Observer") (i) who shall receive notice of all NMC Board
of Directors meetings and all Board Committee meetings, in each case whether in
person, by telephone or other, and NMC shall provide to the Observer,
concurrently with making available to the members of the NMC Board of Directors
or any such Board Committee, a copy of all board packages, minutes, documents,
slides, audio/visual materials, charts, graphs, or other materials provided to
such members, unless distributed at the actual meeting in which case such
materials shall be furnished to the Observer at such meeting, or if the Observer
has not attended such meeting, as soon as practicable thereafter; and (ii) who
may attend, in a nonvoting observer capacity, any such
<PAGE>
NMC Board of Directors meeting or Board Committee meeting, provided, that CVI
and RGC shall execute a Non-Disclosure Agreement in the form agreed upon by CVI,
RGC and NMC. NMC acknowledges that the Observer will likely have, from time to
time, information that may be of interest to NMC ("Information"). NMC agrees
that the Observer shall not have any duty to disclose such Information to NMC or
permit NMC to participate in any projects or investments based on any
Information, or to otherwise take advantage of any opportunity that may be of
interest to NMC if it were aware of such Information, and hereby waives, to the
extent permitted by law, any claim based on the corporate opportunity doctrine
or otherwise that could limit CVI's or RGC's ability to pursue opportunities
based on any Information. Notice of the first such meeting following the Closing
Date shall be provided to Michael Spolan as CVI's initial designee, at the
address for CVI on the first page of the Agreement.
(b) Standstill Provisions.
(i) For a period ending on the first anniversary
of the Closing Date, each of CVI, RGC and ACO agrees (for the exclusive benefit
of NMC) not to (A) sell more than 50% of the Series D Shares held by it
immediately after consummation of the purchase and sale of the Sold Securities
pursuant to Section 3 hereof (its "Post Closing Shares"); or (B) sell more than
50% of the NMC Common Stock issuable upon conversion of all of its Post Closing
Shares.
(ii) Each of CVI, RGC and ACO further agrees (for the
exclusive benefit of NMC) that, as to its Post Closing Shares not subject to the
selling restriction of paragraph (i) above, it will not sell or transfer (other
than to affiliates) either more than (x) 25% of such Post Closing Shares or (y)
25% of the NMC Common Stock issuable upon conversion thereof in any of the
following three month periods: (a) the period beginning on August 12, 1998 and
ending on November 11, 1998, (b) the period beginning on November 12, 1998 and
ending on February 11, 1999, (c) the period beginning on February 12, 1999 and
ending on May 11, 1999, or (d) the period beginning on May 12, 1999 and ending
on August 11, 1999 (each, a "Quarter"); provided, however, that any shares of
NMC Common Stock which were permitted to be sold by it in any Quarter and which
were not so sold will be added to the number of shares of NMC Common Stock
permitted to be sold by it in any subsequent Quarter, except that in no event
shall more than 50% of the shares of NMC Common Stock issuable upon conversion
of its Post Closing Shares may be sold in any subsequent Quarter.
(iii) Notwithstanding the provisions contained in
the Certificate of Designations, Preferences and Rights of Series D Convertible
Stock of National Media Corporation (the "Certificate of Designations"), the
"Conversion Price" (as such term is used in the Certificate of Designations)
shall equal $1.073125 (subject to adjustment as described in the Certificate of
Designations) and the Series D Holders and ACO waive (for themselves, their
successors, assigns
<PAGE>
and transferees) their right to convert such shares at the
Variable Conversion Price. As a condition to the transfer of any Series D Shares
to any other person or entity (other than NMC) (each, a "Transferee") by either
of the Series D Holders or ACO, such Transferee shall be required to execute an
instrument reasonably satisfactory to NMC (in form and substance) subjecting
such Transferee to the terms and conditions of this Section 4(b)(iii) and
Subsection 3(e) hereof. NMC, CVI, RGC and ACO acknowledge that the Series D
Warrants and the Series C Warrants are exercisable for shares of NMC Common
Stock at an "Exercise Price" (as such term is used in the Series C Warrants and
the Series D Warrants) of $1.073125 (subject to adjustment as described in such
warrants).
(iv) The provisions of (i), (ii), (iii) and (vii) of
this Section 4(b) shall immediately and automatically terminate and each of
CVI and RGC shall be free to sell any of its Post Closing Shares or the
underlying NMC Common Stock if (x) the proposed transaction between ACO and
NMC as set forth in a Stock Purchase Agreement between such parties dated
August 11, 1998 (the "Transaction") is terminated at any time or not
consummated by November 15, 1998 or upon receipt of a letter from NMC to ACO
(with a copy to CVI and RGC) extending the termination date of the Transaction
because NMC is awaiting regulatory or shareholder approval, December 31, 1998,
(y) NMC shall agree to eliminate such provisions, or (z) there shall occur a
Change in Control (as defined below) other than as contemplated by the
Transaction.
(v) For the purposes of this Agreement, "Change
in Control" means (A) at such time as any person, other than ACO, any subsidiary
of ACO or any entity Controlled (as defined below) by any of the foregoing
persons, is or becomes the beneficial owner, directly or indirectly, through a
purchase or other acquisition transaction or series of transactions (other than
a merger or consolidation involving NMC which is covered by clause (B) below),
of shares of capital stock of NMC entitling such person to exercise in excess of
50% of the total voting power of all shares of capital stock of NMC entitled to
vote generally in the election of directors; (B) there occurs any consolidation
of NMC with, or merger of NMC into, any other person, any merger of another
person into NMC, or any sale or transfer of the assets of NMC as, or
substantially as, an entirety to another person (other than (y) any such
transaction pursuant to which the holders of all outstanding NMC Common Stock
immediately prior to such transaction have, directly or indirectly, shares of
capital stock of the continuing or surviving corporation immediately after such
transaction which entitle such holders to exercise in excess of 50% of the total
voting power of all shares of capital stock of the continuing or surviving
corporation entitled to vote generally in the election of directors or (y) any
merger (1) which does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of NMC Common Stock or (2) which is
effected solely to change the jurisdiction of incorporation of NMC and results
in a reclassification, conversion or exchange of outstanding shares of NMC
Common Stock solely into shares of the common stock of the successor to NMC
having substantially the same relative rights as the NMC Common Stock); (C)
<PAGE>
a change in the Board of Directors of NMC in which the individuals who
constituted the Board of Directors of NMC at the beginning of the two-year
period immediately preceding such change (together with any other director whose
election by the Board of Directors of NMC or whose nomination for election by
the stockholders of NMC was approved by a vote of at least a majority of the
directors then in office either who were directors at the beginning of such
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the directors then in office;
or (D) the execution of a binding agreement to effect of any of the foregoing.
For the purpose of the definition of "Change in Control" the term "Controlled"
shall mean ownership or control of more than 50% of the voting power of such
entity.
(vi) The provisions of subsections (i) and (ii) of
this Section 4(b) shall not apply to any sale where the seller and buyer are
both parties to this Agreement.
(vii) During the period commencing on the Closing
Date and ending on the date which is the closing date of the Transaction,
neither of the Series D Holders shall sell short shares of NMC Common Stock.
Subject to the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder and the rules of the New York Stock Exchange
("NYSE") as applicable, during the period commencing on the closing date of the
Transaction and ending on the one year anniversary of the Closing Date, the
Series D Holders shall during any calendar week be permitted to sell short only
such number of shares of NMC Common Stock as does not exceed, in the aggregate,
twenty-five percent (25%) of the average daily trading volume of NMC Common
Stock on the NYSE over the 45 trading day period ending on the last trading day
of the week prior to the week during which any such determination is made;
provided, however, that any amounts permitted to be but not sold short in any
calendar week will not be carried forward to the subsequent calendar week.
(viii) An example of the limitations described in
Subsection 4(b)(vii) above is: if the average daily trading volume of NMC Common
Stock on the NYSE over the 45- day trading period ending on Friday November 13,
1998 were 300,000 shares, then commencing on the trading week beginning on
Monday, November 16, 1998 and ending on Friday, November 20, 1998, the Series D
Holders may sell short up to a maximum of 75,000 Shares of NMC Common Stock
during the trading week (e.g., 300,000 x 25% = 75,000 shares).
(c) Voting Provisions. Effective on the closing date of the
Transaction, for a period ending on the third anniversary of the closing date of
the Transaction, each of the Series D Holders agrees (for the exclusive benefit
of NMC) that, as to any shares of NMC Common Stock which it owns as of a "record
date" set by NMC for stockholder vote, it will vote (whether by proxy or
otherwise) all of such shares of NMC Common Stock in favor of any proposal
recommended by
<PAGE>
the NMC Board of Directors for stockholder approval. The provisions of this
Section 4(c) shall immediately and automatically terminate and each of CVI and
RGC shall be free to vote its shares of NMC Common Stock against any proposal
recommended by the NMC Board of Directors for stockholder approval in any
stockholder vote which occurs after a Change in Control has occurred.
(d) Right of First Refusal. For a period ending on the second
anniversary of the Closing Date, each Series D Holder, prior to selling or
transferring (other than (x) to any of its affiliates, or (y) upon conversion
into NMC Common Stock) any of its Post Closing Shares ("Offered Shares"), shall
provide NMC with the right of first refusal to purchase the Offered Shares in
the following manner:
(i) Any Series D Holder proposing to make such a
sale or transfer shall give notice (the "Transfer Notice") to NMC in writing of
such intention, specifying the number of Offered Shares proposed to be sold or
transferred and the proposed price therefor, and setting forth all the other
terms of such proposed sale and transfer.
(ii) NMC shall have the right, exercisable by written
notice given by NMC (which notice shall constitute a binding commitment by NMC)
to the Series D Holder which gave the Transfer Notice within 5 calendar days
after receipt of such Transfer Notice to purchase for cash (or to cause a person
or designated by NMC to purchase for cash) all, but not a part of, the Offered
Shares specified in such Transfer Notice at the price and otherwise on the same
terms set forth therein (except that the closing thereof shall be governed by
Subsection (d)(iii) below). If the purchase price specified in the Transfer
Notice includes any property other than cash or any property with a readily
ascertainable market value, including but not limited to publicly traded
securities, such purchase price shall be deemed to be the amount of any cash
included in the purchase price plus an amount equal in cash to the fair market
value of any property with a readily ascertainable market value included in such
price (which in the case of publicly traded securities shall equal the last
reported sales price on the date of the Transfer Notice) or, if no readily
ascertainable market value exists, an amount equal to the fair market value of
such property determined by a qualified third party appraiser selected jointly
by NMC and the Series D Holder. If NMC and such Series D Holder are unable to
agree upon a third party appraiser, each of NMC and such Series D Holder shall
select a third party appraiser. The two third party appraisers so selected shall
appoint a third appraiser. The determination of such third appraiser shall be
used to determine the consideration payable by NMC, which determination shall be
final and binding on NMC and such Series D Holder.
(iii) If NMC exercises its right of first refusal
hereunder within the time specified for such exercise, the closing of the
purchase of Offered Shares with respect to which such
<PAGE>
right has been exercised shall take place within 5 calendar days after NMC gives
notice of such exercise.
(iv) If NMC fails to exercise any right of first
refusal hereunder within the time specified for such exercise, the Series D
Holder giving the Transfer Notice shall be free during the period of 90 calendar
days following the expiration of such time for exercise to sell the Offered
Shares specified in such Notice at the price specified therein or at any price
in excess thereof. If such Series D Holder fails to consummate the transaction
subject to such Transfer Notice within such 90 calendar day period, the right of
first refusal pursuant to this Section 4(d) shall again become applicable to
such Offered Shares.
(v) The provisions of this Section 4(d) shall
immediately and automatically terminate and the Series D Holders will be
permitted to sell any of their Post Closing Shares if (x) the Transaction is
terminated at any time or otherwise fails to be consummated on or before
November 15, 1998, or upon receipt of a letter from NMC to ACO (with a copy to
CVI and RGC) extending the termination date of the Transaction because NMC is
awaiting regulatory or shareholder approval, December 31, 1998; (y) NMC shall
agree to terminate such provisions; or (z) a Change in Control shall occur.
(e) Transfer of Sold Securities. In connection with the
purchase and sale of the Sold Securities:
(i) NMC acknowledges that it has received the
CVI Sold Warrants, the RGC Sold Warrants and, from each Series D Holder,
endorsed stock certificates for the Series D Shares constituting its Sold
Securities and letters of instruction regarding such Sold Securities and its
Post Closing Shares, Series C Warrants and Series D Warrants, and NMC hereby
waives its right to require that it receive an opinion of counsel in connection
with such transfer to the effect that the transfer of the Sold Securities is
exempt from registration under the Act or any state securities laws. NMC, in
waiving this right, may rely on the representations of ACO in Section 2(b)(iv)
hereof as if being made directly to NMC.
(ii) ACO agrees for the benefit of NMC to be
bound by all of the provisions contained in the Registration Rights Agreement,
among NMC, CVI and RGC, dated as of September 4, 1997, as amended (the
"Registration Rights Agreement"). ACO acknowledges that it has no rights with
respect to NMC Series E Preferred Stock, including without limitation, the right
to sell NMC Common Stock convertible from such Series E Preferred Stock,
pursuant to the Registration Rights Agreement or under the Series D Registration
Statement.
<PAGE>
5. Specific Enforcement. Each of the parties hereto acknowledges and
agrees that a party may not be made whole by monetary damages in the event of
any breach of the provisions of this Agreement. It is accordingly agreed that a
party, in the event of a breach of this Agreement by another party, shall be
entitled to seek an injunction or injunctions to prevent or cure such breaches
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which the party may be entitled by law or
equity. In furtherance of the foregoing, the parties agree that they shall not
be permitted to, and shall not, assert or bring any claim seeking to terminate
or suspend performance of any provision of this Agreement or seeking any
determination that any provision of this Agreement (including this Paragraph 5)
is invalid or unenforceable.
6. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to ACO, shall
be mailed, delivered, or telecopied (and confirmed by letter) at the address set
forth above or at telecopier number (818) 461-5496, Attention: Eric Weiss, with
a copy to Buchalter, Nemer, Fields & Younger, 601 South Figueroa Street, Suite
2400, Los Angeles, California 90017, Attention: Stuart D. Buchalter, telecopier
number: (213) 896-0400, if sent to CVI such notice shall be mailed, delivered,
or telecopied (and confirmed by letter) at the respective addresses set forth
above, Attention: Michael Spolan, or at telecopier number (415) 403-6525, with a
copy to Gibson, Dunn & Crutcher LLP, One Montgomery Street, 31st Floor, San
Francisco, California 94105, Attention: Gregory J. Conklin, telecopier number
(415) 986-5309; if sent to RGC such notice shall be mailed, delivered or
telecopied (and confirmed by letter) to Gary Kaminsky, or at telecopier number
(610) 617-0570, with a copy to Morgan Lewis & Bockius LLP, 2000 One Logan
Square, Philadelphia, Pennsylvania 19103, Attention: James W. McKenzie, Jr.,
telecopier number (215) 963-0570; and if sent to NMC, such notice shall be
mailed, delivered or telecopied (and confirmed by letter) at the address set
forth above or at telecopier number (215) 988-4869, Attention: General Counsel.
7. Parties. This Agreement shall inure to the benefit of and be binding
upon each of the parties hereto and each of their respective administrators,
successors and assigns. Nothing set forth in this Agreement is intended or shall
be construed to give any person or entity, other than the parties hereto and
their respective administrators, successors and assigns, any legal or equitable
right, remedy or claim in respect of this Agreement or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective administrators, successors and assigns.
8. Entire Agreement; Amendments. This Agreement, contains the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect
<PAGE>
to its subject matter, including that certain Letter Agreement dated July 15,
1998 among CVI, RGC, ACO and NMC. CVI and RGC acknowledge that the Certificate
Designations for the NMC Series E Preferred Stock contains a provision which
states that, on liquidation of NMC, the Series E Preferred Stock and the Series
D Shares are treated pari passu. This Agreement may be amended only by a written
instrument duly executed by the party or parties charged with the performance of
the provision to be amended or their respective successors or assigns.
9. Survival of Representations. All representations, warranties and
agreements made by ACO and the Series D Holders in this Agreement or pursuant
hereto shall survive the Closing Date.
10. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, void or unenforceable.
11. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to its conflict of laws principles.
12. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original, and together shall constitute one and
the same Agreement.
13. Publicity. Prior to filing any document with any governmental
authority or issuing any press release or other public statement which refers to
this Agreement, any of the Series D Holders' obligations hereunder, either of
the Series D Holders or the Series D Holders' ownership of any Series D Shares,
Series C Warrants, Series D Warrants or NMC Common Stock, each party hereto
shall provide the other parties with a reasonable opportunity to review and
comment on such document, press release or other public statement.
<PAGE>
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among ACO, the Series D Holders and NMC.
"SERIES D HOLDERS"
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management Inc.,
as agent
By:
------------------------------------
Michael Spolan,
General Counsel and Secretary
<PAGE>
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By:
------------------------------------
Accepted and agreed as of the date written above:
NM ACQUISITION CO., LLC,
a Delaware limited liability company
By: Temporary Media Co., LLC,
a Delaware limited liability company
Its Managing Member
By:
--------------------------------
Eric Weiss,
Managing Member
Accepted and agreed as of the date written above as to Sections 1, 3, 4, 5, 6,
7, 8, 10, 11, 12 and 13
NATIONAL MEDIA CORPORATION,
a Delaware corporation
By:
-----------------------------------------
[Name]
[Title]
<PAGE>
EXHIBIT 10.5
Value Vision/National Media Letter Agreement
<PAGE>
VALUEVISION INTERNATIONAL, INC.
6740 Shady Oak Road
Minneapolis, Minnesota 55344
August 11, 1998
NM Acquisition Co., LLC
c/o BT Alex Brown Incorporated
1 South Street
Baltimore, MD 21202
Attn: Stephen C. Lehman,
Managing Member
National Media Corporation
1835 Market Street, Suite 1100
Philadelphia, PA 19103
Attn: Robert Verratti
Chief Executive Officer
Gentlemen:
ValueVision International, Inc. ("ValueVision"), a Minnesota
corporation, agrees with NM Acquisition Co., LLC ("ACO"), a Delaware limited
liability company and National Media Corporation, a Delaware corporation ("NMC")
as follows:
1. Description of ValueVision Note. ValueVision is the holder of a
Demand Promissory Note (the "ValueVision Note") dated January 5, 1998, pursuant
to which NMC promises to pay $10 million to ValueVision.
2. Description of ValueVision Warrant. ValueVision is the holder of a
warrant (the "ValueVision Warrant") dated November 24, 1995, pursuant to which
NMC agrees to issue up to 500,000 shares of the common stock of NMC ("Shares")
to ValueVision at an exercise price (the "Exercise Price") of $8.865 per Share.
3. Description of Telemarketing Agreement. ValueVision and NMC are
parties to a Telemarketing, Production and Post-Production Agreement (the
"Telemarketing Agreement") dated April 13, 1995, and amended on October 23,
1995, November 24, 1995 and November 5, 1996, pursuant to which ValueVision is
required to pay $1.2 million to NMC for the ValueVision Warrant,
<PAGE>
$800,000 of which has previously been paid and $400,000 of which is payable on
or before September 1, 1998. NMC hereby agrees that ValueVision shall pay the
remaining $400,000 by offsetting such amount against interest payments owing
from time to time under the ValueVision Note and that ValueVision shall not be
required to make any other payment under the Telemarketing Agreement prior to
the termination of this Agreement. Further, ValueVision shall have the right to
exercise the ValueVision Warrant at any time in accordance with its terms.
4. Representations and Warranties.
(a) Representations and Warranties of ValueVision. ValueVision
represents and warrants to NMC and ACO as follows:
(i) ValueVision has not, and has not formed the
intention to, exercise any right arising under the ValueVision Note as
a result of any Triggering Event or Event of Default (as defined in the
ValueVision Note) or any breach of any obligation of NMC under the ValueVision
Note (any such Triggering Event, Event of Default or breach is a "Default" for
the purposes of this Agreement).
(ii) ValueVision has authorized, executed and
delivered this Agreement and this Agreement constitutes a valid and
binding agreement on the part of ValueVision, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles.
(iii) ValueVision has been duly organized and is
validly existing in good standing under the Minnesota Business
Corporations Act; and ValueVision has full legal right, power and authority to
enter into and perform its obligations under this Agreement. All consents,
approvals, authorizations and orders required for the execution and delivery by
ValueVision of this Agreement, have been obtained and are in full force and
effect.
(b) Representations and Warranties of ACO. ACO represents and
warrants to ValueVision as follows:
(i) ACO has been duly organized and is validly
existing as a limited liability company under the Delaware Limited
Liability Company Act; and ACO has full legal right, power and authority to
enter into and perform its obligations under this Agreement.
(ii) ACO has duly authorized, executed and
delivered this Agreement and this Agreement constitutes a valid and
binding agreement on the part of ACO, enforceable in
<PAGE>
accordance with its terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
negotiable principles.
5. ValueVision Note.
(a) Subject to the following sentence, to the extent that the
transactions (the "Transactions") contemplated by the Stock Purchase Agreement
of even date herewith between NMC and ACO (the "Series E Agreement"), and
consummation thereof by ACO and NMC, and any actions of NMC which are necessary
or incidental with respect thereto, constitute or give rise to any Default,
ValueVision hereby conditionally (as described below) waives all of its rights
under the ValueVision Note with respect to such Default. The foregoing waiver is
conditional and will expire upon the earliest to occur of (1) January 1, 1999,
(2) the termination or expiration of the Series E Agreement, (3) the date any
party to the Series E Agreement makes an announcement to the effect that it will
not or does not intend to proceed with the transactions contemplated by the
Series E Agreement and (4) the date after execution of the Series E Agreement
upon which the Series E Agreement is materially amended or changed in a manner
which is materially detrimental to ValueVision (or the date upon which an
agreement to effect such amendment or change is entered into).
(b) ValueVision hereby waives its rights prior to January 1,
1999 to declare immediately due and payable any of the principal amount
outstanding under the ValueVision Note (the "Principal") to the extent that such
rights derive from the failure of a Loan Party (as defined in the ValueVision
Note) to comply with any covenant or agreement contained in the Merger Agreement
(as defined in the ValueVision Note). From the date hereof through January 1,
1999, ValueVision agrees to forbear from declaring any default under the
ValueVision Note unless: (i) NMC fails to make any interest payment to
ValueVision as required under the ValueVision Note or (ii) First Union National
Bank shall declare an event of default, and accelerate the amount due, under the
Amended and Restated Loan Agreement, as amended through the date hereof.
(c) If ValueVision is or becomes entitled to make a demand for
repayment of the Principal, or the Principal becomes immediately due and
payable, prior to January 1, 1999, and if NMC subsequently fails to repay at
least $2,500,000 against the ValueVision Note in accordance with its terms,
ValueVision agrees that its right to elect payment in common stock of NMC,
pursuant to Section 2.a of the ValueVision Note, shall be limited to $2.5
million in aggregate prior to January 1, 1999, at $1.073125 per share after
which time any remaining unpaid amounts may be the subject to such an election.
<PAGE>
(d) For the purposes of Section 6.a.(5) of the ValueVision
Note, the Amended and Restated Loan Agreement (as defined in the ValueVision
Note) shall be deemed to be amended by the First Union National Bank Consent
Agreement (as defined in the Series E Agreement). To the extent that the Amended
and Restated Loan Agreement is fully satisfied prior to the ValueVision Note and
no comparable debt facility is entered into by NMC, the parties hereto agree
that the ValueVision Note will be amended to contain the covenants contained in
Sections 8 and 9 of the Amended and Restated Loan Agreement, as amended through
the date hereof.
(e) The second paragraph of Section 2 a of the ValueVision
Note is hereby amended in its entirety to read as follows:
Borrower shall pay the demanded amount within five Business
Days (as defined below) of demand. In the event Lender makes a
demand for repayment and Borrower cannot repay the demanded
amount in cash, Lender may, in its sole discretion, elect
repayment of any or all of the principal and/or interest in
shares of the common stock of Borrower, par value $.01 per
share (the "Common Stock"), which have been duly and validly
issued, fully paid and non-assessable, at a per share price of
$1.073125 subject to adjustment as set forth below. The
parties agree that the $1.073125 per share price is not
applicable to any payment in full on maturity or prepayment
pursuant to Section 2(b) is as specifically set forth in the
immediately preceding sentence.
Mechanical Adjustments. If at any time prior to satisfaction
of this Note in full, the Borrower shall (i) declare a
dividend or make a distribution on the Common Stock payable in
shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class); (ii) subdivide,
reclassify or recapitalize outstanding Common Stock into a
greater number of shares; (iii) combine, reclassify or
recapitalize its outstanding Common Stock into a smaller
number of shares, or (iv) issue any shares of its capital
stock by reclassification of its Common Stock (including any
such reclassification in connection with a consolidation or a
merger in which the Company is the continuing corporation),
the conversion price in effect at the time of the record date
of such dividend, distribution, subdivision, combination,
reclassification or recapitalization shall be adjusted so that
the Lender shall be entitled to receive the aggregate number
and kind of shares which, if this Note had been converted in
full immediately prior to such event, lender would have owned
upon such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination,
reclassification or recapitalization. Any adjustment required
by this paragraph shall be made successively immediately after
the record date, in the case of a dividend or distribution, or
the effective date, in the
<PAGE>
case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate
number and kind of shares.
6. ValueVision Warrant. The parties hereby agree that the exercise
price under that certain Warrant dated January 5, 1998 issued by NMC to
ValueVision, pursuant to which NMC has agreed to issue ValueVision 250,000
shares of NMC Common Stock (the "January Warrant"), is $2.74 for each such
share. The ValueVision Warrant is hereby amended by reducing the exercise price
for each Share from $8.865 to $2.74.
7. NMC agrees within 20 days of the date hereof to execute amendments
to the ValueVision Warrant and the January Warrant to reflect that the exercise
price under each such warrant is $2.74 per share.
8. Set Off. All amounts owing by NMC to ValueVision pursuant to the
ValueVision Note shall be set off against all amounts owing by ValueVision to
NMC pursuant to the Telemarketing Agreement, such that the difference only shall
be payable by the party owing the greater amount.
9. Condition Subsequent. The rights and obligations of the parties
hereto shall terminate on January 1, 1999, if the Transactions have not been
consummated on or before December 31, 1998; provided, however, that sections
5(e), 6 and 7 shall remain in effect without respect to any such termination.
10. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to ACO shall be
mailed, delivered, or telecopied (and confirmed by letter) to you at the address
set forth above or at telecopier number (818) 461- 5496, Attention: Eric Weiss,
with a copy to Buchalter, Nemer, Fields & Younger, 601 South Figueroa Street,
Suite 2400, Los Angeles, California 90017, Attention: Stuart D. Buchalter. If
sent to ValueVision, such notice shall be mailed, delivered, or telecopied (and
confirmed by letter) to the address set forth above, Attention: Chief Executive
Officer, or at telecopier number (612) 947-0141. If sent to NMC, such notice
shall be mailed, delivered, or telecopied (and confirmed by letter) to the
address set forth above, Attention: General Counsel, or at telecopier number
(215) 988-4869.
11. Parties. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and each of their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or entity, other
than the parties hereto and their respective executors, administrators,
successors and assigns, any legal or equitable right, remedy or claim in respect
of this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and
<PAGE>
being for the sole and exclusive benefit of the parties hereto and their
respective executors, administrators, successors and assigns.
12. Entire Agreement; Amendments. This Agreement supersedes all prior
agreements and understandings set forth in that certain Letter of Agreement
dated July 15, 1998 between the parties hereto. This Agreement may be amended
only by a written instrument duly executed by the parties or their respective
successors or assigns.
13. Survival of Representations. All representations, warranties and
agreements made by ACO and ValueVision in this Agreement shall survive the
consummation of the transactions contemplated hereby.
14. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, void or unenforceable.
15. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware.
16. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original, and together shall constitute one and
the same Agreement.
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding Agreement among ACO, ValueVision and NMC.
"VALUEVISION"
VALUEVISION INTERNATIONAL, INC.,
a Minnesota corporation
By:
-----------------------------------------
Gene McCaffrey, Chief Executive Officer
<PAGE>
Accepted and agreed as of
the date written above:
NM ACQUISITION CO., LLC.,
a Delaware limited liability company
By its Manager,
TEMPORARY MEDIA CO., LLC
a Delaware Limited Liability Company
By:
----------------------------------
Eric Weiss, Managing Member
Accepted and agreed as of
the date written above:
NATIONAL MEDIA CORPORATION,
a Delaware corporation
By:
----------------------------------
Its:
------------------------
<PAGE>
EXHIBIT 99
Press Release
<PAGE>
Investor Relations Contact:
Bruce Goodman Bruce Boyle
(215) 988-4683 (215) 988-4641
NATIONAL MEDIA
SIGNS DEFINITIVE AGREEMENT
WITH INVESTOR GROUP LED BY STEVE LEHMAN
Steve Lehman Named as Acting CEO
PHILADELPHIA, PA, August 13 1998 -- National Media Corporation (NYSE: NM) today
announced that it has executed a definitive agreement with NM Acquisition Co.,
LLC, an investor group led by Stephen C. Lehman, regarding an aggregate $30-32
million investment by the group. In connection with the execution of the
definitive agreement regarding the investment, NM Acquisition Co., LLC,
consummated the acquisition of a $10 million position in the Company's
outstanding Series D Preferred Stock. The Company had previously announced the
investment on July 16, 1998, when a Letter of Intent was signed.
Effective upon execution of the definitive agreement, National Media also named
Mr. Lehman as the Company's Acting CEO. Mr. Lehman, along with Eric Weiss and
Andrew Schuon, was also named to the Company's Board of Directors.
Mr. Lehman, said "We intend to be a very shareholder-oriented company and
recognize that full communication with our shareholders is essential if we are
to reward their trust and build their confidence. In particular, we look forward
to communicating our vision and new platform, along with our accomplishments and
our goals. I am extremely enthusiastic about the opportunities for National
Media and appreciate the support and enthusiasm with which the investment
community has welcomed our involvement with the Company.
"It is both significant and gratifying that National Media's new
management team is personally investing more than $5 million", added Mr. Lehman.
"This investment not only expresses the confidence of the senior executives in
the future of National Media, but aligns the interests of the management team
squarely with those of our other shareholders."
The consummation of the definitive agreement is subject to shareholder approval
and certain regulatory approvals. It is anticipated that the agreement will be
consummated during the fall of 1998, following a shareholder meeting to be held
to vote on the transaction.
National Media Corporation (NYSE: NM) is the world's largest publicly held
direct response television company and is an innovative leader in the growing
world of electronic commerce. It broadcasts more than 3,000 half-hours of
programming each week, reaches 90 percent of television homes in the United
States, and brings its programming to more than 370 million television
households in more than 70 countries worldwide.
-MORE-
<PAGE>
August 13 1998
Page 2
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this press
release (as well as information included in oral statements or other written
statements made or to be made by the Company) contains statements that are
forward-looking, such as statements relating to consummation of the transaction,
anticipated future revenues of the Company and success of current product
offerings. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. For a
description of additional risks and uncertainties, please refer to the Company's
filings with the Securities and Exchange Commissions, including Forms 10-K and
10-Q.
***
[To Request Previous press releases on National Media Corporation please
contact, PR Newswire at (800) 758-5804 Ext 604644.]
