EXHIBIT 10.22
STOCKHOLDERS AGREEMENT (this "Agreement") made and entered into effective
as of December 31, 1995 by and among IWN, Inc., a Delaware corporation (the
"Corporation"), and the Shareholders (as hereinafter defined), with reference to
the following facts:
A. Each Shareholder owns or has the right to acquire that number of shares
of Stock (as herein defined) set forth opposite such Shareholder's name on
Schedule 1 hereto.
B. It is deemed to be in the best interests of the Corporation and the
Shareholders that provision be made for the continuity and stability of the
business and policies of the Corporation and, to this end, the Corporation and
the Shareholders hereby set forth their agreement with respect to the Stock
owned by the Shareholders.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
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meanings indicated:
(a) "Affiliate" means, with respect to any Shareholder, any Person
that directly or indirectly Controls, is Controlled by or is under common
Control with such Shareholder.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Corporation, as in effect on the date hereof.
(d) "Change of Control" means any event or series of events
following which (a) any "person" (as defined in sections 3(a)(9) and 13(d)(3) of
the Securities Exchange Act of 1934, as in effect on the date hereof) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as in effect on the date hereof) of securities
or other interests representing 35% or more of the voting power of the
outstanding securities and interests of NTN; or (b) more than 50% of the members
of the Board are not continuing directors (which term, as used in this
paragraph, means the directors of NTN (i) who are directors on the date of this
Agreement, or (ii) who subsequently become directors and who were admitted,
elected, or designated as such, or whose admission, election, or nomination as
such was otherwise approved, by a vote of a majority of the continuing directors
then a director).
1.
(e) "Common Stock" shall mean the common stock of the Corporation.
(f) "Control" shall mean, with respect to any Person, the power to
direct or cause the direction of the management and policies of such Person,
whether directly or indirectly, through ownership of voting securities, by
contract or otherwise.
(g) "Group" means, with respect to any Shareholder, such Shareholder
and any Affiliate of such Shareholder.
(h) "Investor" means Symphony Management Associates, Inc., a
Delaware corporation ("Symphony"), and any Affiliate thereof to which Symphony
shall transfer its Stock as permitted in this Agreement.
(i) "Non-Affiliated Person" means any Person that is not an
Affiliate of the Corporation, any Shareholder or any member of the Group of any
Shareholder.
(j) "NTN" shall mean NTN Communications, Inc.
(k) "Partnership Agreement" means the Third Amended and Restated
Agreement of Limited Partnership of IWN, L.P., a Delaware limited partnership,
as the same may be amended as provided therein.
(l) "Person" means any individual, partnership, corporation, group,
trust, joint venture or other legal entity.
(m) "Proportionate Percentage" means, the percentage of the number
of shares of Stock to which a Section 4 Offer relates that the Investor shall be
entitled to sell to the Section 4 Offeror, which shall be the percentage that
expresses the ratio, based on Common Stock equivalents, that the number of
shares of Stock owned by the Investor bears to the aggregate number of such
shares of Stock owned by all Shareholders at the date of determination.
(n) "Purchase Agreement" means the Stock Purchase Agreement, of even
date herewith, between the Shareholders.
(o) "Qualified Merger" means a merger or consolidation of the
Corporation into or with any Non-Affiliated Person or the merger or
consolidation of any Non-Affiliated Person into or with the Corporation, in
which consolidation or merger the holders of capital stock of the Corporation
(i) hold less than a majority of the voting power of the resulting or surviving
corporation and (ii) receive distributions of cash or voting common stock of the
Non-Affiliated Person as a result of such consolidation or merger in exchange
for all of the shares of capital stock of the Corporation
2.
held by such holders; provided, however, that in the event that the holders of
capital stock of the Corporation are to receive voting common stock of the
offeror in any such transaction, such voting common stock must be (A) validly
registered under the Securities Act of 1993, as amended (the "Securities Act"),
and the Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provisions thereto, (B) traded on a national securities exchange or included on
the automated quotation system of the National Association of Securities
Dealers, Inc. ("NASDAQ"), and (C) immediately upon issuance to the Shareholders
in connection with such transaction, freely tradeable without any restriction
under the Exchange Act or the Securities Act or any of the rules and regulations
promulgated pursuant to such Acts (including, without limitation, Rule 144
promulgated under the Securities Act or any successor provision thereto), other
than pursuant to Rule 145 promulgated under the Securities Act or any successor
provision thereto.
(p) "Qualified Offer" means a bona fide written offer that shall (i)
be at a specified price per share of capital stock of the Corporation and on
specified terms and conditions, (ii) provide reasonably satisfactory evidence of
the offeror's financial ability to consummate the contemplated transaction, and
(iii) be structured as either a Qualified Merger, Qualified Stock Transaction or
Qualified Sale of Assets.
(q) "Qualified Public Offering" means the consummation of a bona
fide underwritten public offering of Common Stock of the Corporation at an
aggregate public offering price of not less than $5,000,000.
(r) "Qualified Sale of Assets" means the sale, lease, license,
transfer or other disposition of all or substantially all of the assets of the
Corporation as an entirety to any Non-Affiliated Person, in which transaction
the Corporation would (i) receive solely cash in consideration for such assets,
(ii) dissolve and wind up immediately following the consummation of such
transaction, and (iii) distribute the cash proceeds thereof to its shareholders.
(s) "Qualified Stock Transaction" means the Sale of all, but not
less than all, of the outstanding capital stock of the Corporation to any Non-
Affiliated Person solely in exchange for cash.
(t) "Sell" (or "Sale"), as to any Stock, means to sell, or in any
other way directly or indirectly to transfer, assign, pledge, distribute,
encumber or otherwise dispose of, either voluntarily or involuntarily and with
or without consideration, including, but not limited to, any event pursuant to
which an Affiliate which holds Stock ceases to be an Affiliate.
3.
(u) "Selling Group" means any Group proposing to Sell its Stock, or
which has delivered notice of its intention to Sell its Stock, pursuant to
Sections 3, 5, 6 or 7 hereof .
(v) "Shareholders" means NTN and the Investor, and shall include any
other Person who agrees in writing with the parties hereto to be bound by and to
comply with all applicable provisions of this Agreement.
(w) "Stock" means (i) the outstanding shares of Common Stock and any
other issued and outstanding shares of capital stock of the Corporation and any
options or stock subscription warrants exercisable therefor (which options and
warrants shall be deemed to be equivalent to that number of outstanding shares
of Common Stock or other capital stock of the Corporation for which they are
convertible or exercisable), (ii) any additional shares of capital stock of the
Corporation hereafter issued and outstanding and (iii) any shares of capital
stock of the Corporation into which such shares may be converted or for which
they may be exchanged or exercised.
SECTION 2. Limitations on Sales of Stock by the Investor.
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(a) NTN and each member of the Group of NTN hereby agrees that
during the term of this Agreement it shall not Sell any Stock except:
(i) by Sale in accordance with Sections 3, 4 or 5 hereof; or
(ii) by Sale to another member of the Group of NTN; provided,
however, that the recipient of such Stock shall agree in advance in writing with
the parties hereto to be bound by and to comply with all applicable provisions
of this Agreement and to be deemed a member of such Group.
(b) The Investor and each member of the Group of the Investor hereby
agrees that during the term of this Agreement he or it shall not Sell any Stock
except:
(i) by Sale in accordance with Section 4, 6 or 7 hereof; or
(ii) by Sale to a member of the Group of the Investor;
provided, however, that the recipient of such Stock shall agree in advance in
writing with the parties hereto to be bound by and to comply with all applicable
provisions of this Agreement and to be deemed a member of such Group.
4.
SECTION 3. Sale of Stock to Third Parties by NTN.
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(a) In the event that NTN or any member of the Group of NTN
(collectively, the "Section 3 Offeree") receives a bona fide written offer,
other than a Qualified Offer, from a Non-Affiliated Person (the "Section 3
Offeror") to purchase from such Section 3 Offeree shares of Stock for a
specified price payable in cash or otherwise and on specified terms and
conditions, and such Section 3 Offeree desires to accept such offer, the Selling
Group shall first deliver to the Investor a written offer notice complying with
Section 8 hereof (the "Section 3 Offer Notice"), which shall be irrevocable for
a period of 30 days from the date of delivery thereof, offering (the "Section 3
Offer") to sell to the Investor all of the shares of Stock proposed to be Sold
by the Selling Group to the Section 3 Offeror (the shares so offered being
referred to herein as the "Offered Shares") at the purchase price and on the
other terms and conditions of such proposed Sale. The Investor shall thereupon
have the right and option for a period of 30 days from the date of delivery of
the Section 3 Offer Notice to accept for purchase all or, subject to Section
3(e) hereof, any portion of the Offered Shares at the purchase price and on the
terms specified therein. Such acceptance shall be made by delivering a written
notice to the Selling Group within such 30-day period.
(b) Sales of Stock under the terms of Section 3(a) above shall be
made at the offices of the Corporation on a mutually satisfactory business day
within 15 days after the expiration of the aforesaid 30-day period or, at the
option of the Investor, on such date as was proposed for Sale to the Section 3
Offeror. Delivery of certificates or other instruments evidencing such Stock
duly endorsed for transfer to the Investor shall be made on such date against
payment of the purchase price therefor.
(c) If effective acceptance shall not be received pursuant to Section
3(a) above with respect to all Offered Shares, then, subject to compliance with
Section 4 hereof, the Selling Group may Sell all or any part of the remaining
Offered Shares, if any, not so offered to be purchased to the Section 3 Offeror
at the price and on the identical terms stated in the original Section 3 Offer
Notice, at any time within 90 days after the expiration of the Section 3 Offer.
In the event the remaining Offered Shares are not Sold by the Selling Group to
the Section 3 Offeror during such 90-day period, the right of the Selling Group
to Sell such remaining Offered Shares to the Section 3 Offeror shall expire and
the obligations of this Section 3 shall be reinstated; provided, however, that
if the Selling Group determines, at any time during such 90-day period, that the
sale of all or any part of such Offered Shares on the terms set forth in the
Section 3 Offer Notice is impractical, then they can terminate the offer and
reinstate the procedures provided in this Section 3 without waiting for the
expiration of such 90-day period.
5.
(d) The Selling Group may specify in the Section 3 Offer Notice that
all Offered Shares must be sold, in which case an acceptance received pursuant
to Section 3(a) shall be deemed conditioned upon receipt of written notices of
acceptance with respect to all such Offered Shares or the Sale of the remaining
Offered Shares, if any, pursuant to Section 3(c) above.
(e) Anything contained herein to the contrary notwithstanding, NTN
and any member of the Group of NTN shall, in addition to complying with the
provisions of this Section 3 in the event of a proposed sale of Stock, comply
with the provisions of Section 4 hereof.
SECTION 4. Investor's Right of Co-Sale. In the event that NTN or any
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member of the Group of NTN holding Stock (collectively, the "Section 4 Offeree")
receives a bona fide written offer other than a Qualified Offer (the "Section 4
Offer") from a Non-Affiliated Person (the "Section 4 Offeror") to purchase from
such Section 4 Offeree shares of Stock for a specified price payable in cash or
otherwise and on specified terms and conditions, and such Section 4 Offeree
desires to accept such offer, such Section 4 Offeree shall promptly forward a
notice complying with Section 8 hereof (the "Section 4 Offer Notice") to the
Investor. Subject to Sections 3(b) and (c), the Section 4 Offeree shall not
Sell any Stock to the Section 4 Offeror unless the terms of the Section 4 Offer
are extended to the Investor with respect to its Proportionate Percentage of the
aggregate number of shares of Stock (based on Common Stock equivalents) held by
it to which the Section 4 Offer relates, whereupon the Investor shall be
entitled to Sell to the Section 4 Offeror pursuant to the Section 4 Offer all of
such shares of Stock. The Section 4 Offeree and the Investor shall bear all
costs and expenses incurred in connection with the consummation of the Sale of
Stock to the Section 4 Offeror pro rata in accordance with their proportionate
percentage of the aggregate number of shares of Stock sold to the Section 4
Offeror. The Investor shall have the right and option for a period of 30 days
from the date of delivery of the Section 4 Offer Notice to sell all or any
portion of such shares of Stock to the Section 4 Offeror at the purchase price
and on the terms specified therein. Such acceptance shall be made by delivering
a written notice to the Section 4 Offeree within such 30-day period. Anything
contained herein to the contrary notwithstanding, in the event that a Section 4
Offeree receives a bona fide written offer to purchase from such Section 4
Offeree shares of Stock pursuant to a Qualified Offer, such Section 4 Offeree
shall have the right to accept such Qualified Offer without complying with the
other provisions of this Section 4.
SECTION 5. Investor's Obligation to Purchase Stock.
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(a) If NTN or any member of the Group of NTN holding
6.
Stock receives a Qualified Offer (the "Section 5 Offer"), which NTN and each
member of the Group of NTN desires to accept, from any Non-Affiliated Person
(the "Section 5 Offeror"), written notice of which shall be sent promptly by NTN
to the Corporation and the Investor, and each of the following conditions is
satisfied (the "Section 5 Trigger Event"):
(i) the Section 5 Offer is approved by (A) the Board and (B) (x)
in the case of a Qualified Merger or Qualified Sale of Assets, the holders of
Common Stock (excluding the Investor) entitled to vote on such transaction,
including, without limitation, the Selling Group, in each case, in accordance
with the applicable provisions of the Delaware General Corporation Law (the
"GCL"), the Certificate of Incorporation and the By-laws of the Corporation (the
"By-laws") or (y) in the case of a Qualified Stock Transaction, the Selling
Group by means of a notice to the Corporation in writing of its intention to
Sell its Stock to the Section 5 Offeror; but
(ii) the transaction(s) contemplated by the Qualified Offer
cannot be legally consummated because the Investor either (A) in the case of a
Qualified Merger or Qualified Sale of Assets, fails to approve of such Qualified
Merger or Qualified Sale of Assets, as the case may be, pursuant to Section 11
hereof or (B) in the case of a Qualified Stock Transaction, notifies the
Corporation in writing of its determination not to Sell its Stock to the Section
5 Offeror;
then, concurrently with the occurrence of such Section 5 Trigger Event, the
Investor shall have the obligation to purchase, and the Selling Group shall have
the obligation to sell, all, but not less than all, of the shares of Stock held
by the Selling Group at a per share purchase price (the "Section 5 Purchase
Price") in cash equal to the Fair Market Value (as defined below) of the
consideration that the Selling Group would have received for each share of its
Stock (on a Common Stock equivalents basis) had the Section 5 Offer been
accepted and the transaction(s) contemplated thereby consummated in accordance
with the terms of the Section 5 Offer. For purposes hereof, the Section 5
Trigger Event shall be deemed to have occurred on the date that all of the
conditions set forth in this Section 5(a) have been satisfied.
(b) In determining the fair market value (the "Fair Market Value") of
the consideration which would be payable to the holders of Stock pursuant to any
Qualified Offer, the following provisions shall be applicable:
(i) cash shall be valued at the face value thereof;
(ii) the value of one share of voting common stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending on the fifth business day
7.
before the day the Selling Group received the Qualified Offer (as adjusted for
any stock dividend, split-up, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price or, in case no such reported sales took place on such
day, the average of the last reported bid and asked prices, in either case on
the principal national securities exchange on which such common stock is listed
or admitted to trading (or if such common stock is not at the time listed or
admitted for trading on any such exchange, then such price as shall be equal to
the last reported sale price, or if there is no such sale price, the average of
the last reported bid and asked prices, as reported by NASDAQ on such day, or
if, on any day in question, the security shall not be quoted on the NASDAQ, then
such price shall be equal to the last reported bid and asked prices on such day
as reported by the National Quotation Bureau, Inc. (or any similar reputable
quotation and reporting service, if such quotation is not reported by the
National Quotation Bureau, Inc.); and
(iii) all consideration shall be net of any applicable selling
expenses, withholding taxes and similar charges and expenses.
(c) Any purchase of Stock by the Investor pursuant to this Section 5
shall be made at the offices of the Corporation on a mutually satisfactory
business day within 45 days following the date of the Section 5 Trigger Event.
Delivery of certificates representing Stock purchased hereunder shall be made
against payment of the Section 5 Purchase Price for the Stock evidenced thereby.
SECTION 6. NTN's Obligation to Purchase Stock.
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(a) If the Investor or any member of the Group of the Investor
receives a Qualified Offer (the "Section 6 Offer"), which the Investor and each
member of the Group of the Investor desires to accept, from any Non-Affiliated
Person (the "Section 6 Offeror"), written notice of which shall be sent promptly
by the Investor to the Corporation and NTN, and each of the following conditions
is satisfied (the "Section 6 Trigger Event"):
(i) the Selling Group either (A) in the case of a Qualified
Merger or Qualified Sale of Assets, votes all of its shares of Stock in favor of
such Qualified Merger or Qualified Sale of Assets, as the case may be, or (B) in
the case of a Qualified Stock Transaction, notifies the Corporation in writing
of its or his intention to Sell its Stock to the Section 6 Offeror; but
(ii) the transaction(s) contemplated by the Qualified Offer
cannot be legally consummated because NTN and each member of the Group of NTN
either (A) in the case of a Qualified
8.
Merger or Qualified Sale of Assets, votes all of its shares of Stock against, or
otherwise fails to approve, such Qualified Merger or Qualified Sale of Assets,
as the case may be, and as a result thereof, such Qualified Merger or Qualified
Sale of Assets is not approved by the requisite percentage of the shareholders
of the Corporation entitled to vote on such transaction in accordance with the
applicable provisions of the GCL, the Certificate of Incorporation and the
By-laws or (B) in the case of a Qualified Stock Transaction, notifies the
Corporation in writing of its determination not to Sell its Stock to the Section
6 Offeror;
then, concurrently with the occurrence of such Section 6 Trigger Event, the
Corporation and NTN shall have the joint and several obligation to purchase, and
the Selling Group shall have the obligation to sell, all, but not less than all,
of the shares of Stock held by the Selling Group (including shares of Common
Stock issuable upon exercise of the Warrant) at a per share purchase price (the
"Section 6 Purchase Price") in cash equal to the Fair Market Value of the
consideration that the Selling Group would have received for each share of its
Stock (on a Common Stock equivalents basis) had the Section 6 Offer been
accepted and the transaction(s) contemplated thereby consummated in accordance
with the terms of the Section 6 Offer. For purposes hereof, the Section 6
Trigger Event shall be deemed to have occurred on the date that all of the
conditions set forth in this Section 6(a) have been satisfied.
(b) Any purchase of Stock by the Corporation or NTN pursuant to this
Section 6 shall be made at the offices of the Corporation on a mutually
satisfactory business day within 45 days following the date of the Section 6
Trigger Event. Delivery of certificates representing Stock purchased hereunder
shall be made against payment of the Section 6 Purchase Price for the Stock
evidenced thereby.
SECTION 7. Procedures on Sale of Stock to Third Parties by Investor.
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(a) In the event that the Investor or any member of the Group of the
Investor (collectively, the "Section 7 Offeree") receives a bona fide written
offer, other than a Qualified Offer, from a Non-Affiliated Person (the "Section
7 Offeror") to purchase from such Section 7 Offeree shares of Stock for a
specified price payable in cash or otherwise and on specified terms and
conditions, and such Section 7 Offeree desires to accept such offer, the Selling
Group shall first deliver to NTN a written offer notice complying with Section 8
hereof (the "Section 7 Offer Notice"), which shall be irrevocable for a period
of 30 days from the date of delivery thereof, offering (the "Section 7 Offer")
to sell to NTN all of the shares of Stock proposed to be Sold by the Selling
Group to the Section 7 Offeror (the shares so offered being referred to herein
as the "Offered Shares") at the purchase price and on the
9.
other terms and conditions of such proposed Sale. NTN shall thereupon have the
first right and option as to all (but not part) of the Offered Shares for a
period of 30 days after delivery of the Section 7 Offer Notice, to accept for
purchase (subject to Section 7(e) hereof) the Offered Shares at the purchase
price and on the terms specified therein. Such acceptance NTN shall be made
within said 30-day period by delivering a written notice to the Investor.
(b) Sales of Stock under the terms of Section 7(a) shall be made at
the offices of the Corporation on a mutually satisfactory business day within 15
days after the expiration of the latest of the aforesaid periods. Delivery of
certificates or other instruments evidencing such Stock duly endorsed for
transfer to NTN shall be made on such date against payment of the purchase price
therefor.
(c) Subject to Section 7(e) hereof, if effective acceptance shall not
be received pursuant to Section 7(a) with respect to all the Offered Shares,
then, at any time within 90 days after the expiration of the offer required by
Sections 4(a), the Selling Group may sell all or any part of the Offered Shares
not to be purchased pursuant to Section 7(a) to any Person or Persons. Any such
sale shall be made at a price not less than the price, and on terms not more
favorable to the purchaser thereof than the terms, stated in the original
Section 7 Offer Notice. If such Offered Shares are not sold by the Selling
Group during such 90-day period, their right to Sell such Offered Shares shall
expire and the obligations of this Section 7 shall be reinstated; provided,
however, that if the Selling Group determines, at any time during such 90-day
period, that the sale of all or any part of such Offered Shares on the terms set
forth in the Section 7 Offer Notice is impractical, then they can terminate the
offer and reinstate the procedures provided in this Section 7 without waiting
for the expiration of such 90-day period.
(d) Anything contained herein to the contrary notwithstanding, any
purchaser of Stock pursuant to this Section 7 who is not a Shareholder shall
agree in writing in advance with the parties hereto to be bound by and to comply
with all applicable provisions of this Agreement and shall be deemed to be an
Investor for all purposes of this Agreement.
(e) The Investor may specify in the Section 7 Offer Notice that all
of the Offered Shares must be sold, in which case acceptances received pursuant
to Section 7(a) shall be deemed conditioned upon (i) receipt of written notices
of acceptance with respect to all of the Offered Shares and/or (ii) the Sale of
the remaining Offered Shares, if any, pursuant to Section 7(c) above.
10.
SECTION 8. Notice of Offer From Non-Affiliated Persons. Any notice
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required to be delivered pursuant to Sections 3, 4, 5, 6 or 7 in respect of any
offer received from a Non-Affiliated Person shall set forth (i) the name and
address of the offeree, (ii) the name and address of the Non-Affiliated Person,
(iii) the number of shares of Stock (based on Common Stock equivalents) to which
the offer relates, (iv) the proposed date of Sale of such shares of Stock to the
Non-Affiliated Person, (v) the proposed amount and type of consideration
(including, if the consideration consists in whole or in part of non-cash
consideration, such information available to the offeree as may be reasonably
necessary for the Investor or NTN, as the case may be, to properly analyze the
economic value and investment risk of such non-cash consideration) and the terms
and conditions of payment offered by the Non-Affiliated Person, and (vi) all
other relevant terms of the proposed Sale. The Selling Group shall also furnish
to the Investor or NTN, as the case may be, such additional information relating
to the offer and/or the Non-Affiliated Person as may reasonably be requested by
the Investor or NTN, as the case may be.
SECTION 9. Election of Directors. On or before the date of NTN's delivery
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to Symphony IWN Investment LLC of the Warrant (as defined in the Investment
Agreement as hereinafter defined), Richard J. Donnelly shall be appointed by the
Board to serve as a director of the Corporation until the next annual meeting of
stockholders of the Corporation and until his or her successor is duly elected
and qualified. Unless NTN and Investor shall otherwise agree, thereafter the
Board of Directors of the Corporation shall at all times during the term of this
Agreement consist of three persons, two of whom shall be nominated by NTN and
one of whom shall be nominated by Investor as provided in this Section 9. At
each annual meeting of the holders of the capital stock of the Corporation, and
at each special meeting of the holders of the capital stock of the Corporation
called for the purpose of electing directors of the Corporation, and at any time
at which holders of the capital stock of the Corporation shall have the right
to, or shall, vote for or consent in writing to the election of directors of the
Corporation, including, but not limited to, upon the occurrence of any vacancy
created on the Board, then, and in each such event, NTN, each member of the
Group of NTN, the Investor and each member of the Group of the Investor shall
vote or cause to be voted all shares of Stock owned by them for, or consent in
writing with respect to such shares in favor of, the election of a Board
consisting of three persons, one of whom shall be the nominee of the Investor,
and two of whom shall be nominees of NTN.
SECTION 10. Establishment of Executive Committee. The Board shall at all
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times during the term of this Agreement establish and maintain in existence an
Executive Committee to which it shall
11.
delegate all rights, responsibilities and powers of the Board of Directors (and
only such rights, powers and responsibilities) to review, consider and approve
of those matters enumerated in Section 6.2(c) of the Partnership Agreement and
such other matters, if any, as the Board may hereafter delegate to it. Except as
the Shareholders and the Corporation may otherwise agree in writing, such
Executive Committee shall at all times consist of such members and act in the
manner specified in the Partnership Agreement.
SECTION 11. Investor Approval Rights. The Corporation shall not, and NTN
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and each member of the Group of NTN shall not suffer or permit the Corporation
to, directly or indirectly, without the affirmative vote or prior written
approval of the holders of not less than a majority of the shares of Stock held
by the Investor and permitted transferees of the Investor, adopt or undertake
any of the following actions:
(a) sell, abandon, transfer, lease, license or otherwise dispose of
all or substantially all of the Corporation's properties or assets, or merge or
consolidate with or into, or permit any subsidiary of the Corporation to merge
with or into, any other person; or
(b) authorize, create, designate, issue or sell any shares of capital
stock (including any shares of treasury stock) or rights, options, warrants or
other securities convertible into or exercisable or exchangeable for capital
stock or any debt security which by its terms is convertible into or
exchangeable for any equity security or has any other equity feature or any
security that is a combination of debt and equity or enter into any commit ment
to do the same, provided, however, that the restrictions contained in this
subsection (a) shall not apply to a Qualified Public Offering; or
(c) take any action to voluntarily liquidate, dissolve or wind up or
carry out any partial liquidation or dissolution or transaction in the nature of
a partial liquidation or dissolution; or
(d) declare or pay any dividends or make any distribution of cash or
property or both to holders of shares of capital stock or other securities of
the Corporation or repurchase, retire or redeem any shares of capital stock
except pursuant to the exercise of the Put Option (as defined in the Investment
Agreement, dated as of December 31, 1995, by and among the Corporation, NTN and
the Investor (the "Investment Agreement")), provided, however, that the
restriction contained in this subsection (b) shall not preclude the Board from
(A) declaring dividends on a pro rata basis to holders of shares of Stock or (B)
complying with the terms of any shares of capital stock which may be issued in
accordance with the terms hereof; or
12.
(e) in any manner alter or change the designation, powers,
preferences or rights, or the qualifications, limitations or restrictions of,
the Common Stock; or
(f) take any action to cause any amendment, alteration or repeal of
any of the provisions of the Certificate of Incorporation or of the By-laws; or
(g) enter into any "Insider Transaction" (as defined in the
Investment Agreement); or
(h) enter into or become subject to any agreement which restricts or
purports to restrict the Corporation from engaging or otherwise competing in any
aspect of its business anywhere in the world or which otherwise limits the
business in which the Corporation may engage or compete; or
(i) other than as contemplated in the Corporation's Operating Budget
as in effect from time to time and except for trade debt incurred in the
ordinary course of business, incur, create or assume any indebtedness; or
(j) incur, create, assume or suffer or permit to exist on any of its
properties or assets or any income or rights any lien or encumbrance with
respect to liabilities or obligations in excess of $25,000, excluding for
purposes of calculating the amount of such liens and encumbrances the value of
any liens and encumbrances in connection with indebtedness permitted under
subsection (i) above; or
(k) sell, transfer, assign, license, lease or otherwise dispose of
any material assets or properties or other rights of the Corporation having a
value in excess of $25,000 in any fiscal year of the Corporation other than as
contemplated in the Operating Budget and except inventory in the ordinary course
of business; or
(l) purchase or otherwise acquire for value, directly or
beneficially, any assets, properties or securities of any other person having a
value in excess of $25,000, or make any loans or advances to, any other person
having a value in excess of $25,000; or
(m) make any investment or acquire any interest whatsoever in any
other person other than the Partnership; or
(n) make any payment of any compensation, directly or indirectly, in
cash, shares of capital stock or otherwise to any employee of the Corporation
other than as provided for in such employee's employment agreement;
13.
(o) make any capital expenditures (as such term is defined in
accordance with generally accepted accounting principles) in an amount in excess
of $25,000 other than as contemplated in the Operating Budget; or
(p) engage in any business activities other than its activities as
General Partner of IWN, L.P.
SECTION 12. Legend on Stock Certificates. Each certificate representing
----------------------------
shares of Stock held by the Shareholders shall bear a legend containing the
following words:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND/OR THE RIGHTS OF THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IN RESPECT OF THE ELECTION OF
DIRECTORS ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS
AGREEMENT DATED AS OF DECEMBER 31, 1995, AMONG IWN, INC. AND CERTAIN
HOLDERS OF THE OUTSTANDING SECURITIES OF SUCH CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF IWN, INC."
SECTION 13. Additional Shares of Stock. In the event additional shares of
--------------------------
Stock are issued by the Corporation to a Shareholder at any time during the term
of this Agreement, either directly or upon the exercise or exchange of
securities of the Corporation exercisable for or exchangeable into shares of
Stock, such additional shares of Stock shall, as a condition to such issuance,
become subject to the terms and provisions of this Agreement.
SECTION 14. Change of Control. In the event of a Change of Control (the
-----------------
date of such occurrence being the "Change of Control Date"), the Corporation
shall, within 5 days of the Change of Control Date, notify the Investor in
writing (such notification being referred to herein as the "Notice") of such
occurrence and shall make an offer to redeem (the "Change of Control Offer") all
shares of Stock owned by Investor and any of Investor's trans ferees, in
exchange for the transfer by the Corporation to Investor and such transferees of
a portion of the Corporation's interest in IWN, L.P. representing an aggregate
Percentage Interest (as defined in the Partnership Agreement) equal to the
proportion of the Corporation's aggregate Percentage Interest on the date of the
Notice that the number of shares of Stock then owned by Investor and such
transferees bears to the total number of shares of Stock. Upon such issuance,
Investor and any such transferees shall be substituted as limited partners of
IWN, L.P. with respect to the interests so transferred. The Change of Control
Offer shall expire if the Corporation does not receive notice of the Investor's
acceptance thereof within 30 days of Investor's receipt of the
14.
Notice.
SECTION 15. Duration of Agreement. This Agreement shall terminate on
----------------------------------
the consummation of a Qualified Public Offering; provided, however, that the
rights and obligations of each Shareholder under this Agreement shall terminate
as to such Shareholder upon the earlier transfer in compliance with the terms of
this Agreement of all Stock owned by such Shareholder. The parties hereto shall
act in good faith and shall refrain from taking any actions to circumvent or
frustrate the provisions of this Agreement. Each of the Shareholders agrees to
execute and deliver any such documents or instruments and to take any such
actions as shall be reasonably necessary to carry out the terms of this
Agreement.
SECTION 16. Severability; Governing Law. If any provisions of this
---------------------------
Agreement shall be determined to be illegal and unenforceable by any court of
law, the remaining provisions shall be severable and enforceable in accordance
with their terms. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware applicable to contracts made
and to be performed wholly therein.
SECTION 17. Assignment, Successors and Assigns. Except as otherwise
----------------------------------
specifically provided in this Agreement, this Agreement may not be assigned by
any party without the prior written consent of the other parties. This
Agreement shall bind and inure to the benefit of the parties and their
respective permitted successors and assigns, legal representatives and heirs.
SECTION 18. Notices. All notices, requests, consents and other
-------
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or by telecopy or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or at such other address as may hereafter be designated
in writing by such party to the other parties:
(i) if to the Corporation or NTN:
NTN Communications, Inc.
5966 La Place Court
Carlsbad, CA 92008
Telecopy: (619) 929-5289
Attention: President
15.
with a copy to:
Troy & Gould
1801 Century Park East
16th Floor
Los Angeles, CA 90067
Telecopy: (310) 201-4746
Attention: William D. Gould, Esq.
(ii) if to the Investor:
Symphony Management Associates, Inc.
900 Best Road
Suite 400
Annapolis, MD 21401
Telecopy: (410) 573-5205
Attention: Chief Financial Officer
with a copy to:
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
Telecopy: (215) 564-8120
Attention: William R. Sasso, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been delivered (a) in the case of personal delivery or delivery
by telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
SECTION 19. Modification. Except as otherwise provided herein, neither
------------
this Agreement nor any provisions hereof can be modified, changed, discharged or
terminated except by an instrument in writing signed by the Corporation, and the
Shareholders.
SECTION 20. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 21. Nouns and Pronouns. Whenever the context may require, any
------------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
16.
SECTION 22. Entire Agreement. This Agreement and the other writings
----------------
referred to herein or delivered pursuant hereto contain the entire agreement
among the parties hereto with respect to the subject matter hereof and supersede
all prior and contemporaneous agreements and understandings with respect
thereto.
SECTION 23. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 24. Attorneys' Fees. In the event that any party hereto brings an
---------------
action or proceeding for a declaration of the rights of the parties under this
Agreement, for injunctive relief, for an alleged breach or default of, or any
other action arising out of, this Agreement or the transactions contemplated
hereby, or in the event any party is in default of its obligations pursuant
hereto, whether or not suit is filed or prosecuted to final judgment, the
prevailing party in any such action or proceeding shall be entitled to
reasonable attorneys' fees, in addition to any court costs incurred and in
addition to any other damages or relief awarded.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
IWN, INC.
By: /s/ Daniel C. Downs
-----------------------------------
Name: Daniel C. Downs
Its: Chairman
SHAREHOLDERS:
NTN COMMUNICATIONS, INC.
By: /s/ Patrick J. Downs
------------------------------
Name: Patrick J. Downs
Its: President
SYMPHONY MANAGEMENT ASSOCIATES, INC.
By: /s/ Valerie S. Hart
------------------------------
Name: Valerie S. Hart
Its: Vice President
17.
SCHEDULE 1
# of shares
of Common Stock
---------------
NTN Communications, Inc. 900,000
Symphony Management Associates, Inc. 100,000
18.