EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October
31, 1997, by and among NTN Communications, Inc., a Delaware corporation, with
headquarters located at 5966 La Place Court, Carlsbad, CA 92008 (the "COMPANY"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the following new series of its
Preferred Stock, $.005 par value per share (the "PREFERRED STOCK"): the
Company's Series B Convertible Preferred Stock ("SERIES B PREFERRED STOCK")
which shall be convertible into shares of the Company's Common Stock, $.005 par
value per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Series B Preferred Shares, in the form attached
hereto as Exhibit A (the "CERTIFICATE OF DESIGNATIONS");
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C. The Buyers wish to purchase, upon the terms and conditions stated
in this Agreement, an aggregate of $7 million of Series B Preferred Stock in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers; and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
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AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES.
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a. Purchase of Series A Preferred Shares. Subject to the
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satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate of 70,000 shares of Series B Preferred Stock (the
"SERIES B PREFERRED SHARES"), in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers (the "CLOSING"). The per share purchase
price (the "PURCHASE PRICE") of the Preferred Shares shall be $100 or an
aggregate purchase price of $7 million.
b. Closing Date. The date and time of the Closing (the "CLOSING
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DATE") shall be 10:00 a.m. Central Standard Time on October 31, 1997, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below (or such later date as is mutually agreed to by
the Company and the Buyers).
c. Form of Payment. On the Closing Date, (i) each Buyer shall
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pay the Purchase Price to the Company for the Series B Preferred Shares to be
issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer, a stock certificate representing
such number of the Series B Preferred Shares which such Buyer is then purchasing
(as indicated opposite such Buyer's name on the Schedule of Buyers), duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee (the "STOCK CERTIFICATES").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Series B
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Preferred Shares and (ii) upon conversion of the Series B Preferred Shares, will
acquire the Conversion Shares then issuable, for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any Series B Preferred Shares for any
minimum or other specific term and reserves the right to dispose of Series B
Preferred Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
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investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
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Series B Preferred Shares and the Conversion Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Series B Preferred
Shares and the Conversion Shares.
d. Information. Such Buyer and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Series B
Preferred Shares and the Conversion Shares which have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives
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shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. Such
Buyer understands that its investment in the Series B Preferred Shares and the
Conversion Shares involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Series B
Preferred Shares and the Conversion Shares.
e. No Governmental Review. Such Buyer understands that no
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United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Series B
Preferred Shares or the Conversion Shares or the fairness or suitability of the
investment in the Series B Preferred Shares or the Conversion Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Series B Preferred Shares or the Conversion Shares.
f. Transfer or Resale. Such Buyer understands that except as
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provided in the Registration Rights Agreement: (i) the Series B Preferred Shares
and the Conversion Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) such
Buyer shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable
assurance that such securities can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("RULE
144"); (ii) any sale of such securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Such Buyer understands that the certificates or
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other instruments representing the Series B Preferred Shares and, until such
time as the sale of the Conversion Shares have been registered under the 1933
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
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THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Series B Preferred Shares
or the Conversion Shares upon which it is stamped, if (i) the Series B Preferred
Shares or the Conversion Shares are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Series B Preferred Shares or the Conversion
Shares may be made without registration under the 1933 Act, or (iii) such holder
provides the Company with reasonable assurances that the Series B Preferred
Shares or the Conversion Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold. Each Buyer acknowledges, covenants and agrees to
sell the Series B Preferred Shares and the Conversion Shares represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act. In the event the above legend is removed from the Series B Preferred Shares
or the Conversion Shares, the Company may, upon reasonable advance notice to the
holder, require that the above legend be placed on any Series B Preferred Shares
or Conversion Shares that cannot then be sold pursuant to an effective
registration statement or Rule 144(k) under the 1933 Act (or any successor rule
thereto).
h. Authorization; Enforcement. This Agreement has been duly and
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validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country
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specified in the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that
except as (i) set forth on the indicated Schedule or (ii) disclosed in the
Company's Form 10-K for the fiscal year ended December 31, 1996, the Company's
Quarterly Reports on Form 10-Q for the three months and six months ended March
31, 1997 and June 30, 1997, respectively, and the Company's 1997 Proxy Statement
(collectively, the "SEC DOCUMENTS"):
a. Organization and Qualification. The Company and its
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subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and
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validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole
or on the transaction contemplated hereby.
b. Authorization; Enforcement; Compliance with Other
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Instruments. (i) The Company has the requisite corporate power and authority to
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enter into and perform this Agreement and the Registration Rights Agreement, and
to issue the Series B Preferred Shares and the Conversion Shares in accordance
with the terms hereof and the Certificate of Designations, (ii) the execution
and delivery of this Agreement and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Series B Preferred
Shares and the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, except that, as
provided in the Certificate of Designations, the issuance of certain Conversion
Shares may be restricted in the absence of stockholder approval in accordance
with Section 713 of the AMEX Listing Standards Policies and Requirements, (iii)
this Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company, (iv) this Agreement and the Registration Rights
Agreement constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies, and (v) prior to the Closing Date, the Certificate of Designations
will have been filed with the Secretary of State of the State of Delaware and
will be in full force and effect, enforceable against the Company in accordance
with its terms.
c. Capitalization. As of the date hereof, the authorized
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capital stock of the Company consists of 50,000,000 shares of Common Stock, of
which as of October 27, 1997, 23,672,001 shares were issued and outstanding, and
10,000,000 shares of Preferred Stock, of which as of October 27, 1997, 161,112
shares were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), no shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in Schedule 3(c), as
of the date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or
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rights convertible into, any shares of capital stock of the Company or any of
its subsidiaries, (ii) there are no outstanding debt securities and (iii) there
are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement). Except as disclosed in
Schedule 3(c), there are no securities or instruments containing anti-dilution
or similar provisions that will be triggered by the issuance of the Series B
Preferred Shares or the Conversion Shares as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.
d. Issuance of Securities. The Series B Preferred Shares are
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duly authorized and, upon issuance in accordance with the terms hereof, shall be
(i) validly issued, fully paid and non-assessable, (ii) free from all taxes,
liens and charges with respect to the issue thereof and (iii) entitled to the
rights and preferences set forth in the Certificate of Designations. Not less
than 200% of the number of shares of Common Stock necessary to provide for the
issuance of the Conversion Shares based on the trading price of the Common Stock
as of the date hereof have been duly authorized and reserved for issuance upon
conversion of the Series B Preferred Shares. Upon conversion in accordance with
the Certificate of Designations, the Conversion Shares will be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company, the performance by the Company of its
obligations under the Certificate of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby will not (i) result
in a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or By-laws or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the principal
market or exchange on which the Common Stock is traded or listed) applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e), neither the Company nor its subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock or By-laws or their organizational charter or by-laws, respectively, or
any material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries. The business of the Company and its subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
ordinance or
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regulation of any governmental entity, except for those violations that
individually or in the aggregate would not have a material adverse effect on the
business of the Company or any of its subsidiaries. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental or regulatory or self-
regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the Registration Rights
Agreement or perform its obligations under the Certificate of Designations in
accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing requirements of the American Stock Exchange. The
Company and its subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing or to delisting of the Common Stock by
the American Stock Exchange.
f. SEC Documents; Financial Statements. Since December 31,
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1996, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the
"DESIGNATED SEC DOCUMENTS"). The Company has delivered to the Buyer or its
representative true and complete copies of the Designated SEC Documents. As of
their respective dates, the Designated SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the Designated SEC Documents, and
none of the Designated SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the Designated SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the Designated SEC Documents, including, without limitation,
information referred to in Section 2(d) of this Agreement, contains when read in
conjunction with the SEC Documents and the Schedules hereto any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
are or were made, not misleading.
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g. Absence of Certain Changes. Except as disclosed in Schedule
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3(g) or the Company's Quarterly Report on Form 10-Q for the three months and six
months ended March 31, 1997 and June 30, 1997, and as filed with the SEC on May
20, 1997 and August 14, 1997, respectively, since December 31, 1996 there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company and its subsidiaries taken as a whole. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
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inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or its subsidiaries or their respective directors or officers, or the Common
Stock, wherein an unfavorable decision, ruling or finding would (i) have a
material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement, the Registration
Rights Agreement, or any of the documents contemplated herein or (iii), except
as expressly set forth in the SEC Documents or in Schedule 3(h), have a material
adverse effect on the business, operations, properties, financial condition,
results of operation or prospects of the Company and its subsidiaries taken as a
whole.
i. Acknowledgment Regarding Buyers' Purchase of Series B
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Preferred Shares. The Company acknowledges and agrees that each of the Buyers is
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acting solely in the capacity of arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any of the Buyers
or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Series B Preferred Shares or the Conversion Shares. The
Company further represents to each Buyer that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its representatives. The Company has not provided to any Buyer any
nonpublic information that, in the opinion of the Company, is material to a
decision to purchase or sell Common Stock.
j. No General Solicitation. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Series B Preferred Shares or the Conversion Shares.
k. No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Series B Preferred Shares or the Conversion Shares under the
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1933 Act or cause this offering of Series B Preferred Shares and Conversion
Shares to be integrated with prior offerings by the Company for purposes of the
1933 Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the American Stock Exchange.
l. Employee Relations. Neither the Company nor any of its
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subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
m. Intellectual Property Rights. Except as set forth on
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Schedule 3(m), the Company and its subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted. Except as set
forth on Schedule 3(m), none of the Company's trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights have expired or terminated, or are
expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company or its
subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(m), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service mark registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
n. Environmental Laws. The Company and its subsidiaries (i) are
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in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where the failure to
comply with such laws or regulations or to receive or comply with such permits,
licenses, approvals would not have a material adverse effect on the Company and
its subsidiaries taken as a whole.
o. Title. The Company and its subsidiaries have good and
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marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each
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case free and clear of all liens, encumbrances and defects except such as are
described in Schedule 3(o) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
p. Insurance. The Company and each of its subsidiaries are
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insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts is prudent and customary in the businesses in
which the Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
q. Regulatory Permits. The Company and its subsidiaries possess
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all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit except where the failure to possess such
certificates, authorizations and permits would not have a material adverse
effect on the business of the Company or any of its subsidiaries.
r. Internal Accounting Controls. The Company and each of its
----------------------------
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
s. No Materially Adverse Contracts, Etc. Neither the Company
------------------------------------
nor any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has a material adverse effect on
the business, properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries.
t. Tax Status. Except as set forth on Schedule 3(t), the
----------
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
10
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply
and there are no unpaid taxes in any material amount.
u. Certain Transactions. Except as set forth on Schedule 3(u)
--------------------
or in the SEC Documents and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed on Schedule 3(c), none of the
officers, directors or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
v. Dilutive Effect. The Company understands and acknowledges
---------------
that the number of Conversion Shares issuable upon conversion of the Series B
Preferred Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Series B Preferred Shares in accordance with this Agreement and the
Certificate of Designations is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
------
the Series B Preferred Shares and the Conversion Shares as required under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Series B
Preferred Shares and the Conversion Shares for, or obtain exemption for the
Series B Preferred Shares and the Conversion Shares for, sale to the Buyers at
the Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Investors shall have sold all the
11
Conversion Shares and (B) none of the Series B Preferred Shares is outstanding
(the "Registration Period"), the Company shall file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Series B Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
---------------------
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii)
within one (1) day after release thereof, copies of all press releases issued by
the Company or any of its subsidiaries and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares based on the trading price of
the Common Stock at such time.
g. Listing. The Company shall promptly secure the listing of
-------
the Conversion Shares upon The American Stock Exchange, Inc. ("AMEX") (subject
to official notice of issuance) and shall maintain, so long as any other shares
of Common Stock shall be so listed, the listing of all Conversion Shares from
time to time issuable under the terms of this Agreement and the Registration
Rights Agreement on each national securities exchange and automated quotation
system (including the Nasdaq National Marketing System), if any, upon which
shares of Common Stock are then listed. The Company shall promptly provide to
each Buyer copies of any notices it receives from the AMEX regarding the
continued eligibility of the Common Stock for listing on the AMEX. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(g).
h. Expenses. Each of the Company and the Buyers shall each pay
--------
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement and the Registration Rights Agreement; provided, that, subject to
Section 9(l) below, at or following the Closing as the Buyers may request, the
Company shall reimburse the Buyers for Buyers' attorneys' fees and expenses in
connection with this Agreement and the Registration Rights Agreement up to an
aggregate of $12,500.
12
i. Additional Issuances of Securities.
----------------------------------
(a) Right of First Refusal. For a period of 270 days from and
----------------------
after the Closing Date, if the Company shall desire to issue any Common Stock or
any security convertible, exchangeable or exercisable for Common Stock or any
other right to acquire any Common Stock pursuant to an offering under Regulation
D or Regulation S of the Securities Exchange Act of 1934, as amended (other than
pursuant to stock option plans with employees or directors of the Company) in
any such case with an acquisition price for each share of Common Stock that is
proposed to be less than the Average Market Price (as defined in the Certificate
of Designations) of the Common Stock on the date of such issuance (the
"Discounted Securities"), then the Company shall first comply with the terms of
this Section 4(i).
(b) Notice Requirements. The Company shall notify, or cause to
-------------------
be notified, the Buyers not less than ten (10) business days nor more than
twenty (20) business days prior to the time the Company intends to consummate
such issuance (the "Issuance Notice"). The Issuance Notice shall set forth all
of the terms of such proposed issuance.
(c) Exercise of Right of First Refusal. The right of first
----------------------------------
refusal provided for in this Section 4(i) may be exercised by the Buyers by
delivery of a written notice to the Company (the "Exercise Notice"), within ten
(10) business days following receipt of the Issuance Notice (the "Refusal
Period"). The Exercise Notice shall state that the Buyers agree to purchase all
or any specified part of the proposed issuance of Discounted Securities on terms
substantially equal to the terms set forth in the Issuance Notice.
(d) Right to Issue Discounted Securities. After expiration of
the Refusal Period, if the provisions of this Section 4(i) have been complied
with in all respects by the Company and no Exercise Notice has been given, or if
given, the Buyers have not agreed to purchase all of the Discounted Securities
set forth in the Issuance Notice, the Company shall have the right for ninety
(90) business days following the termination of the Refusal Period to issue the
Discounted Securities, or any portion thereof not being purchased by the Buyers,
specified in the Issuance Notice on the terms described in the Issuance Notice
without further notice to the Buyers, but after such ninety (90) business days,
no such issuance of Discounted Securities may be made without again giving
notice to the Buyers and complying with all of the requirements of this Section
4(i).
(e) The Company will not issue any Series B Preferred Shares
other than to the Buyers as contemplated hereby or as otherwise contemplated in
the Certificate of Designations.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent
(in the form attached hereto as Exhibit E) to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Series B Preferred Shares (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares
13
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act) will be given by the Company to its
transfer agent and that the Series B Preferred Shares and the Conversion Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Series B Preferred Shares or Conversion Shares. If a Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in form
and substance to the Company, that registration of a resale by such Buyer of any
of the Series B Preferred Shares or the Conversion Shares is not required under
the 1933 Act, the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Series B
Preferred Shares to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. Such Buyer shall have delivered to the Company the Purchase
Price for the Series B Preferred Shares being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
14
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Series B
Preferred Shares at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to such Buyer.
b. The Certificate of Designations, shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to such Buyer.
c. The Common Stock shall be authorized for quotation on the
AMEX, trading in the Common Stock issuable upon conversion of the Series B
Preferred Shares to be traded on the AMEX shall not have been suspended by the
SEC or the AMEX and all of the Conversion Shares issuable upon conversion of the
Series B Preferred Shares to be sold at the Closing shall be listed upon the
AMEX.
d. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer including,
without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit C attached
---------
hereto.
f. The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall request) for
the Series B Preferred Shares being purchased by such Buyer at the Closing.
g. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit D attached hereto.
---------
15
h. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Series B Preferred Shares, at least 200% of the number of
shares of Common Stock necessary to provide for the issuance of the Conversion
Shares based on the trading price of the Common Stock as of the Closing Date.
i. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and acknowledged in
- ---------
writing by the Company's transfer agent.
j. The transactions contemplated hereby shall not violate any
law, regulation or order then in effect and applicable to Buyers or the Company.
8. INDEMNIFICATION.
---------------
(a) In consideration of each Buyer's execution and delivery of this
Agreement and acquiring the Series B Preferred Shares and Conversion Shares
hereunder and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of Series B Preferred Shares and Conversion Shares
and all of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "BUYER INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Buyer Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "BUYER INDEMNIFIED LIABILITIES"), incurred by any Buyer
Indemnitee (and shall advance the same) as a result of, or arising out of, or
relating to (a) subject to Section 9(i), any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Certificate of Designations or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, the Certificate of Designations or the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
or (c) any cause of action, suit or claim brought or made against such Buyer
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Buyer Indemnitees, any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Series B Preferred Shares
or the status of such Buyer or holder of the Series B Preferred Shares or the
Conversion Shares as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Buyer Indemnified Liabilities which is permissible under applicable
law.
(b) In consideration of the Company's execution and delivery of
this Agreement and selling the Series B Preferred Shares and Conversion Shares
hereunder and in
16
addition to all of the Buyers' other obligations under this Agreement, the
Buyers shall defend, protect, indemnify and hold harmless the Company and all of
its officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "COMPANY INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Company Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "COMPANY INDEMNIFIED LIABILITIES"), incurred by any
Company Indemnitee (and shall advance the same) as a result of, or arising out
of, or relating to (a) subject to Section 9(i), any misrepresentation or breach
of any representation or warranty made by the Buyers in this Agreement or the
Registration Rights Agreement, or (b) any breach of any covenant, agreement or
obligation of the Buyers contained in this Agreement or the Registration Rights
Agreement. To the extent that the foregoing undertaking by the Buyers may be
unenforceable for any reason, the Buyers shall make the maximum contribution to
the payment and satisfaction of each of the Company Indemnified Liabilities
which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience
--------
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
----------------------------
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
17
f. Notices. Any notices, consents, waivers or other
-------
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
NTN Communications, Inc.
5966 La Place Court
Carlsbad, CA 92008
Telephone: (760) 438-7400
Facsimile: (760) 930-1187
Attention: President
With a copy to:
Troy & Gould
1801 Century Park East
16th Floor
Los Angeles, CA 90067
Telephone: (310 ) 553-4441
Facsimile: (310) 201-4746
Attention: William D. Gould
If to the Transfer Agent:
American Stock Transfer & Trust Co.
6201 16th Avenue
3rd Floor
Brooklyn, NY 11219
Telephone: (718) 921-8275
Facsimile: (718) 921-8331
Attention: Paul Caroppoli
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Series B Preferred Shares. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Buyers, except pursuant to a Major Transaction
(as defined in Section 3(c) of the Certificate of Designations)
18
with respect to which the Company is in compliance with Section 3 of the
Certificate of Designations. A Buyer may assign some or all of its rights
hereunder without the consent of the Company, provided, however, that (i) any
such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption and (ii) no Buyer may assign its
rights hereunder in a manner that would cause the offering of Series B Preferred
Shares hereunder to be required to be registered under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 3 and 2, respectively, shall survive the Closing until one year
after the Company has filed its Form 10-K for the fiscal year ended December 31,
1997 including without limitation all financial statements thereto. Unless this
agreement is terminated under Section 9(l), the agreements and covenants set
forth in Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred with respect to a Buyer on or before five (5) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the Buyers
for the expenses described in Section 4(h) above.
m. Placement Agent. The Company acknowledges that it has
---------------
engaged a placement agent in connection with the sale of the Series B Preferred
Shares, which placement
19
agent may have formally or informally engaged other agents on its behalf. The
Company shall be responsible for the payment of any placement agent's fees or
broker's commissions relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney's fees and
out of pocket expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this
----------------------
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
20
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
- ------- ------
NTN COMMUNICATIONS, INC. STARK INTERNATIONAL
By: /s/ Gerald Sokol, Jr. By: /s/
--------------------------------- -------------------------------
Name: Gerald Sokol Name:
Its: President and Chief Executive Its:
Officer
SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.
By: /s/
------------------------------
Name:
Its:
SCHEDULE OF BUYERS
Number of
Investor Address and Series B Investor's Advisors and Legal
Investor Name Facsimile Number Preferred Shares Counsel Address
- --------------------- -------------------------- ---------------- -----------------------------
Stark International c/o Staro Asset Management 35,000 Eleazer Klein, Esq.
(United States) 1500 West Market Street Schulte Roth Zabel LLP
Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
Shepherd International c/o Staro Asset Management 35,000 Eleazer Klein, Esq.
Investments, Ltd. 1500 West Market Street Schulte Roth Zabel LLP
(Bermuda) Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(a)
Subsidiaries
------------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(c)
-------------
Capitalization
--------------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(e)
-------------
Conflicts
---------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(g)
-------------
Material Changes
----------------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(h)
-------------
Litigation
----------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(m)
-------------
Intellectual Property
---------------------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(t)
-------------
Tax Status
----------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(u)
-------------
Certain Transactions
--------------------
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 4(d)
-------------
Use of Proceeds
---------------
EXHIBIT A
Form of Certificate of Designations, Preferences
and Rights of the Series B Preferred Shares
EXHIBIT B
Form of Registration Rights Agreement
EXHIBIT C
Form of Company Counsel Opinion
EXHIBIT D
Form of Resolutions Adopted by the Company's Board of Directors
EXHIBIT E
Form of Irrevocable Transfer Agent Instructions