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EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of October 5, 1998 (the
"AGREEMENT"), 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 parties to a Securities
Purchase Agreement, dated as of October 31, 1997 (the "SECURITIES PURCHASE
AGREEMENT"), pursuant to which, among other things, the Buyers purchased an
aggregate of $7 million of the Company's Series B Convertible Preferred Stock
(the "SERIES B PREFERRED SHARES"), which are 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, filed with the Delaware Secretary of State on October 31, 1997
(the "CERTIFICATE OF DESIGNATIONS");
B. There are currently 56,000 shares of Series B Preferred
Shares outstanding and held by the Buyers;
C. The Company and the Buyers executed a Modification
Agreement, dated as of July 31, 1998 (the "MODIFICATION AGREEMENT"), to modify
certain terms of the Series B Preferred Shares, the related Registration Rights
Agreement dated as of July 31, 1998 by and among the Company and the Buyers, and
the Common Stock Purchase Warrant (the "JULY 31 WARRANTS"), dated as of July 31,
1998, issued by the Company to each Buyer to purchase 500,000 shares of Common
Stock (collectively, the "MODIFICATION DOCUMENTS");
D. The Company and each Buyer desire to exchange the Series
B Preferred Shares for a convertible senior subordinated promissory note of the
Company and a warrant to purchase shares of Common Stock, each as more fully
described in Section 1(a) below;
E. The Company and the Buyers agree that this Agreement
shall supersede the terms of the Modification Documents and that said
Modification Documents shall be null and void and of no force and effect. Upon
execution of this Agreement and delivery of the fully executed Warrants, the
Buyers shall surrender to the Company the forms of July 31 Warrants in Buyers'
possession.
F. 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 A (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the "1933
ACT") and the rules and regulations promulgated thereunder, and applicable state
securities laws.
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NOW THEREFORE, the Company and the Buyers hereby agree as
follows:
CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"EXCHANGE PRICE" means, for each Buyer, an amount equal to
the sum of (A) the Stated Value (as defined in the Certificate of Designations)
for all such Buyer's Series B Preferred Shares outstanding on the Note Issuance
Date and (B) all accrued and unpaid dividends on such Series B Preferred Shares
due to such Buyer.
"NOTE ISSUANCE DATE" means the date that is three (3) days
immediately subsequent to the date that the Registration Statement (as defined
in the Registration Rights Agreement) is declared effective by the Securities
and Exchange Commission (the "SEC").
1. EXCHANGE AND CONVERSION OF SERIES B PREFERRED SHARES.
(a) Issuance of Warrants and Notes. On the date hereof, the
Company shall issue to each Buyer a Common Stock Purchase Warrant (the "WARRANT"
and collectively, the "WARRANTS") to purchase 500,000 shares of Common Stock
(the "WARRANT SHARES"), which Warrants shall be substantially in the form
attached hereto as Exhibit B. On the Note Issuance Date, the Company shall
deliver to each Buyer a convertible senior subordinated promissory note of the
Company (the "NOTE" and collectively, the "NOTES") in the principal amount of
the Exchange Price for such Buyer, convertible into shares of Common Stock of
the Company (the "NOTE CONVERSION SHARES"), made payable to the order of such
Buyer and otherwise substantially in the form attached hereto as Exhibit C. Upon
receipt of the Notes, the Series B Preferred Shares shall be deemed to be no
longer outstanding and the Buyers shall surrender the share certificates to the
Company.
(b) Conversion Right. From and after the date hereof and
until the Note Issuance Date, each Buyer shall be entitled, at any time or from
time to time, to convert such Buyer's Series B Preferred Shares in accordance
with the provisions of the Certificate of Designations as modified by the
provisions of Sections 1(c) and 1(d) hereof.
(c) Conversion Price. The parties hereto hereby agree that
notwithstanding the provisions of the Certificate of Designations, the
Conversion Price will be set such that from and after the date hereof
"CONVERSION PRICE" means $1.275, subject to adjustment for the events set forth
in Section 3(c) of the Note. Notwithstanding any provision of the Certificate of
Designations or of this Agreement, in no event shall any Buyer be entitled to
convert any Series B Preferred Shares in excess of that number of Series B
Preferred Shares which, upon giving effect to such conversion, would cause the
aggregate number of shares of Common Stock beneficially owned by the Buyer and
its affiliates to exceed 4.99% of the outstanding shares of the Common Stock
following such conversion; provided, however, that a Buyer may elect to waive
this restriction upon not less than sixty-one (61) days prior written notice to
the Company. For purposes of this paragraph, beneficial ownership shall be
calculated
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in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "1934 ACT").
(d) Dividends. The parties hereto agree that notwithstanding
the provisions of the Certificate of Designations, it would be in the Company's
best interest to adjust the dividend rate for the Series B Preferred Shares such
that from and after the date hereof, the first sentence of Section (1) of the
Certificate of Designations shall read "The holders of the outstanding Series B
Preferred Shares shall be entitled to receive cumulative dividends at the annual
rate of $7.00 per Series B Preferred Share."
(e) Full Force. Other than as set forth in this Section 1,
the original terms of the Series B Preferred Shares as set forth in the
Certificate of Designations and the Securities Purchase Agreement remain in full
force and effect.
(f) Modification Documents. The Company and the Buyers agree
that this Agreement shall supersede the terms of the Modification Documents and
that said Modification Documents shall be null and void and of no force and
effect. Upon execution of this Agreement and delivery of the Warrants, the
Buyers shall surrender to the Company the forms of July 31 Warrants in Buyers'
possession.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only
itself that:
(a) Investment Purpose. Such Buyer (i) shall acquire the
Notes and the Warrants and (ii) upon conversion of the Notes and exercise of the
Warrants, will acquire the Note Conversion Shares and Warrant 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 Notes, Warrants, Note Conversion Shares or Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the Notes or
Warrants 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
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the
Notes, the Warrants, the Note Conversion Shares and the Warrant Shares are being
issued 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
Notes, the Warrants, the Note Conversion Shares and the Warrant Shares.
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(d) Information. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the Notes, the Warrants, the
Note Conversion Shares and the Warrant 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 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 Notes, the Warrants, the Note
Conversion Shares and the Warrant 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 Notes, the Warrants, the Note Conversion Shares and the
Warrant Shares.
(e) No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Notes, the
Warrants, the Note Conversion Shares or the Warrant Shares or the fairness or
suitability of the investment in the Notes, the Warrants, the Note Conversion
Shares or the Warrant Shares nor have such authorities passed upon or endorsed
the merits of the Notes, the Warrants, the Note Conversion Shares or the Warrant
Shares.
(f) Transfer or Resale. Such Buyer understands that except
as provided in the Registration Rights Agreement: (i) the Notes, the Warrants,
the Note Conversion Shares and the Warrant 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
other instruments representing the Notes and the Warrants and, until such time
as the sale of Note Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Warrant Shares, except as set
forth below, shall bear a restrictive legend in substantially the
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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 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 Notes, the Warrants or the
Warrant Shares upon which it is stamped, if (i) the Notes, the Warrants or the
Warrant 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 Notes, the Warrants or the Warrant Shares may be
made without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that the Notes, the Warrants or the Warrant
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 Notes, the
Warrants and the Warrant 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 Notes, the Warrants or the Warrant Shares, the
Company may, upon reasonable advance notice to the holder, require that the
above legend be placed on any Notes, Warrants or Warrant 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 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) Ownership. As of the date hereof, each Buyer (i) is the
beneficial owner of 28,000 Series B Preferred Shares and (ii) has not
transferred or assigned such Series B Preferred Shares to any Person, or any
interest therein or under the Modification Documents.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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, 1997, the Company's
Quarterly Reports on Form 10-Q for the three months ended March 31, 1998, and
for the three and six months ended June 30, 1998, and the Company's 1998 Proxy
Statement (collectively, the "SEC DOCUMENTS"):
(a) Organization and Qualification. The Company and its
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and 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 by the
Securities Purchase Agreement or this Agreement.
(b) Authorization; Enforcement; Compliance with Other Laws.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement and the Notes and
to issue the Notes, the Warrants, the Note Conversion Shares and the Warrant
Shares in accordance with the terms of the Notes, the Warrants and this
Agreement, (ii) the execution and delivery of this Agreement, the Registration
Rights Agreement, the Notes and the Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Notes and the Warrants and the reservation for
issuance and the issuance of the Note Conversion Shares and the Warrant Shares
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, (iii) this Agreement, the Registration Rights Agreement and
the Warrants have been and the Notes upon their issuance will be duly executed
and delivered by the Company, and (iv) this Agreement, the Registration Rights
Agreement and the Warrants constitute and the Notes upon execution and delivery
by the Company will 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.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 shares of Common Stock, of
which as of September 30, 1998, 26,543,297 shares were issued and outstanding,
and 10,000,000 shares of Preferred Stock, $.005 par value per share (the
"PREFERRED Stock"), of which as of September 30, 1998, 161,112 shares of Series
A Preferred Stock, and 56,000 Shares of Series B Preferred Stock, respectively,
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
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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 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 Notes, the Warrants, the Note Conversion Shares or the Warrant
Shares as described in this Agreement. The Company has furnished to the Buyers
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 Notes, the Warrants, the
Note Conversion Shares and the Warrant Shares are duly authorized and, upon
issuance in accordance with the terms of the Notes, the Warrants and this
Agreement, shall be (i) validly issued, fully paid and non-assessable and (ii)
free from all taxes, liens and charges with respect to the issue thereof and
(iii) the holders of the Note Conversion Shares and the Warrant Shares will be
entitled to all rights accorded to a holder of Common Stock. Not less than 100%
of the number of shares of Common Stock necessary to provide for the issuance of
the Note Conversion Shares, the Warrant Shares and any shares of Common Stock
issued to the Holders to pay interest on the Notes have been duly authorized and
reserved for issuance upon conversion of the Notes and exercise of the Warrants.
The reservation of the Note Conversion Shares and the Warrant Shares as of the
date hereof has been duly authorized.
(e) No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Notes and the Warrants 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 the Company's 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
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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 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 the Registration Rights 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, the Registration Rights Agreement, the Notes or the Warrants 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 hereto or pursuant to the Securities
Purchase Agreement and Certificate of Designations 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 ("AMEX"). 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 AMEX.
(f) SEC Documents; Financial Statements. Since June 30,
1997, 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 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
Buyers or their 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
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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
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.
(g) Absence of Certain Changes. Except as disclosed in
Schedule 3(g) or the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and Quarterly Report on Form 10-Q for the three months ended
March 31, 1998 and for the three and six months ended June 30, 1998, since June
30, 1997 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, 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 by the Securities Purchase Agreement or this Agreement (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement, the Certificate
of Designations, the Registration Rights Agreement, the Notes, the Warrants or
any of the documents contemplated herein or therein 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. The Company 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 the transactions
contemplated hereby. 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.
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(j) No General Solicitation. Neither the Company, nor any of
its 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
Notes, the Warrants, the Note Conversion Shares or the Warrant Shares.
(k) No Integrated Offering. Neither the Company, nor any of
its 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
Notes, the Warrants, the Note Conversion Shares or the Warrant Shares under the
1933 Act or cause the offering of the Notes, the Warrants, the Note Conversion
Shares and the Warrant 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 AMEX.
(l) Employee Relations. Neither the Company nor any of its
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
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 event, fact or circumstance that
may have a material adverse effect on the business, operations, properties,
financial condition, results of operations or prospects of the Company and its
subsidiaries, either individually or taken as a whole, relating to (i) 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 or (ii) any person or entity now infringing
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights or any such development of similar or identical trade
secrets or technical information owned or used by the Company or any of its
subsidiaries 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
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and its subsidiaries are unaware of any facts or circumstances which might have
a reasonable likelihood to 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 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
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 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
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as is prudent and customary in the businesses in
which the Company and its subsidiaries are engaged. Neither the Company nor any
of its subsidiaries 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 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 of its subsidiaries 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
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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
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 acknowledges that its
obligation to issue (x) Conversion Shares upon conversion of the Series B
Preferred Shares in accordance with the Securities Purchase Agreement and the
Certificate of Designations, (y) Note Conversion Shares upon conversion of the
Notes in accordance with this Agreement and the Notes and (z) Warrant Shares
upon exercise of the Warrants in accordance with this Agreement and the
Warrants, is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
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(w) Covenants Contained in the Securities Purchase
Agreement. The Company has performed, satisfied and complied in all material
respects with the covenants and agreements contained in the Securities Purchase
Agreement required to be performed, satisfied or complied with by the Company at
or prior to the date hereof.
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
Section 6 of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect
to the Notes, the Warrants, the Note Conversion Shares and the Warrant 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 date hereof, take such
action as the Company shall reasonably determine is necessary to qualify the
Notes, the Warrants, the Note Conversion Shares and the Warrant Shares for, or
to obtain exemption for the issuance of the Notes and the Warrants and the sale
of the Note Conversion Shares and Warrant Shares to the Buyers 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 date hereof.
(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 Note Conversion Shares and the Warrant 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 Note Conversion Shares and the Warrant Shares and (B) the Notes have
been fully converted and the Warrants have been fully exercised (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) 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 and for so long as amounts due under
the Notes shall remain unpaid: (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.
(e) 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 100% of the number of shares of Common Stock needed to
provide for the issuance of the
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Note Conversion Shares, the Warrant Shares and any shares of Common Stock issued
to the Holders to pay interest on the Notes.
(f) Listing. The Company shall promptly secure the listing
of the Note Conversion Shares, the Warrant Shares and any shares of Common Stock
issued to the Holders to pay interest on the Notes upon the 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 Note Conversion Shares and
Warrant Shares from time to time issuable under the terms of this Agreement, the
Registration Rights Agreement, the Notes and the Warrants 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(f).
(g) 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, the Registration Rights Agreement and the other documents
contemplated hereby; provided, that, at the date hereof, the Company shall
reimburse the Buyers for Buyers' attorneys' fees and expenses in connection with
this Agreement, the Registration Rights Agreement and the other documents
contemplated hereby up to an aggregate of one-half of such fees and expenses.
(h) Transfer. Neither Buyer shall transfer any Series B
Preferred Shares, Notes or Warrants unless, on or prior to the effective date of
such transfer, the transferee agrees to be bound by and takes such Series B
Preferred Shares , Notes or Warrants subject to the terms and conditions of this
Agreement.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent (in the form attached hereto as Exhibit D) to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the Note
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Notes and exercise
of the Warrants (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to
registration of the Note Conversion Shares and the Warrant Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in the
Notes and Warrants. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5 will be
given by the Company to its transfer agent and that the Notes, the Warrants, the
Note Conversion Shares and the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, the Notes and the
Warrants. 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 Notes, the Warrants, the Note Conversion Shares or the Warrant
Shares. If a Buyer provides the Company with an opinion of counsel, reasonably
satisfactory in form and substance
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to the Company, that registration of a resale by such Buyer of any of the Notes,
the Warrants, the Note Conversion Shares or the Warrant Shares is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Note Conversion Shares or Warrant 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 EFFECTIVENESS.
The effectiveness of this Agreement is subject to the
satisfaction on or prior to the date hereof of each of the following conditions,
provided that these conditions are for each party's sole benefit and may be
waived by each of the parties hereto at any time in its sole discretion:
(a) The Company shall have executed this Agreement, the
Registration Rights Agreement, the Notes (as of the Note Issuance Date) and the
Warrants, and delivered the same to the Buyers.
(b) The Buyers shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(c) The Common Stock shall be authorized for quotation on
the AMEX and trading in the Common Stock issuable upon conversion of the Notes
and exercise of the Warrants to be traded on the AMEX shall not have been
suspended by the SEC or the AMEX.
(d) Each party hereto 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 by such party
at or prior to the date hereof.
(e) The Buyers shall have received the opinion of the
Company's counsel dated as of the date hereof, in form, scope and substance
reasonably satisfactory to the Buyers and in substantially the form of Exhibit E
attached hereto.
(f) The Board of Directors of the Company shall have adopted
the resolutions in substantially the form of Exhibit F attached hereto.
(g) As of the date hereof, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion and exercise of the Notes and the Warrants, at least
100% of the number of shares of Common Stock
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necessary to provide for the issuance of the Note Conversion Shares, the Warrant
Shares and any Shares of Common Stock issued to the Holders to pay interest on
the Notes.
(h) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(i) The transactions contemplated hereby shall not violate
any law, regulation or order then in effect and applicable to Buyers or the
Company.
(j) Schulte Roth & Zabel LLP shall have been paid by the
Company the amount of $20,000 as payment for the Company's share of such
counsel's legal fees and disbursements.
(k) The Company is in compliance with all applicable laws,
rules and regulations.
7. INDEMNIFICATION.
(a) In consideration of each Buyer's execution and delivery
of this Agreement 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 the Series B Preferred Shares, the
Conversion Shares, the Notes, the Warrants, the Note Conversion Shares and the
Warrant 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 herewith (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) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Registration Rights Agreement, the Notes, the Warrants 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 Registration Rights Agreement, the Notes, the Warrants 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 Notes or the Warrants or the status of such
Buyer or holder of the Series B Preferred Shares, the Notes, the Warrants, the
Note Conversion Shares or the Warrant 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.
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(b) In consideration of the Company's execution and delivery
of this Agreement and in 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 herewith
(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) 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.
8. 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, the
Securities Purchase Agreement, the Registration Rights Agreement, the Notes and
the Warrants and the instruments referenced herein and therein contain the
entire understanding of the parties with respect to the matters specifically
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
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waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
(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: Paula 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.
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(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 Notes
and the Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyers. 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 the Notes or the Warrants 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. The representations and warranties of the
Company and the Buyers contained in Sections 3 and 2, respectively, shall
survive the date hereof until one (1) year after the Company has filed its Form
10-K for the fiscal year ended after the Note Issuance Date, including without
limitation all financial statements thereto. The agreements and covenants set
forth in Sections 4, 5 and 8, and the indemnification provisions set forth in
Section 7, shall survive without limitation. 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) Placement Agent. The Company acknowledges that it has
engaged a placement agent in connection with the transactions contemplated
hereby, which placement 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.
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(m) 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.
(n) Judicial Proceedings. Any legal action, suit or
proceeding brought against the Company with respect to this Agreement or the
Securities Purchase Agreement or any of the documents executed in connection
with this Agreement or the Securities Purchase Agreement, may be brought in
federal or state court located in Delaware. The Company and the Buyers
irrevocably submit to the exclusive jurisdiction of the aforementioned Delaware
courts in such action, suit or proceeding, and by execution and delivery of this
Agreement, the Company and the Buyers hereby irrevocably and unconditionally
waive any claim (by way of motion, as a defense or otherwise) of improper venue,
that it is not subject personally to the jurisdiction of such court, that such
courts are an inconvenient forum or that this Agreement or the Securities
Purchase Agreement or the other documents executed in connection this Agreement
or the Securities Purchase Agreement or the subject matter may not be enforced
in or by such court. The Company and the Buyers hereby irrevocably and
unconditionally consent to the service of process of any of the aforementioned
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, at their respective addresses
set forth or provided for in Section 8, such service to become effective 10 days
after such mailing. Nothing herein contained shall be deemed to affect the right
of any party to serve process in any manner permitted by law or commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction to enforce judgments obtained in any action, suit or proceeding
brought pursuant to this Section.
(o) The Company agrees that all of the representations and
warranties made by the Company herein shall be true and correct as of the Note
Issuance Date.
(p) Termination. This Agreement shall, at the option of the
Buyers, terminate and shall have no further force and effect if the Note
Issuance Date shall not have occurred within 180 days after the date hereof.
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IN WITNESS WHEREOF, the Buyers and the Company have caused
this Exchange Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
NTN COMMUNICATIONS, INC. STARK INTERNATIONAL
By: By:
------------------------- ----------------------------
Name: Name:
Its: Its:
SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.
By:
----------------------------
Name:
Its:
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SCHEDULE OF BUYERS
Investor Address and
Investor Name Facsimile Number Investor's Legal Counsel
- - ------------- -------------------- ------------------------
Stark International c/o Staro Asset Management Eleazer Klein, Esq.
(Bermuda) 1500 West Market Street Schulte Roth & Zabel LLP
Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
Shepherd Investments c/o Staro Asset Management Eleazer Klein, Esq.
International, Ltd. 1500 West Market Street Schulte Roth & Zabel LLP
(British Virgin Islands) Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
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SCHEDULES TO EXCHANGE AGREEMENT OF __________ 1998
SCHEDULE 3(A)
SUBSIDIARIES
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SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(C)
CAPITALIZATION
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SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(E)
CONFLICTS
25
26
SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(G)
MATERIAL CHANGES
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27
SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(H)
LITIGATION
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28
SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(M)
INTELLECTUAL PROPERTY
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29
SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(O)
LIENS
29
30
SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(T)
TAX STATUS
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31
SCHEDULES TO EXCHANGE AGREEMENT OF ________ 1998
SCHEDULE 3(U)
CERTAIN TRANSACTIONS
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EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
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EXHIBIT B
FORM OF WARRANTS
33
34
EXHIBIT C
FORM OF CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE
34
35
EXHIBIT D
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
35
36
EXHIBIT E
FORM OF OPINION
36
37
EXHIBIT F
FORM OF RESOLUTIONS ADOPTED BY THE COMPANY'S BOARD OF DIRECTORS
37