<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(AMENDMENT NO. )*
---------
NATIONAL MEDIA CORPORATIOM
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(Name of Issuer)
Common Stock $0.01 Par Value
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(Title of Class of Securities)
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(CUSIP Number)
11 Penn Center, Suite 1100, 1835 Market Street,
Philadephia, PA 19103
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
July 15, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box / /.
NOTE: Schedules filed in paper format shall include a signed original and
copies of the schedule, including all exhibits. See Section 240.13d-7 for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED
IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
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CUSIP No.
- -------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Daniel M. Yukelson
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group* (See
Instructions)
(a) X
(b)
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds* (See Instructions) PF, OO
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization United States of America
- -------------------------------------------------------------------------------
Number of Shares 7. Sole Voting
Beneficially Owned Power 0
by Each Reporting --------------------------------------------------
Person With 8. Shared Voting
Power 26,734,476
--------------------------------------------------
9. Sole Dispositive 0
Power
--------------------------------------------------
10. Shared Dispositive
Power 26,734,476
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
26,734,476
- -------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
(See Instructions)
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
51.22%
- -------------------------------------------------------------------------------
14. Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR COVER PAGE
(1) NAMES AND I.R.S. IDENTIFICATION NUMBERS OF REPORTING PERSONS - Furnish
the full legal name of each person for whom the report is filed - i.e.,
each person required to sign the schedule itself- including each member
of a group. Do not include the name of a person required to be
identified in the report but who is not a reporting person. Reporting
persons that are entities are also requested to furnish their I.R.S.
identification numbers, although disclosure of such numbers is
voluntary, not mandatory (see "SPECIAL INSTRUCTIONS FOR COMPLYING
WITH SCHEDULE 13D below).
(2) If any of the shares beneficially owned by a reporting person are held
as a member of a group and the membership is expressly affirmed, please
check row 2a. If the reporting person disclaims membership in a group
or describes a relationship with other persons but does not affirm the
existence of a group, please check row 2(b) [unless it is a joint filing
pursuant to Rule 13d-1(k)(s) in which case it may be necessary to check
row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
2
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CUSIP No.
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
NM Acquisition Co., LLC 95-4696564
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2. Check the Appropriate Box if a Member of a Group* (See Instructions
(a) X
(b)
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3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds* (See Instructions) OO
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5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
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6. Citizenship or Place of Organization Delaware
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Number of Shares 7. Sole Voting
Beneficially Owned Power 0
by Each Reporting --------------------------------------------------
Person With 8. Shared Voting
Power 26,734,476
--------------------------------------------------
9. Sole Dispositive 0
Power
--------------------------------------------------
10. Shared Dispositive
Power 26,734,476
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
26,734,476
- -------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
(See Instructions)
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
51.22%
- -------------------------------------------------------------------------------
14. Type of Reporting Person*
00
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INSTRUCTIONS FOR COVER PAGE
(1) NAMES AND I.R.S. IDENTIFICATION NUMBERS OF REPORTING PERSONS - Furnish
the full legal name of each person for whom the report is filed - i.e.,
each person required to sign the schedule itself- including each member
of a group. Do not include the name of a person required to be
identified in the report but who is not a reporting person. Reporting
persons that are entities are also requested to furnish their I.R.S.
identification numbers, although disclosure of such numbers is
voluntary, not mandatory (see "SPECIAL INSTRUCTIONS FOR COMPLYING
WITH SCHEDULE 13D below).
(2) If any of the shares beneficially owned by a reporting person are held
as a member of a group and the membership is expressly affirmed, please
check row 2a. If the reporting person disclaims membership in a group
or describes a relationship with other persons but does not affirm the
existence of a group, please check row 2(b) [unless it is a joint filing
pursuant to Rule 13d-1(k)(s) in which case it may be necessary to check
row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
2
<PAGE>
CUSIP No.
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Stephen C. Lehman
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2. Check the Appropriate Box if a Member of a Group* (See
Instructions)
(a) X
(b)
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3. SEC Use Only
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4. Source of Funds* (See Instructions) PF
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5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
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6. Citizenship or Place of Organization United States of America
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Number of Shares 7. Sole Voting
Beneficially Owned Power 0
by Each Reporting --------------------------------------------------
Person With 8. Shared Voting
Power 26,734,476
--------------------------------------------------
9. Sole Dispositive 0
Power
--------------------------------------------------
10. Shared Dispositive
Power 26,734,476
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
26,734,476
- -------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
(See Instructions)
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
51.22%
- -------------------------------------------------------------------------------
14. Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR COVER PAGE
(1) NAMES AND I.R.S. IDENTIFICATION NUMBERS OF REPORTING PERSONS - Furnish
the full legal name of each person for whom the report is filed - i.e.,
each person required to sign the schedule itself- including each member
of a group. Do not include the name of a person required to be
identified in the report but who is not a reporting person. Reporting
persons that are entities are also requested to furnish their I.R.S.
identification numbers, although disclosure of such numbers is
voluntary, not mandatory (see "SPECIAL INSTRUCTIONS FOR COMPLYING
WITH SCHEDULE 13D below).
(2) If any of the shares beneficially owned by a reporting person are held
as a member of a group and the membership is expressly affirmed, please
check row 2a. If the reporting person disclaims membership in a group
or describes a relationship with other persons but does not affirm the
existence of a group, please check row 2(b) [unless it is a joint filing
pursuant to Rule 13d-1(k)(s) in which case it may be necessary to check
row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
2
<PAGE>
CUSIP No.
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1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Eric R. Weiss
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2. Check the Appropriate Box if a Member of a Group* (See
Instructions)
(a) X
(b)
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds (See Instructions) PF
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization United States of America
- -------------------------------------------------------------------------------
Number of Shares 7. Sole Voting
Beneficially Owned Power 0
by Each Reporting --------------------------------------------------
Person With 8. Shared Voting
Power 26,734,476
--------------------------------------------------
9. Sole Dispositive 0
Power
--------------------------------------------------
10. Shared Dispositive
Power 26,734,476
- -------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
26,734,476
- -------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
(See Instructions)
- -------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
51.22%
- -------------------------------------------------------------------------------
14. Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
INSTRUCTIONS FOR COVER PAGE
(1) NAMES AND I.R.S. IDENTIFICATION NUMBERS OF REPORTING PERSONS - Furnish
the full legal name of each person for whom the report is filed - i.e.,
each person required to sign the schedule itself- including each member
of a group. Do not include the name of a person required to be
identified in the report but who is not a reporting person. Reporting
persons that are entities are also requested to furnish their I.R.S.
identification numbers, although disclosure of such numbers is
voluntary, not mandatory (see "SPECIAL INSTRUCTIONS FOR COMPLYING
WITH SCHEDULE 13D below).
(2) If any of the shares beneficially owned by a reporting person are held
as a member of a group and the membership is expressly affirmed, please
check row 2a. If the reporting person disclaims membership in a group
or describes a relationship with other persons but does not affirm the
existence of a group, please check row 2(b) [unless it is a joint filing
pursuant to Rule 13d-1(k)(s) in which case it may be necessary to check
row 2(b)].
(3) The 3rd row is for SEC internal use; please leave blank.
2
<PAGE>
CUSIP NO. SCHEDULE 13D
INTRODUCTION
The reporting persons named in Item 2 below are hereby jointly filing this
statement on Schedule 13D because they may be deemed a "group" within the
meaning of Rule 13d-5(b)(1) promulgated by the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"), by virtue of their affiliated status and/or action in
concert with respect to (i) the acquisition of Series D Convertible Preferred
Stock of National Media Corporation, which Series D Convertible Preferred Stock
is convertible into shares of Common Stock (as herein defined); (ii) the
acquisition of Series E Convertible Preferred Stock of National Media
Corporation, which Series E Convertible Preferred Stock will be convertible into
shares of Common Stock; (iii) the acquisition of common stock purchase warrants
of National Media Corporation to purchase shares of Common Stock; and (iv) the
acquisition, pursuant to the Consulting Agreement (as hereinafter defined), of
common stock purchase warrants and options of National Media Corporation to
purchase shares of Common Stock.
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the Common Stock, $.01 par value ("Common
Stock"), of National Media Corporation, a Delaware corporation ("Issuer"), whose
principal executive offices are located at Eleven Penn Center, Suite 1100, 1835
Market Street, Philadelphia, PA 19103.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is filed on behalf of Stephen C. Lehman ("Lehman"), Eric
R. Weiss ("Weiss"), Daniel Yukelson ("Yukelson"), and NM Acquisition Co., LLC, a
Delaware limited liability company ("NM Acquisition Co.") (Lehman, Weiss,
Yukelson and NM Acquisition Co. are collectively referred to hereinafter as the
"Filing Persons").
Under the definition of "beneficial owner" ("Beneficial Ownership
Definition") provided in Rule 13d-3(d)(1) of the 1934 Act, the Filing Persons
may be deemed to beneficially own shares of Issuer's Common Stock for which they
have a right to acquire, by virtue of the fact that the Filing Persons have
entered into a Letter of Intent, dated July 15, 1998, with the Issuer to
purchase, on an as converted basis, in excess of five percent of the outstanding
Common Stock of the Issuer.
The business address of Lehman is 15260 Ventura Boulevard, Suite 500,
Sherman Oaks, CA 91403-5339.
The business address of Weiss is 15260 Ventura Boulevard, Suite 500,
Sherman Oaks, CA 91403-5339.
The business address of Yukelson is 15260 Ventura Boulevard, Suite 500,
Sherman Oaks, CA 91403-5339.
The business address of NM Acquisition Co. is 15260 Ventura Boulevard,
Suite 500, Sherman Oaks, CA 91403-5339.
Messrs Lehman, Weiss and Yukelson are private investors and NM Acquisition
Co., LLC is a Delaware limited liability company, organized by Messrs Lehman,
Weiss and Yukelson to effect the transactions described in the Introduction.
Neither Messrs Lehman, Weiss or Yukelson nor NM Acquisition Co. has, during
the last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), nor have any of the above mentioned parties
been a party to a civil proceeding of a judicial or administrative body of
competent
<PAGE>
jurisdiction as the result of such proceedings was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activity subject to, federal or state securities laws or finding
any violation with respect to such laws.
Messrs Lehman, Weiss and Yukelson are citizens of the United States of
America and NM Acquisition Co., LLC is a Delaware limited liability company.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
All shares of Issuer's Common Stock to be acquired pursuant the conversion
of Series D Convertible Preferred Stock and common stock purchase warrants
related thereto, and Series E Convertible Preferred Stock to be acquired by the
Filing Persons are to be purchased with personal funds except that a portion of
the source of Yukelson's funds shall be financed through margin debt.
ITEM 4. PURPOSE OF TRANSACTION
The Filing Persons entered into a Letter of Intent, dated July 15, 1998,
with National Media Corporation ("LOI"), a Delaware corporation, pursuant to
which the Filing Persons are to acquire (i) shares of Series D Convertible
Preferred Stock from the existing holders thereof, which Series D Convertible
Preferred Stock is convertible into shares of Common Stock, (ii) shares of
Series E Convertible Preferred Stock, which Series E Convertible Preferred Stock
is convertible into shares of Common Stock, from the Issuer, for the following
purposes: (i) investment purposes, (ii) to acquire additional shares, (iii) to
change the current make up of the Issuer's Board of Directors, (iv) to change
the current make up of the management of the Issuer, and (v) to materially
change the capitalization of the Company.
None of the Filing Persons presently has any present plans or proposals
which relate to or would result in:
(a) An extraordinary Corporate transaction, such as a merger,
reorganization or liquidation of the Issuer;
(b) The sale or transfer of a material amount of assets of the Issuer;
(c) The material change of the business or corporate structure of the
Issuer other than as contemplated by the LOI;
(d) Changes in the Issuer's Certificate of Incorporation or Bylaws or
other actions which may impede the acquisition of control of the Issuer by any
person; or
(e) Causing any class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation or a registered national securities association.
The Filing Persons intend to continually review the Issuer's business
affairs and financial position, as well as conditions in the securities markets
and general economic and industry conditions. Based on such evaluation and
review, the Filing Persons will continue to consider various alternative courses
of action and will in the future take such actions with respect to the Issuer as
it deems appropriate in light of the circumstances existing from time to time.
Such actions may include, but are not limited to, purchasing additional shares
of Preferred Stock, Common Stock, or debt securities of the Issuer, either in
the open market or in privately negotiated transactions, or selling its shares
of Series D Convertible Preferred Stock, Series E Convertible Preferred Stock
and/or Common Stock (if converted or purchased), either in the open market or in
privately negotiated transactions. The foregoing actions may be taken by each
of the Filing Persons alone or with other persons.
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The percentage outstanding Common Stock reported in this Item 5 are based
on the assumption that there are 25,453,752 shares of Common Stock outstanding,
which is the number of outstanding shares set forth on the Issuer's Annual
Report on Form 10K, filed with the SEC as of July 8, 1998, for the fiscal year
ended March 31, 1998. As to each item below in this Item 5, the number of
outstanding shares is increased to reflect the issuance of additional Common
Stock pursuant to the conversion of the particular security.
Under the Beneficial Ownership Definition, the Filing Persons, upon
waiver by them of certain provisions governing the conversion of the Series D
Convertible Preferred Stock (which they intend to waive upon acquisition
thereof), may be deemed beneficial owner of 9,345,700 shares Common Stock as
a result of the conversion of their Series D Convertible Preferred Stock, or
26.86% of Common Stock.
Under the Beneficial Ownership Definition, the Filing Persons may be deemed
beneficial owner of 13,333,334 shares Common Stock as a result of the conversion
of their Series E Convertible Preferred Stock, or 34.37% of Common Stock.
Under the Beneficial Ownership Definition, the Filing Persons, upon waiver
by them of certain provisions governing the exercise of such warrants (which
they intend to waive upon acquisition thereof), may be deemed beneficial owner
of 992,942 shares of the Common Stock as a result of the exercise of common
stock purchase warrants to purchase 992,942 shares of Common Stock, or 3.75% of
Common Stock.
Under the Beneficial Ownership Definition, the Filing Persons may be deemed
beneficial owner of 3,062,500 shares of the Common Stock as a result of the
exercise of common stock purchase warrants to purchase 3,062,500 shares of
Common Stock, or 10.74% of Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Upon the execution of the transaction documents contemplated by the LOI,
the Issuer and Temporary Media Co., LLC, a Delaware limited liability company
controlled by Messrs Lehman, Weiss and Yukelson ("TMC"), are to enter into a six
month consulting agreement, pursuant to which TMC shall provide management
consulting services (the "Consulting Agreement"). In consideration of the
management consulting services provided by TMC, the Issuer shall (i) pay TMC a
retainer of $80,000 per month, (ii) issue contingent common stock purchase
warrants to purchase up to 3,762,500 shares of Common Stock, of which 3,412,500
have an exercise price of $1.32 and 350,000 have an exercise price of $1.50, and
(iii) grant a five year option to purchase up to 212,500 shares of Common Stock
at an exercise price of $1.32.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Letter of Intent, by and between NM Acquisition Co. and the Issuer, dated
July 10, 1998, and amendment thereto, dated July 15, 1998.
<PAGE>
/s/ Stephen C. Lehmann
_______________________
Stephen C. Lehmann
_______________________
Eric R. Weiss
_______________________
Daniel Yukelson
NM Acquisition Co., LLC
By:___________________
Daniel Yukelson, Co-Managing Member
<PAGE>
______________________
Stephen C. Lehmann
Daniel Yukelson
______________________
Eric R. Weiss
Daniel Yukelson (As Attorney-in-Fact for Eric R. Weiss)
Daniel Yukelson
______________________
Daniel Yukelson
NM Acquisition Co., LLC
Daniel Yukelson
By:___________________
Daniel Yukelson, Co-Managing Member
<PAGE>
NM Acquisition Co.
c/o BT Alex. Brown Incorporated
1 South Street
Baltimore, Maryland 21202
July 10, 1998
Board of Directors
National Media Corporation
1700 Walnut Street
Philadelphia, PA 19103
Gentlemen:
We are pleased to submit this Letter of Intent on behalf of NM Acquisition
Co., LLC, a newly formed Delaware limited liability company ("ACO"), controlled
by Stephen C. Lehman ("Lehman") to acquire a substantial equity interest in and
operational control of National Media Corporation, a Delaware corporation,
("NMC" or the "Company") (such proposed transaction is referred to herein as the
"Transaction"). As at the date of this Letter of Intent ("LOI"), Lehman, Eric
Weiss ("Weiss") and Dan Yukelson ("Yukelson") are the only proposed managing
members of ACO and BT Capital, Jacor and Gruber McBain are the only proposed
members holding a 10% or greater ownership interest in ACO. ACO will notify NMC
as to any future developments regarding such management or ownership of ACO.
The purpose of this Letter of Intent ("LOI") is to set forth the terms
and conditions pursuant to which NMC and ACO are prepared to negotiate a
definitive agreement(s) to consummate the Transaction. We are committed to
working diligently to complete our due diligence, arrive at a negotiated
agreement and consummate the Transaction as rapidly as possible. We anticipate
that we will be able to complete the required due diligence within two weeks of
the date of this LOI (depending upon when the requested information is provided
to us and the availability of "key" management personnel) and that execution of
a definitive agreement for the Transaction would occur soon after the end of
such two week due diligence period. Once a definitive agreement is executed, we
would expect to jointly proceed to closing the Transaction as soon as
practicable (the "Closing").
Based upon the information regarding NMC available to us as of this date
and subject to the terms and conditions herein set forth, we propose the
following:
<PAGE>
Board of Directors
National Media Corporation
July 10, 1998
Page 2
A. EQUITY INVESTMENT: ACO will raise a minimum of $25 million for
investment (the "Investment") as follows:
1. $10 million of the Investment shall be utilized to purchase
fifty percent (50%) of the outstanding Series D convertible, preferred stock
of NMC ("Series D Shares"), including two-thirds (2/3) of the related
outstanding warrants (e.g., 992,942 warrants) from the existing holders of
Series D Shares, substantially on the terms to be annexed as Annex I hereto.
2. $15 million of the Investment shall be utilized to purchase from
NMC newly issued convertible, voting Series E preferred stock ("Series E
Shares"). Each Series E Share shall vote with the common stock of the Company on
an as converted basis. Such Series E Shares shall be convertible into shares of
NMC's common stock at a fixed conversion price of $1.50 per share (as may be
adjusted pursuant to standard antidilution provisions). The proceeds of the
Series E Shares shall be utilized by the Company for working capital purposes,
including, but not limited to satisfying the Company's credit facility
obligations with First Union Bank and notes payable obligations with ValueVision
International, Inc. ("ValueVision").
3. The Company shall use best efforts to ensure the continuous
registration with the Securities Exchange Commission (the "SEC") of all common
stock, $0.01 par value ("Shares"), acquired by ACO (and its assigns) through
conversion of Series D or E preferred stock or the conversion of any options or
warrants acquired in connection with the Transaction.
4. In conjunction with the Transaction, the Company and ACO shall
use best efforts to enter into: (a) a definitive agreement with the existing
holders of Series D Shares, substantially on the terms to be annexed as Annex I
hereto; (b) a definitive agreement with ValueVision, substantially on the terms
to be annexed as Annex 2 hereto; and (c) a definitive agreement with First
Union Bank, substantially on the terms to be annexed as Annex 3 hereto
(these three definitive agreements are the "Third Party Agreements" for
the purposes of this LOI).
5. The Transaction is subject to: (a) ACO and NMC executing
definitive agreements for the Transaction (the "Definitive Agreements")
satisfactory to ACO, NMC and their respective legal counsel; (b) ACO and NMC
and the respective third parties executing the Third Party Agreements;
and (c) receipt of all regulatory, exchange, and other approvals or consents
which may be required. Nothing contained herein shall be deemed
<PAGE>
Board of Directors
National Media Corporation
July 10, 1998
Page 3
to constitute ACO or Lehman acting in concert or as a "group" with the Company
or any of its present preferred or common stockholders.
B. CONSULTING AGREEMENT: Upon execution of the Definitive Agreements, the
Company and Temporary Media Co., LLC, a newly formed Delaware limited liability
company ("TMC"), controlled by Lehman, Weiss and Yukelson, shall execute a
consulting agreement (the "Consulting Agreement") including the following
principal terms:
1. SERVICES. In consideration of the Retainer (as defined in
paragraph 2 below), the Option (as defined in paragraph 3 below), and the
Contingent Warrants (as defined in paragraph 4 below), TMC shall provide
executive management consulting services to NMC throughout the Term (as defined
in paragraph 5 below). TMC shall not be required to devote its services entirely
to the Company, and shall, in consultation with the Chairman of the Board of the
Company, determine the method, details and means of performing such services,
subject to reporting to the Company's Chairman. TMC shall ensure that Lehman,
Weiss and Yukelson devote, in aggregate, at least one hundred man-hours per week
to the business of the Company, provided that Lehman, who shall be designated as
"Acting CEO" at no additional cost to the Company, shall devote at least forty
of such man-hours per week.
2. RETAINER. During the Term, the Company shall pay TMC the sum of
$80,000 per month, payable on the first day of each month, as a retainer for the
Services (as defined in paragraph 1 above).
3. OPTION. On the date NMC and the Company execute the Definitive
Agreements (the "Definitive Agreement Date"), the Company shall grant to TMC a
five year option to purchase up to 212,500 shares of the Company's common stock
at an exercise price of $1.32 per Share. One sixth of such options shall vest on
the last business day of each of the six months following the execution of this
LOI, provided that: (a) all such options shall immediately vest upon the earlier
of: (i) the Closing; or (ii) termination of the Consulting Agreement pursuant to
paragraph 6 below; and (b) all non-vested options shall be cancelled if and when
NMC's shareholders resolve that NMC will not proceed with the transaction.
4. CONTINGENT WARRANTS. On the Definitive Agreement Date, the
Company shall grant to TMC five year fully vested but contingent warrants
(substantially in the form to be appended to the definitive agreement) to
purchase up to 3,762,500 Shares (the "Contingent Warrants"), as follows:
<PAGE>
Board of Directors
National Media Corporation
July 10, 1998
Page 4
(a) A warrant to purchase 3,412,500 Shares at an exercise price
of $1.32 per Share, exercisable on and from the Closing as to 2,912,500 shares.
Upon the price of the Company's common stock first trading in excess of $3.00
per Share, for a period of 15 consecutive trading days (the "Price Threshold"),
the warrant shall be exercisable for an additional 500,000 Shares 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.
(c) A warrant to purchase 200,000 Shares, at an exercise price
of $1.50 per share, provided that such warrant shall not be exercisable until
the Price Threshold is achieved.
At the Closing, each of the Warrants shall be exchanged for non-plan
stock options of NMC granted on the same terms and conditions. If the
Transaction is not consummated, then each of the Warrants shall be cancelled.
TMC shall be the sole determinant of the manner in which the Option and the
Warrants are distributed, except that the Warrant referred to in (a) above shall
be distributed as to 1,000,000 Shares to future or existing management of NMC
(other than Lehman, Weiss or Yukelson) and the Warrant referred to in (b) above
shall be distributed to BT Alex. Brown Incorporated.
5. TERM: The Consulting Agreement shall have a term of six months
(the "Term") commencing on the Definitive Agreement Date, unless terminated
earlier pursuant to paragraph 6(b) below.
6. TERMINATION: The Consulting Agreement shall terminate upon the
earlier to occur of: (a) the expiration of the Term; (b) a negative vote by the
Company's shareholders regarding the Transaction; or (c) NMC becoming obligated
to pay the Topping Fee pursuant to Section F below. If the Consulting Agreement
is terminated pursuant to (c) above, NMC shall pay to TMC a sum equal to 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, NMC shall pay to TMC a sum equal
to the amount which would have been payable to TMC if the Consulting Agreement
had continued in full force and effect for the Term. NMC acknowledges and agrees
that (a) TMC has expended and will expend a considerable amount of time and
effort in connection with the Transaction, (b) TMC has incurred and will incur
significant expenses in connection with
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Board of Directors
National Media Corporation
July 10, 1998 Page 5
the Transaction, (c) the relationship of the parties is not marked by any
self-dealing, and (d) TMC's costs described above are and will be difficult to
predict and ascertain and that the amount described above is a good faith
attempt by TMC to estimate the amount of such costs.
C. CORPORATE GOVERNANCE:
1. In conjunction with the Transaction, the Company shall work with
Lehman and ACO to secure amendments (e.g., waiver of applicable "change of
control" provisions) to certain existing "key" executive contracts,
substantially as follows:
(a) Robert Verratti: In exchange for waiving his rights regarding change
of control, 350,000 of his options will be repriced to $2.00 and the
maturity of all of his issued options will be extended 1 year.
Further, 100,000 of his options will be repriced to $2.00 if by the
close of business on July 15, 1998, ACO and NMC receive (i) the
ValueVision Letter Agreement (Annex 2), and (ii) the First Union Bank
Term Sheet (Annex 3).
(b) Frederick Hammer: In exchange for waiving his rights regarding change
of control, 88,000 of his $5.65 options will be repriced to $2.00 and
the maturity of all of his issued options will be extended 1 year.
Further, 37,000 of his $5.65 options will be repriced to $2.00, if by
the close of business on July 15, 1998, ACO and NMC receive (i) the
ValueVision Letter Agreement (Annex 2), and (ii) the First Union Bank
Term Sheet (Annex 3).
(c) Constantinos Costalas: In exchange for waiving his rights regarding
change of control:
(i) he will be employed for one year from the Closing in a
position to be determined at an annual salary of $325,000 with
full time reporting for the first 90 days thereof;
(ii) NMC will forgive his indebtedness to the Company;
(iii) he will be engaged as a nonexclusive consultant for one year
after the termination of employment at a rate of $200,000 per
year plus medical benefits and with no affirmative work
obligations; and
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Board of Directors
National Media Corporation
July 10, 1998 Page 6
(iv) 50,000 of his $7.00 options will be repriced to $2.00.
2. In conjunction with the Transaction, ACO shall have the
ability to (a) designate Andrew Schuon, Lehman and Weiss to serve on NMC's Board
effective at ACO's option at any point between the Definitive Agreement Date and
the date that NMC's shareholders vote on the Transaction (the "Shareholders'
Meeting") to serve until the earlier of the termination or consummation of the
Transaction and (b) nominate a slate of directors who are reasonably acceptable
to NMC's outside directors and shall include the persons named above, whose
election shall be voted on at the Shareholders' Meeting. The directors elected
to NMC's Board pursuant to (b) above shall constitute a majority of NMC's
directors on and after the Closing.
3. All of the present NMC directors shall agree to: (a) vote
their individually owned Shares in favor of the Transaction; and (b) vote as
directors in favor of amending the Rights Agreement dated January 3, 1994,
between the Company and Mellon Securities Trust Company, in order to exempt the
Transaction from the provisions thereof.
D. EXCLUSIVITY. The Company agrees that, for a 45 day period from the
date hereof, 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 (as hereinafter defined)
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 of the Company or
any of its subsidiaries to any person, corporation, partnership or other entity
(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. The Company shall, and shall cause its affiliates and
representatives to, immediately discontinue and, for a 45 day period from the
date hereof, not resume or otherwise continue any discussions with respect to
any Acquisition Proposal existing on or commenced prior the date hereof (other
than, in each case, with ACO and its representatives). In addition, for a 45 day
period from the date hereof, the Company shall provide ACO with notice of any
Acquisition Proposal received by the Company not later than 24 hours after
receipt. The term "Acquisition Proposal" as used herein means any offer or
proposal for, or indication of interest in, any acquisition of any interest in
the
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Board of Directors
National Media Corporation
July 10, 1998 Page 7
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.
E. CONFIDENTIALITY. The Company agrees to maintain confidentiality of the
terms of, and existence of, our proposal (including, without limitation, this
LOI) subject to the applicable rules and regulations promulgated under the
Securities Act of 1933 and the Securities Exchange Act of 1934. Subject to the
requirement of the Securities Laws, each of the terms and conditions of our
proposal (including, without limitation, any draft of definitive documentation),
the terms of our proposed financing, our identity and the identity of our
financing sources are confidential and our willingness to execute a definitive
agreement for the Transaction is expressly conditioned upon your not issuing any
press release or disclosing such information to anyone, including, without
limitation, any potential purchasers of any interest in the Company or any of
its subsidiaries or any portion of their assets; provided, however, the Company
may disclose such information to its legal and financial advisors and lenders
and to the existing holders of the Series D shares in connection with their
evaluation of the Transaction and, provided, further, that such advisors are,
prior to receipt of such information, informed of the confidential nature of
such information and agree to be bound by the nondisclosure provisions hereof.
F. TRANSACTION INITIATION FEE:
NMC acknowledges that following NMC's last Board of Directors meeting,
ACO and Lehman have been requested by NMC to present this proposal to NMC and
that the due diligence, negotiations, investigations required to prepare and
submit this LOI have been time consuming and costly including legal and
accounting fees. The parties acknowledge that ACO has been reluctant to present
this proposal for fear that it will be shopped around and topped by a third
party relying upon ACO's due diligence. For this and other reasons NMC and ACO
agree that from the date hereof should the parties fail to enter into the
Definitive Agreements within one month of the date of this LOI as a result of
any event, action or inaction other than: (a) failure of ACO and any of the
respective third parties to enter into the Third Party Agreements; (b) ACO's
termination of this LOI; or (c) ACO's failure to proceed in good faith
(collectively, "ACO's Termination"), NMC shall promptly pay to the order of ACO
cash in an amount equal to ACO's reasonable expenses, up to a maximum of
$500,000 (the "Base Termination Fee"). Should NMC, prior to the Closing or
within four months after the termination of this LOI or failure to enter into
the Definitive Agreements within the one month period referred to above for
reasons other than ACO's Termination, enter into any understanding or agreement
with a
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Board of Directors
National Media Corporation
July 10, 1998 Page 8
third party for the sale of all or a substantial portion of the stock or assets
of NMC (whether by way of merger, recapitalization, issuance or sale of capital
stock or securities, or sale of assets) (the "Competing Transaction"), NMC shall
promptly pay to the order of ACO cash in the amount of the Base Termination Fee
plus 4.9% of the difference between the aggregate equity value attribute to NMC
for the purposes of the Competing Transaction and the aggregate equity value
attributed to NMC for the purposes of this LOI up to a maximum amount of
$2,500,000 (the "Topping Fee"). For the purposes of this LOI, such difference
between the "aggregate equity values" shall be calculated by: (a) determining
the final price per Share contemplated by the Competing Transaction; (b)
subtracting the mean price per Share on the day this LOI is executed by NMC; and
(c) multiplying that difference by the total number of Shares issued or issuable
on that day on a fully diluted basis, but excluding therefrom all Shares
issuable to ACO or BT Alex. Brown Incorporated pursuant to options or warrants
the exercise price of which is less than the purchase price of a Share on that
day. The Base Termination Fee and the Topping Fee shall be referred to as the
"Transaction Initiation Fee." NMC acknowledges and agrees that (a) ACO has
expended and will expend a considerable amount of time and effort in connection
with the Transaction, and (b) ACO has incurred and will incur significant
expenses in connection with the Transaction, and (c) the relationship of the
parties is not marked by any self-dealing, and (d) the Transaction Initiation
Fee provides ACO with a reasonable incentive to make the offer contained in this
LOI, (e) in light of the foregoing, the Transaction Initiation Fee constitutes a
fair and reasonable percentage of the Investment, and (f) 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.
G. CONDITION PRECEDENT. Other than the provisions of Section E, and the
provisions of Section F with respect to a Competing Transaction in which
ValueVision is the acquiring party, this LOI shall be of no legal force or
effect unless and until such time as ACO and the respective third parties have,
on or before close of business (Pacific Standard Time) on July 17, 1998,
executed letter agreements or term sheets to be annexed hereto as Annex 1, Annex
2 and Annex 3.
H. DEFINITIVE AGREEMENT CONDITIONS:
In addition to the other terms and conditions set forth in this LOI,
including the execution of the Third Party Agreements, both the execution of the
Definitive Agreements and the Closing of the Transaction are conditional upon
ACO's satisfaction with the following:
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Board of Directors
National Media Corporation
July 10, 1998 Page 9
1. Obtaining all necessary third party, exchange and governmental
consents and approvals;
2. As to the execution of the Definitive Agreements only, the
results of the business, legal and accounting due diligence investigations and
review of NMC to be performed by ACO and its advisors;
3. Absence of any material adverse change, since March 31, 1998
and prior to Closing in NMC's businesses, assets, financial condition, operating
results, customer, supplier and employee relations, or business prospects other
than as disclosed to ACO and set forth in the Definitive Agreements. For the
purpose of this paragraph 3, any delisting of the Company's common stock by the
New York Stock Exchange, Inc. (the "NYSE") pursuant to a decision by the NYSE
shall be deemed a material adverse change, but any other action taken by the
NYSE with respect the listing of the Company's common stock shall not be deemed
a material adverse change.
I. EXPENSES. Except as provided herein, the Company shall bear its own
and all of ACO's reasonable expenses and costs in connection with the
Transaction, unless ACO determines not to proceed with the transaction prior to
execution of the Definitive Agreements. Without limiting the generality of the
previous sentence, the Company shall bear the expense and costs of all
regulatory filings (for example, pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act) in connection with this LOI or the Transaction; provided,
however, that the Company shall not be obligated to pay any of ACO's such
expenses if the Base Termination Fee or the Transaction Initiation Fee are paid.
J. GENERAL.
(i) This LOI shall be governed and construed in accordance with
the laws of the State of Delaware, without regard to choice of law principles.
(ii) This LOI may be amended, modified and supplemented only upon a
written instrument executed by all of the parties to this LOI.
(iii) The parties agree that money damages would be insufficient
remedy for a breach of the Mandatory Provisions (as defined below) and that
money damages would be extremely difficult to calculate. Accordingly, in
addition to any other remedies available at law, or in equity, it is agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of the Mandatory Provisions and to enforce specifically the
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Board of Directors
National Media Corporation
July 10, 1998 Page 10
Mandatory Provisions. For purposes of this LOI, "Mandatory Provisions" means the
provisions of paragraphs D, E, F and H of this LOI which are intended to
constitute a binding agreement of the parties hereto.
(iv) This LOI may be executed in one or more counterparts, each of
which shall be considered one and the same agreement and the Mandatory
Provisions shall become effective when two or more counterparts have been signed
by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
(v) Neither this LOI nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, the Mandatory Provisions will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Please acknowledge your understanding of and agreement to the terms of
this Letter of Intent by signing and dating the enclosed copy of this letter and
returning one fully executed copy to the undersigned. This Letter of Intent
shall remain open for your consideration until 5:00 p.m. (EST) on July 10,
1998. Your execution and returning of this Letter of Intent shall acknowledge
your determination that the Transaction is fair in all material respects to NMC
and its shareholders. We look forward to moving expeditiously
<PAGE>
Board of Directors
National Media Corporation
July 10, 1998 Page 11
to consummate the Transaction. Please feel free to call me if there are any
questions or comments.
Very truly your,
NM ACQUISITION C0., LLC
By: /s/ Stephen C. Lehman
--------------------------
Stephen C. Lehman
ACCEPTED AND AGREED TO
this 10th day of July, 1998
NATIONAL MEDIA CORPORATION
BY: /s/ [Illegible]
-----------------------------
Its: CEO
-----------------------------
<PAGE>
NM Acquisition Co.
c/o BT Alex. Brown Incorporated
1 South Street
Baltimore, Maryland 21202
July 15, 1998
Board of Directors
National Media Corporation
1700 Walnut Street
Philadelphia, PA 19103
Gentlemen:
Please refer to that certain Letter of Intent dated July 10, 1998 between
us ("LOI") with regard to our proposed equity investment in National Media
Corporation ("NMC").
As required by paragraph A.4 of the LOI, we enclose:
(i) Annex 1 -- Letter Agreement with Holders of Series D Preferred
Shares dated July 15, 1998.
(ii) Annex 2 -- Letter Agreement with ValueVision International, Inc.,
dated July 15, 1998.
(iii) Annex 3 -- Letter Agreement with First Union National Bank dated
July 15, 1998.
Further, per our prior understanding, we are amending the provisions of
paragraph A.2. to concur with the First Union National Bank ("F/U Bank") Letter
Agreement so that our minimum investment will be $30 million but not to exceed
$32 million and our investment in the Series E Preferred Shares shall be $20
million to $22 million, as your Board of Directors shall determine prior to the
closing of the Transaction.
<PAGE>
Board of Directors
National Media Corporation
July 15, 1998 Page 2
Please sign and return a copy of this letter to us acknowledging receipt
for the above Annexes to the LOI and agreeing to this first amendment to the
LOI.
Very truly yours,
NM ACQUISITION CO., LLC
/s/ Eric R. Weiss
-----------------------
By: Eric R. Weiss
ACCEPTED AND AGREED TO
this 15th day of July, 1998
NATIONAL MEDIA CORPORATION
By: [Illegible]
----------------------------
Its: Senior Vice President
----------------------------
