<PAGE>
As filed with the Securities and Exchange Commission on October 6, 1995
Reg. No. 33-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware The Campus 31-1103425
(State or other jurisdiction of 5966 La Place Court (I.R.S. Employer
incorporation or organization) Carlsbad, California 92008 Identification No.)
(619) 438-7400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Ronald E. Hogan, Chief Financial Officer
NTN Communications, Inc.
The Campus
5966 La Place Court
Carlsbad, California 92008
(619) 438-7400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copy to:
Dale E. Short, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price aggregate offering registration
securities to be registered registered(1) per share price fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.005 par value.... 1,165,955 shares(2) $ 4.875(3) $5,684,031(3)
Common Stock, $.005 par value.... 50,000 shares(4) $ 7.50 (5) $ 375,000(5)
Common Stock, $.005 par value.... 37,500 shares(4) $ 6.75 (5) $ 253,125(5)
WCA Warrants..................... 87,500 -- (6) -- (6)
Total........................ 1,253,455 shares $6,312,156 $2,177
===========================================================================================================================
</TABLE>
(Footnotes on next cover page)
<PAGE>
(1) In accordance with Rule 416 of the General Rules and Regulations under the
Securities Act of 1933, there are also being registered such indeterminate
number of additional shares of Common Stock as may become issuable pursuant
to anti-dilution provisions of the stock purchase agreements and warrant
agreements relating to the initial issuance of the shares and warrants being
registered.
(2) Includes 53,455 shares of Common Stock which may become issuable pursuant to
certain anti-dilution provisions of the stock purchase agreements relating
to the original issuance of 600,000 of the shares registered hereunder.
(3) Estimated solely for the purpose of calculating the registration fee and
based, pursuant to Rule 457(c), on the average of the high and low sale
prices of Registrant's Common Stock as reported on the American Stock
Exchange on October 3, 1995.
(4) Consists of the shares underlying the warrants being registered hereunder.
(5) Pursuant to Rule 457(g), calculated based on the exercise prices of the WCA
Warrants.
(6) Pursuant to Rule 457(g), no separate registration fee is required.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
NTN COMMUNICATIONS, INC.
Cross-Reference Sheet
Pursuant to Item 501(b) of Regulation S-K, showing the location in the
Prospectus of the answers to the items in Part I of Form S-3.
<TABLE>
<CAPTION>
Form S-3
Item Number and Caption Prospectus Caption
----------------------- ------------------
<S> <C>
1. Front of the Registration Facing Page; Outside Front Cover Page
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Inside Front Cover Page and Back Cover Page
Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors
Risk Factors and Ratio of
Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Outside Front Cover Page; Price Range of Common
Offering Price Stock and Dividend Policy
6. Dilution Not Applicable
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Outside Front Cover Page; Plan of Distribution
9. Description of Securities Outside Front Cover Page; Description of
to Be Registered Securities
10. Interest of Named Not Applicable
Experts and Counsel
11. Material Changes Certain Recent Developments
12. Incorporation of Incorporation of Certain Documents by Reference
Certain Information by
Reference
13. Disclosure of Not Applicable
Commission Position on
Indemnification for
Securities Act Liabilities
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER __, 1995
PROSPECTUS
NTN COMMUNICATIONS, INC.
1,200,000 Shares
83,750 WCA Warrants
(at various exercise prices and varying exercise periods)
This Prospectus relates to the offer by certain securityholders named herein
(the "Selling Securityholders") for sale to the public from time to time of up
to 1,200,000 shares (the "Shares") of common stock, $.005 par value (the "Common
Stock"), and up to 87,500 WCA Warrants (the "Warrants"), of NTN Communications,
Inc. See "Selling Securityholders." Unless otherwise indicated herein,
references herein to the "Company" mean NTN Communications, Inc. and its
subsidiaries, including New World Computing, Inc. ("New World").
Of the shares of Common Stock offered hereby, 512,500 are held by Jon Van
Caneghem, the President and former sole shareholder of New World, 87,500 are
issuable upon the exercise of the Warrants and the remainder are offered by
certain Selling Securityholders advised by Divisional Fund Advisors, Inc. See
"Selling Securityholders."
Each Warrant entitles the holder thereof to purchase one share of Common Stock
at an exercise price, depending upon the Warrant, of either $6.75 or $7.50 per
share, subject to adjustment, at any time until the fifth anniversary from the
date on which it was granted to its original holder. Prospective purchasers of
the Warrants offered hereby must confirm in advance of any such purchase the
relevant exercise price and exercise period of the Warrants being offered. The
Company will not receive any proceeds from the sale of the Warrants or, with the
exception of the exercise price of the Warrants, from the sale of the Common
Stock offered hereby. See "Use of Proceeds" and "Description of Securities."
The Common Stock is traded on the American Stock Exchange ("AMEX") under the
symbol "NTN." As of October 2, 1995, the last sale price for the Common Stock
as reported on the AMEX was $5.00. There is no established market for the
Warrants. See "Price Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN MATERIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Price to Proceeds to Selling
Public Securityholders (1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Per Share of Common Stock.................... $ (2) $
- --------------------------------------------------------------------------------
Per WCA Warrant.............................. $ - (3) $ - (3)
- --------------------------------------------------------------------------------
Total........................................ $
================================================================================
</TABLE>
(1) All proceeds from the sale of the Shares offered hereby will be received
by the Selling Securityholders. The amount shown is without deduction
for brokerage fees which may be paid by the Selling Securityholders and
for offering expenses, estimated at $_______, payable by the Company.
See "Use of Proceeds."
(2) Based on the last reported sale price of the Common Stock on the AMEX on
_______, 1995.
(3) There is no established trading market for the Warrants, and therefore
it is impracticable to determine the price at which such Warrants will
be offered for sale to the public. Consequently, no corresponding
information can be given with respect to the Warrants.
The date of this Prospectus is ________, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy or information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following regional
offices: Seven World Trade Center, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the AMEX, and the Company's reports, proxy
or information statements and other information filed with the AMEX may be
inspected at the AMEX's offices at 86 Trinity Place, New York, New York, 10006-
1881.
Additional information regarding the Company and the Shares offered hereby is
contained in the Registration Statement of which this Prospectus is a part, and
the exhibits thereto, filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). For further information pertaining to
the Company and the Shares, reference is made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the office of the Commission
at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549. Statements
contained herein concerning the provisions of any document are not necessarily
complete and in each instance reference is made to the copy of the document
filed as an exhibit or schedule to the Registration Statement. Each such
statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act (Commission file no. 1-11460) are incorporated in this Prospectus
by reference: (a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, which contains consolidated financial statements for the
Company's year ended December 31, 1994; (b) the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995; (c) the Company's Current Report
on Form 8-K dated April 21, 1995; (d) the Company's Current Report on Form 8-K
dated July 5, 1995; and (e) the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares offered hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such documents. Any statement contained
in a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Ronald E. Hogan, Chief Financial Officer, NTN
Communications, Inc., The Campus, 5966 La Place Court, Carlsbad, California
92008. Telephone requests may be directed to Mr. Hogan at (619) 438-7400.
2
<PAGE>
RISK FACTORS
The Shares offered hereby are speculative in nature and involve a high degree
of risk. The following risk factors should be considered carefully in
evaluating the Company and its business before purchasing the Shares offered by
this Prospectus.
HISTORY OF SIGNIFICANT LOSSES; RECENT PROFITABILITY
The Company has a history of significant losses and had an accumulated deficit
of $21,011,000 as of June 30, 1995. The year ended December 31, 1994, in which
the Company reported net earnings of $707,000, was the Company's first year of
profitable operations. The Company reported a net loss of $1,772,000 for six
months ended June 30, 1995, and there can be no assurance that the Company will
operate profitably in the future. See "Selected Consolidated Financial Data."
PENDING LITIGATION
The Company currently is defending litigation filed by stockholders of the
Company alleging violations by the Company of federal and state securities laws.
In June 1993, a class-action lawsuit against the Company was filed by certain
stockholders in the United States District Court for the Southern District of
California. The plaintiffs allege that announcements made by the Company
regarding a possible agreement in which the Company would sell certain equipment
and services to an arm of the Mexican Government were misleading. The
plaintiffs are seeking to recover unspecified damages for a drop in the market
price of the Company's Common Stock following a later announcement that the
anticipated agreement may be put out for bid. In September 1993, the class of
plaintiffs consisting of purchasers of Common stock during the period January
27, 1993 through June 24, 1993 was certified by the District Court. A motion by
the Company to dismiss the suit was denied in February 1994. Percipient
discovery has been undertaken by the parties.
In April 1995, a stockholder of the Company filed a class-action lawsuit
against the Company in the United States District Court for the Southern
District of California. The plaintiff seeks unspecified damages for alleged
violations of securities laws based upon public statements by the Company
regarding the projected results of operations of the Company and its wholly-
owned subsidiary, New World Computing ("New World"), for the fourth quarter 1994
and for fiscal 1994. The complaint filed in the action further alleges that
certain insiders sold stock following the projections based on information not
generally known to the public and seeks certification of a class of plaintiffs
consisting of purchasers of the Company's common stock during the period
November 9, 1994 through March 28, 1995. Preliminary discovery has been
undertaken by the parties.
In July 1995, the Company was named as a defendant in a separate action filed
in the United States District Court for the Northern District of Texas based
upon substantially the same allegations as set forth in the April 1995 class-
action suit against the Company. The Company recently filed its answer to the
complaint, which includes third-party claims for contribution against the
plaintiff's stock representative.
The Company plans to defend vigorously these actions, but there can be no
assurance that one or more of these actions will not be decided adversely to the
Company. Should the plaintiffs in these actions prevail, depending upon the
amount of any damages awarded, such claims could have a material adverse effect
on the Company. The Company expects to continue to incur litigation costs and
expenses relating to these and the other pending legal proceedings discussed
below. See "Certain Recent Developments -- Recent Results of Operations."
The Company also is defending or prosecuting various lawsuits in federal
courts in both the United States and Canada involving Interactive Network, Inc.
("IN").
On June 11, 1992, the Company commenced an action against IN in the United
States District Court for the Northern District of California seeking a
declaration that the Company's United States programming does not infringe a
United States patent held by IN (the "IN/US Patent"), or, alternatively, that
such patent is invalid and unenforceable. On June 12, 1992 the Company, NTN
Canada, an unaffiliated licensee, and NTN Canada's subsidiary NTN Sports,
3
<PAGE>
Inc. filed a similar action against IN in the Federal Court of Canada, Trial
Division, seeking a declaration that the Company's activities (and those of NTN
Canada and NTN Sports, Inc.) in Canada do not infringe a Canadian patent held by
IN (the "IN/Canada Patents"). The Company subsequently amended its claims to
include an assertion of invalidity of the IN/Canada patent based upon untrue and
material allegations made by IN in its patent petition. No discovery has been
undertaken, and the existence of this litigation has not affected the operations
of the Company's Canadian licensee in Canada.
In July 1993, the United States District Court granted IN a summary judgment
dismissing the Company's claims involving the IN/US Patent. The Company's
subsequent appeals of the summary judgment were denied. IN moved for a court
order awarding it attorneys' fees, and on September 15, 1995, the District Court
ordered NTN to pay IN an aggregate of $359,165 in attorneys' fees and accrued
interest. NTN intends to appeal the District Court's order. The summary
judgment did not affect the Company's current license with IN and did not
constitute any finding that the Company's programming is infringing on the IN/US
Patent.
On June 18, 1992, IN filed an action against the Company, NTN Sports, Inc. and
NTN Canada in the Federal Court of Canada, Trial Division, seeking a declaration
that the IN/Canada Patent is valid and infringed by the Company's games
broadcast and associated equipment sold in Canada, an injunction against such
alleged infringement, unspecified damages based on certain games sold in Canada
since the 1990 issuance of the IN/Canada Patent and interest and costs of the
action. IN has not taken any action in furtherance of this litigation, and the
existence of this litigation has not affected the operations of the Company's
Canadian licensee in Canada.
On April 28, 1993, the Company commenced an action against IN in the Superior
Court for the County of Santa Clara, California, seeking an injunction against
IN's making certain untrue statements regarding the Company, unspecified damages
and a declaration of the Company's rights with respect to the broadcast of QB1.
That action was subsequently stayed by the court, pending the outcome of the
Company's June 11, 1992 United States District Court action against IN. The
stay has now been lifted, and the Company intends to vigorously pursue its
claims.
On or about February 28, 1994, IN filed its own action against the Company in
the Superior Court for the County of Santa Clara, California, which sets forth
causes of action for malicious prosecution, defamation, interference with
economic relations and unfair competition. IN seeks compensatory damages and
punitive damages on all causes of action and injunctive relief with respect to
its claim for unfair competition. The Company has filed a motion for summary
judgment with respect to the claim for malicious prosecution, which is scheduled
to be heard on October 12, 1995. The responsibility for the Company's legal
fees in this action has been assumed by the Company's insurance carrier under
reservation of rights.
On May 5, 1994, IN filed an action against the Company in the United States
District Court for the Northern District of California seeking a declaration
that the Company's interactive boxing game, "Uppercut", infringes the IN/US
patent and request injunctive relief. The Company's motion for summary judgment
was granted by the District Court on the basis that an agreement between the
parties called for arbitration of this matter. IN's motion for reconsideration
of the Court's ruling was denied, and an order in favor of the Company was
entered on February 22, 1995 which included an award of approximately $57,000 in
attorneys' fees to the Company. IN has voluntarily dismissed its notice of
appeal of the District Court's ruling and the Company has since collected the
court-awarded attorneys' fees. The Company had previously submitted this matter
to arbitration for a declaration of non-infringement pursuant to an earlier
agreement between the parties which provided for arbitration and for a license
to the Company for a specified royalty if infringement were to be found. There
has not been any significant action taken in furtherance of the pending
arbitration.
On October 18, 1994, the Company filed a complaint against IN in the United
States District Court for the Northern District of California for alleged
trademark infringement, false designation of origin, unfair competition,
misappropriation and dilution in connection with the Company's exclusive license
from the Canadian Football League ("CFL"). In response, IN filed a motion to
dismiss the complaint, which was heard before the Court on February 17, 1995.
The Court found that, since IN was not yet playing its interactive game in
connection with CFL games, the Company's claim would appropriately be one based
upon declaratory relief. The Court gave the Company the opportunity to amend
its complaint, however, the Company will not pursue its claim at this time since
IN has ceased its business operations.
4
<PAGE>
The Company believes, based in part on the advice of outside counsel, that any
adverse outcome of the foregoing litigation involving IN will not result in a
material adverse effect on the Company's financial position.
DEPENDENCE ON LICENSES FOR BROADCAST RIGHTS
The Company's interactive sports games are broadcast in conjunction with live
telecasts of football, baseball, basketball and hockey games. In order to effect
this simultaneous broadcast, wherever possible the Company seeks to obtain
licenses from the owners of the broadcast rights to the sporting events to
utilize such telecasts for its interactive game programming. The Company's
original, exclusive license agreement with the National Football League ("NFL")
expired on March 31, 1995 and the NFL extended its arrangement with the Company
until August 30, 1995 to allow time for the negotiation and documentation of a
new license arrangement. The Company has since entered into a multi-year
exclusive license with the NFL for QB1, which runs through 1997 and contains
provisions for renewal. In addition, during the term of the license, the NFL
will consider the Company's proposal for the creation of a joint venture between
the NFL and NTN with respect to QB1. The Company has also obtained approval
from Major League Baseball for its proprietary interactive baseball game,
"Diamondball." The Company currently is broadcasting QB1 in conjunction with
college football games without any license. Limitations on the Company's sports
licenses could have an adverse effect upon the Company's business. In addition,
legal action by the owners or licensees of broadcast rights to college football
games seeking to enjoin further broadcasts by the Company or money damages could
preclude the playing of QB1 in connection with college football games.
RELIANCE ON INDEPENDENT DISTRIBUTORS; DIRECT DISTRIBUTION BY NEW WORLD
The Company relies in large part on the efforts of independent distributors to
market and sell the NTN Network to its subscriber locations. The Company
currently uses approximately 25 distributors who cover 49 states. The Company
has entered into long-term agreements with certain of its distributors, but such
agreements are typically terminable upon short notice. The loss of a
significant number of these distributors would have a material adverse effect on
the Company's business until such time, if any, as the Company found alternate
means of servicing the markets currently served by such distributors.
Since June 1994, the Company's New World subsidiary has relied solely on its
in-house sales force to market and sell its products. Prior to such time, New
World's products had been distributed in North America under an affiliate-label
program with Broderbund Software, Inc. New World has only limited experience in
direct marketing and sales activities, and there can be no assurance that it
will be successful in directly marketing and selling its products.
COMPETITION
The market for interactive entertainment systems is in its formative stages
and is characterized by frequent introductions of new software and hardware and
advancing technologies. Numerous companies have commercialized, are developing
or are expected to introduce interactive products that are or may become
directly competitive with the Company's products. Most of the Company's
competitors have substantial experience and expertise in the electronics
industry and in interactive entertainment hardware systems and multimedia
technology and in producing and selling consumer products through retail
distribution, and also have substantially greater engineering, marketing and
financial resources than the Company.
Numerous major companies in the movie, cable and telecommunications industries
and in the computer and software industries have publicly announced large
development budgets and deployment plans for and field testing of interactive
television services and are developing methods for delivery of interactive
multimedia products and services through existing or planned cable and telephone
networks. To the extent that these companies provide interactive functionality
through cable or telephone networks, their products will compete directly with
the Company's products. Some of these companies include large, established
companies such as AT&T Corp., Microsoft Corporation, Time Warner, Inc.,
Telecommunications, Inc., Intel Corporation and Motorola, Inc. All of these
companies have also devoted substantial financial resources to development
projects and many of them have commenced trial testing or have announced their
intention to commence trial testing in the immediate future. The Company also
anticipates competition from emerging companies, including those that may be
formed by persons with substantial experience and credibility
5
<PAGE>
in interactive technology. There can be no assurance that the Company can
compete successfully against these companies.
The Company also competes with other providers of interactive television
services to in-home viewers. Each of the major providers of interactive video
services, which include GTE Mainstreet, ACTV, Video Jukebox Network, IN,
Interactive Systems, Explore Technology and Call Interactive, is focused on in-
home delivery of programming. The Company's strategy for in-home delivery has
been to be a provider of programming to systems operated by others, and the
Company's programming currently is available through GTE Mainstreet. The
Company may also face potential competition from businesses engaged in
information gathering and related businesses which may seek to enter the markets
served by the Company, many of which are larger and have far greater personnel
and financial resources than does the Company. If such larger businesses enter
the markets, if existing competitors increase their activities in areas in which
the Company intends to do business or if the Company is unable to distribute its
programming to home viewers through systems operated by others, such
developments may have a materially adverse effect upon the Company.
The video game and personal computer industry also is characterized by intense
competition. New World's products compete with a variety of video games and
personal computer entertainment software on the market and with new games and
software continuously being introduced. Competition in the video game and
personal computer software industry extends to competition for shelf space in
retail outlets, and there can be no assurance that New World will be able to
compete successfully. New World will also face competition from all other forms
of interactive hardware and software providers such as the current computer
hardware and videogame manufacturers, as well as other providers of interactive
entertainment systems, including Sega, Nintendo, and 3DO, as well as many
others. Most of these competitors are large corporations with significantly
greater financial and marketing resources, market share and name recognition
than New World.
POTENTIAL FOR TECHNOLOGICAL OBSOLESCENCE
The computer industry and related services have been marked by rapid and
significant technological development and change. There can be no assurance
that technological development will not render the Company's interactive
technology and services obsolete within a relatively short period, or that the
Company will have the resources to respond to such technological change.
UNCERTAIN PROPRIETARY PROTECTION
The Company has two patent applications pending for its proprietary
interactive technology. In addition, the Company relies on a combination of
trademark and unfair competition laws, trade secrets and confidentiality
procedures and agreements to protect rights it considers proprietary. The
Company has copyrights for all of its programming, and the Company has
registered the trademark QB1 and has registered trademarks for a significant
number of its other services. However, no assurance can be given that such
patents will issue, or if issued, the scope of the protection afforded by such
patents. The Company currently is involved in litigation concerning the
enforceability, scope and validity of proprietary rights. See "Risk Factors --
Litigation."
New World regards all of its software as proprietary and attempts to protect
it. New World has no patents, and existing copyright laws afford only limited
practical protection for the New World's software. New World has entered into
license agreements with foreign entities for the translation of its software
into foreign languages and distribution in foreign countries. The laws of some
foreign countries do not protect proprietary rights to the same extent as do the
laws of the United States. In addition, New World has registered trademarks on
"New World," "Might & Magic" and "King's Bounty." However, no assurance can be
given as to the scope of protection afforded by such trademarks, or that New
World would be able to effectively enforce such trademarks.
INFLUENCE OF MANAGEMENT
The Company's executive officers and directors and their affiliates own, in
the aggregate, approximately 9% of the outstanding Common Stock, and have the
right, through the exercise of currently exercisable options and warrants to
purchase 3,127,314 shares of Common Stock, to increase their percentage
ownership to 21%. Therefore,
6
<PAGE>
these stockholders, if acting together, would have the ability to significantly
influence the Company's affairs and operations. See "Description of Securities."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain certain
provisions that may discourage attempts to acquire control of the Company that
are not negotiated with the Company's Board of Directors. These provisions may
have the effect of discouraging takeover attempts that some stockholders might
deem to be in their best interests, including takeover proposals in which
stockholders might receive a premium for their shares over the then current
market price, as well as making it more difficult for individual stockholders or
a group of stockholders to elect directors. The Board of Directors believes,
however, that these provisions are in the best interests of the Company and its
stockholders because such provisions may encourage potential acquirors to
negotiate directly with the Board of Directors, which is in the best position to
act on behalf of all stockholders. The Certificate of Incorporation provides
that the affirmative vote of the holders of at least 80% of the total voting
power of all outstanding securities of the Company then entitled to vote
generally in the election of directors, voting together as a single class, is
required to amend certain provisions of the Certificate of Incorporation,
including among others, those provisions relating to the number, election and
term of directors; the removal of directors and the filing of vacancies; and the
supermajority voting requirements of the Certificate of Incorporation. These
voting requirements will have the effect of making more difficult any
amendments, even if a majority of the Company's stockholders believes that such
amendment would be in their best interest. See "Description of Securities --
Anti-Takeover Provisions."
VOLATILITY OF STOCK PRICE
Historically, the trading price of the Company's Common Stock has fluctuated
widely, and it may be subject to similar future fluctuations in response to
quarter-to-quarter variations in the Company's operating results, announcements
regarding litigation, technological innovations or new products by the Company
or its competitors, general conditions in the industries in which the Company
competes and other events or factors. In addition, in recent years, broad stock
market indices, in general, and the securities of technology companies, in
particular, have experienced substantial price fluctuations. Such broad market
fluctuations also may adversely affect the future trading price of the Company's
Common Stock. See "Price Range of Common Stock and Dividend Policy."
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and anticipates
that for the foreseeable future earnings, if any, will be retained for the
operation and expansion of the Company's business. See "Price Range of Common
Stock and Dividend Policy."
EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND PREFERRED STOCK
As of September 14, 1995, there were 3,633,030 shares of Common Stock reserved
for issuance upon the exercise of stock options outstanding under the Company's
stock option plans at exercise prices ranging from $2.25 to $8.25 per share, of
which options to purchase 2,861,396 shares are currently exercisable. An
additional 1,195,000 shares of Common Stock (plus any shares of Common Stock
covered by stock options currently outstanding under the Company's 1985
Incentive Stock Option Plan and 1985 Nonqualified Stock Option Plan which are
subsequently terminated or expire without being exercised) are reserved for
issuance upon the exercise of options available for future grant under the
Company's 1995 Stock Option Plan. In addition, the Company has outstanding
warrants to purchase an aggregate of 3,441,329 shares of Common Stock at
exercise prices ranging from $2.00 to $8.00 per share, all of which warrants are
currently exercisable. Substantially all of such warrants, are subject to
currently effective registration statements covering the resale of the warrants
and the underlying warrant shares by the holders. The Company also has
outstanding 162,612 shares of preferred stock which entitle holders thereof,
upon surrender of the shares of preferred stock, to receive 45,548 shares of
Common Stock. Such options, warrants and preferred stock could adversely affect
the Company's ability to obtain future financing, since the holders of those
options, warrants and preferred stock can be expected to exercise or surrender
them for conversion, as the case may be, at a time when the Company would be
able to obtain additional capital through a new offering of securities on terms
more
7
<PAGE>
favorable than those provided by such options, warrants and preferred stock. For
the life of such options, warrants and preferred stock, the holders are given
the opportunity to profit from a rise in the market price of the Common Stock
without assuming the risk of ownership. To the extent the trading price of the
Common Stock at the time of exercise of any such options or warrants exceeds the
exercise price, such exercise will also have a dilutive effect on the Company's
stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
Approximately 2,753,000 shares of Common Stock outstanding as of the date of
this Prospectus, including the Shares offered hereby, are "restricted
securities," as that term is defined under Rule 144 promulgated under the Act.
All or substantially all of such shares are covered by currently effective
registration statements and can be offered and sold publicly by the beneficial
owners at any time so long as registration statements remain effective.
Moreover, in general under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, if two years have elapsed since the later of
the date of acquisition of restricted shares from an issuer or from an affiliate
of an issuer, the acquiror or subsequent holder is entitled to sell in the open
market, within any three-month period, a number of shares that does not exceed
the greater of 1% of the outstanding shares of the same class or the average
weekly trading volume during the four calendar weeks preceding the filing of the
required notice of sale. A person who has not been an affiliate of the Company
for at least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock as described above for at least three
years is entitled to sell such shares under Rule 144(k) without regard to any of
the limitations described above. Of the 2,753,000 outstanding shares of Common
Stock constituting restricted shares, approximately 78,000 were eligible as of
August 31, 1995 to be resold publicly without restriction under Rule 144(k).
No predictions can be made with respect to the effect, if any, that sales of
Common Stock in the market or the availability of shares of Common Stock for
sale pursuant to currently effective registration statements or under Rule 144
will have on the market price of Common Stock prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
CERTAIN RECENT DEVELOPMENTS
RECENT RESULTS OF OPERATIONS
As described under "Risk Factors -- Pending Litigation," the Company currently
is involved in a number of lawsuits. During the year ended December 31, 1994
and the six months ended June 30, 1995, the Company incurred aggregate legal
fees and expenses, including fees and expenses relating to litigation matters,
of approximately $980,000 and $1,405,000, respectively. The Company expects to
incur substantial additional legal fees and expenses associated with its pending
litigation for the balance of fiscal 1995 and, perhaps, future periods as well.
RECENT RETENTION OF INVESTMENT BANKER
In July 1995, the Company retained Donaldson, Lufkin & Jenrette to assist in
establishing the Company's long-term financial strategy.
USE OF PROCEEDS
Other than the exercise price of the Warrants, the Company will not receive
any of the proceeds from the sale of the Common Stock offered hereby. The
Company will pay the costs of this offering, which are estimated to be $36,000.
Holders of the Warrants are not obligated to exercise their Warrants, and there
can be no assurance that such holders will choose to exercise all or any of such
Warrants. The gross proceeds to the Company in the event
8
<PAGE>
that all of the Warrants are exercised would be $628,125 (37,500 shares at an
exercise price of $6.75 per share and 50,000 shares at an exercise price of
$7.50 per share).
The Company intends to apply the net proceeds it receives from the exercise of
the Warrants, to the extent any are exercised, to augment its working capital
and for general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is listed on the AMEX under the symbol "NTN." The
prices below are the high and low sales prices for the Common Stock as reported
on the AMEX for periods shown.
<TABLE>
<CAPTION>
LOW HIGH
----- ------
<S> <C> <C>
1993
----
First Quarter.... $4.37 $10.63
Second Quarter... 6.37 11.50
Third Quarter.... 5.75 10.37
Fourth Quarter... 8.50 10.50
1994
----
First Quarter.... 6.00 10.25
Second Quarter... 4.63 7.50
Third Quarter.... 6.37 8.50
Fourth Quarter... 5.75 7.87
1995
----
First Quarter.... 5.63 8.25
Second Quarter... 4.44 5.81
Third Quarter.... 4.06 6.25
</TABLE>
For a recent closing price for the Common Stock as reported on the AMEX see
the cover page of this Prospectus. As of September 14, 1995, there were 1,757
record owners of the Common Stock according to information available from the
Company's transfer agent.
To date, the Company has not declared or paid any cash dividends with respect
to its Common Stock, and the current policy of the Board of Directors is to
retain earnings, if any, after payment of dividends on the Company's outstanding
preferred stock to provide for the growth of the Company. Consequently, no cash
dividends are expected to be paid on the Company's Common Stock in the
foreseeable future. Further, there can be no assurance that the proposed
operations of the Company will generate the revenues and cash flow needed to
declare a cash dividend or that the Company will have legally available funds to
pay dividends.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Selected
Consolidated Statement of Operations Data" and "Selected Consolidated Balance
Sheet Data" for, and as of the end of, each of the years in the five-year period
ended December 31, 1994, are derived from the consolidated financial statements
of NTN Communications, Inc., which financial statements have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of December 31, 1994 and 1993, and for each
of the years in the three-year period ended December 31, 1994, and the report
thereon, are incorporated by reference elsewhere in this Prospectus. The
selected data should be read in conjunction with the consolidated financial
statements for the three-year period ended December 31, 1994, the related notes
and the independent auditors' report which contains an explanatory paragraph
that states that the Company is a defendant in a class action lawsuit. The
litigation is in its early stages and no prediction can be made as to the
likelihood of the ultimate outcome. Accordingly, no provision for any liability
that may result from adjudication has been recognized in the consolidated
financial statements. The report also refers to a change in the method of
accounting for investments in debt and equity securities in 1994. The following
selected consolidated statement of operations data for the six months ended June
30, 1995 and 1994 and related consolidated balance sheet data as of June 30,
1995 are derived from the unaudited consolidated financial statements of the
Company and reflect all adjustments (including only normal recurring accruals)
which in the opinion of management are necessary for a fair presentation of the
Company's financial position and results of operations for these periods. The
operating results for the six months ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
following data should be read in conjunction with "Management's Discussions and
Analysis of Results of Operations and Financial Condition" and the Consolidated
Financial Statements and notes thereto incorporated by reference in this
Prospectus.
SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
--------------------------------------------------- ------------------
1994 1993 1992 1991 1990 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $24,646 $17,258 $10,702 $ 5,853 $ 5,871 $11,971 $ 9,625
Total cost of sales..................... 9,453 7,514 4,200 2,411 2,569 5,582 3,657
------- ------- ------- ------- ------- ------- -------
Gross profit............................ 15,193 9,744 6,502 3,442 3,302 6,389 5,968
Total operating expenses................ 14,898 11,198 8,636 5,260 4,094 8,150 5,358
Interest income (expense), net.......... (412) (434) - 576 1,087 (11) 250
Income taxes............................ - 281 106 - - - 67
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before extraordinary 707 (1,301) (2,240) (2,394) (1,879) (1,772) 793
item...................................
Extraordinary item...................... - - - 3,889 - - -
Net earnings (loss)..................... $ 707 $(1,301) $(2,240) $ 1,495 $(1,879) $(1,772) $ 793
------- ------- ------- ------- ------- ------- -------
Earnings (loss) per share before $ .03 $ (.08) $ (.20) $ (.38) $ (.71) $ (.09) $ .04
extraordinary item(1).................
Net earnings (loss) per share........... $ .03 $ (.08) $ (.20) $ .24 $ (.71) $ (.09) $ .04
------- ------- ------- ------- ------- ------- -------
Weighted average equivalent shares
outstanding(1)........................ 21,124 17,135 11,344 6,263 2,661 19,459 21,074
</TABLE>
_______________
(1) As adjusted to reflect a 1-for-20 reverse stock split effected in June
1991.
10
<PAGE>
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------- June 30,
1994 1993 1992 1991 1990 1995
------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total current assets.................... $22,106 $23,102 $ 9,004 $5,119 $ 2,358 $23,806
Total assets............................ 31,239 27,240 10,171 5,604 2,630 35,569
Total current liabilities............... 4,958 2,933 2,554 2,810 11,506 8,282
Long-term debt, less current portion.... 8 163 18 91 953 11
Shareholders' equity (deficiency)....... 25,457 23,653 7,432 2,703 (9,828) 26,390
</TABLE>
11
<PAGE>
SELLING SECURITYHOLDERS
In a transaction with unaffiliated third parties, the Company recently
sold an aggregate of 600,000 shares of Common Stock to the Selling
Securityholders named in the table below other than Jon Van Caneghem and
Continuum Capital, Inc. (collectively, the "DFA Securityholders"), at an initial
purchase price of $4.3563 per share. In the event that the Company sells any
shares of Common Stock during the twelve-month period ending April 28, 1996 at a
price less than the initial purchase price per share, the purchase price per
share is subject to downward adjustment to the price paid in such subsequent
sale or sales. Such adjustment generally will be accomplished by the Company
issuing additional shares to the DFA Securityholders, except that if the
aggregate number of shares held by them and other entities advised by
Dimensional Fund Advisors Inc. would exceed 4.99% of the total outstanding stock
of the Company, the DFA Securityholders can require the Company to make a cash
refund to the extent necessary to avoid exceeding such percentage ownership.
Other than Jon Van Caneghem, the President of New World, no Selling
Securityholder or its affiliates has any position, office or other material
relationship with the Company.
In connection with the foregoing transaction, the Company agreed to file
the Form S-3 Registration Statement of which this Prospectus is a part and to
grant to DFA Securityholders certain demand and piggyback registration rights
until such time as it, in the reasonable opinion of its counsel, can sell the
Shares under the provisions of Rule 144(k) under the Securities Act.
The following table sets forth as of September 14, 1995 the number and
percent of shares of Common Stock owned by each of the Selling Securityholders,
the number of shares of Common Stock offered by each of them hereby, and the
number and percent of shares of Common Stock to be held by each of them after
the conclusion of this offering:
<TABLE>
<CAPTION>
Before Offering After Offering
-------------------------- --------------------------
Number of Number of
Shares Number of Shares
Selling Beneficially Shares Beneficially
Securityholder Owned Percent(1) Being Offered Owned Percent
-------------- ------------ ---------- ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Jon Van Caneghem........... 512,500 2.6% 512,500 0 0%
DFA Group Trust -- Small
Company Subtrust......... 308,000(2) 1.6(2) 308,000(2) 0 0
U.S. 9-10 Small Company
Portfolio................ 161,500(2) *(2) 161,500(2) 0 0
DFA Group Trust - 6-10
Subtrust................. 124,200(2) *(2) 124,200(2) 0 0
Continuum Capital, Inc..... 87,500(3) * 87,500(3) 0 0
U.S. 6-10 Small Company
Series................... 6,300(2) *(2) 6,300(2) 0 0
</TABLE>
- -----------------
(1) Based on 19,940,654 shares of Common Stock outstanding as of September
14, 1995. An asterisk denotes beneficial ownership of less than 1%.
(2) Subject to adjustment as described above.
(3) Constitute shares of Common Stock issuable pursuant to current
exercisable WCA Warrants.
12
<PAGE>
PLAN OF DISTRIBUTION
Each of the Selling Securityholders has advised the Company that it may
sell, directly or through brokers, its Shares offered hereby in negotiated
transactions or in one or more transactions on the AMEX, or otherwise, at the
prices prevailing at the time of sale. In connection with such sales, the
Selling Securityholders and any participating broker may be deemed to be
"underwriters" of the Shares so sold within the meaning of the Securities Act,
although the offering of the Shares will not be underwritten by a broker-dealer
firm.
The Company will bear all costs and expenses of the registration of the
Shares under the Securities Act and certain state securities laws, other than
fees of counsel for the Selling Securityholders and any discounts or commissions
payable with respect to sales of such Shares.
The Company has informed the Selling Securityholders that the anti-
manipulation provisions of Rules 10b-6 and 10b-7 under the Exchange Act may
apply to their sales of the Shares and has furnished each of the Selling
Securityholders with a copy of these rules, as well as a copy of certain
interpretations thereof by the Securities and Exchange Commission. The Company
also has advised the Selling Securityholders of the requirement for delivery of
this Prospectus in connection with any sale of the Shares.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 10,000,000 shares of
preferred stock, par value $.005 per share ("Preferred Stock"), and 50,000,000
shares of Common Stock. The Preferred Stock may be issued in one or more
series; the only series currently designated is a series of 5,000,000 shares of
Series A Convertible Preferred Stock (the "Series A Preferred Stock").
COMMON STOCK
On September 14, 1995, there were 19,940,654 shares of Common Stock
outstanding.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. The holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared by
the Company's Board of Directors out of legally available funds, after payment
of any dividends required on the outstanding Preferred Stock. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets that are legally available for
distribution, after payment of or provision for all debts and liabilities and
for any payments with respect to the Preferred Stock. The holders of Common
Stock have no preemptive, subscription or conversion rights, and there are no
redemption or sinking fund provisions applicable to such shares. All of the
outstanding shares of Common Stock are fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to the
rights of the holders of shares of the Series A Preferred Stock, and may be
subject to the rights of the holders of such other Preferred Stock as the
Company may issue in the future, although the Company has no plans at this time
to issue additional Preferred Stock.
PREFERRED STOCK
On September 14, 1995, there were 162,612 shares of Series A Preferred
Stock outstanding. The holders of the Series A Preferred Stock are entitled to
an annual dividend of 10% of the original issue price of $1.00 per share,
payable semiannually on December 1 and June 1 of each year in cash or, at the
option of the Company, by means of the issuance of shares of Common Stock, which
are to be valued for this purpose at the fair market value of the Common Stock.
The Company is current in the payment of all dividends on the Series A Preferred
Stock. Upon liquidation, dissolution and winding up of the Company, each holder
of the Series A Preferred Stock shall be entitled to receive $1.00 per share
before any payment shall be made with respect to the outstanding shares of the
Common Stock. Each share of the Series A Preferred Stock is convertible into
approximately .2801 share of Common Stock at any time at the option of the
holders of the Series A Preferred Stock. The rate of conversion is subject to
13
<PAGE>
certain antidilution provisions. The holders of the Series A Preferred Stock do
not have any voting, preemptive, subscription or redemption rights.
Additional shares of Preferred Stock may be issued without stockholder
approval. The Board of Directors is authorized to issue such shares in one or
more series and to fix the rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights and rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without any vote or action by the shareholders. Any
Preferred Stock to be issued could rank prior to the Common Stock with respect
to dividend rights and rights on liquidation. The Board of Directors, without
stockholder approval, may issue Preferred Stock with voting and conversion
rights that could adversely affect the voting power of holders of Common Stock
or create impediments to persons seeking to gain control of the Company. The
Company has no present plan or arrangement to issue any additional shares of
common stock.
WCA WARRANTS
In March 1994 and June 1994, the Company issued to Continuum Capital,
Inc., a financial consultant of the Company, in consideration of services
rendered, Warrants to purchase shares of Common Stock at exercise prices of
$7.50 and $6.75 per share, respectively. Such warrants are exercisable for five
years from their respective dates of grant, contain antidilution provisions that
adjust the exercise price per share in the event of a stock split, stock
dividend, recapitalization and certain other events, and provide for piggyback
registration rights commencing one year after their respective dates of grant,
and continuing for six years thereafter.
ANTI-TAKEOVER PROVISIONS
The provisions of the Company's Restated Certificate of Incorporation
(the "Certificate") and Bylaws (the "Bylaws"), summarized in the succeeding
paragraphs, may be deemed to have anti-takeover effects and may delay, defer or
prevent a tender offer, takeover attempt or change in control that a stockholder
might consider to be in such stockholder's best interest, including those
attempts that might result in a premium over the market price for the shares
held by stockholders.
Amendment of Certain Provisions of the Certificate of Incorporation and
Bylaws
The Certificate provides that the affirmative vote of the holders of at
least 80% of the total voting power of all outstanding securities of the Company
then entitled to vote generally in the election of directors, voting together as
a single class, is required to amend certain provisions of the Certificate,
including those provisions relating to the number, election and term of
directors; the removal of directors and the filling of vacancies;
indemnification of directors, officers and others; and the supermajority voting
requirements in the Certificate. The Certificate further provides that the
Bylaws may be amended by the Board of Directors or by an affirmative vote of the
holders of not less than 80% of the total voting power of all outstanding
securities of the Company then entitled to vote generally in the election of
directors, voting together as a single class. These voting requirements will
have the effect of making more difficult any amendment by stockholders, even if
a majority of the Company's stockholders believes that such amendment would be
in their best interests.
Classified Board of Directors
The Certificate and the Bylaws divides the Board of Directors into three
classes, each class to be nearly equal in number as possible, each class serving
staggered three-year terms. Presently, two directors of the Company are subject
to re-election at each annual meeting of stockholders.
The classification of directors and provisions in the Certificate that
limit the ability of stockholders to increase the size of the Board of Directors
without the vote of at least 80% of the total voting power of all outstanding
voting securities, together with provisions in the Certificate that limit the
ability of stockholders to remove directors and that permit the remaining
directors to fill any vacancies on the Board, will have the effect of making it
more difficult for stockholders to change the composition of the Board of
Directors. As a result, at least two annual meetings of stockholders may be
required for the stockholders to change a majority of the directors, whether or
not a change in
14
<PAGE>
the Board of Directors would be beneficial to the Company and its stockholders
and whether or not a majority of the Company's stockholders believes that such a
change would be desirable.
Certain Stockholder Action
The Certificate requires that stockholder action be taken at an annual
meeting or special meeting of stockholders called pursuant to a resolution
adopted by a majority of the Board of Directors and prohibits stockholder action
by written consent.
Section 203 of the Delaware General Corporation Law
The Company is governed by the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Subject to certain exceptions
summarized below, Section 203 prohibits any Interested Stockholder from engaging
in a "business combination" with a Delaware corporation for three years
following the date such person became an Interested Stockholder. Interested
Stockholder, as defined, includes (i) any person who is the beneficial owner of
15% or more of the outstanding voting stock of the corporation and (ii) any
person who is an affiliate or associate of the corporation and who held 15% or
more of the outstanding voting stock of the corporation at any time within three
years before the date on which such person's status as an Interested Stockholder
is determined. Subject to certain exceptions, a "business combination"
includes, among other things: (i) any merger or consolidation involving the
corporation; (ii) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets having an aggregate market value equal to 10% or more of
either the aggregate market value of all assets of the corporation determined on
a consolidated basis or the aggregate market value of all the outstanding stock
of the corporation; (iii) any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the Interested
Stockholder, except pursuant to a transaction that effects a pro rata
distribution to all stockholders of the corporation; (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation that is owned directly or
indirectly by the Interested Stockholder; and (v) any receipt by the Interested
Stockholder of the benefit (except proportionately as a stockholder) of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
Section 203 does not apply to a business combination if: (i) before a
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder or the business combination; (ii) upon consummation of
the transaction that resulted in the person becoming an Interested Stockholder,
the Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commences (other than
certain excluded shares); or (iii) following a transaction in which the person
became an Interested Stockholder, the business combination is (a) approved by
the board of directors of the corporation and (b) authorized at a regular or
special meeting of stockholders (and not by written consent) by the affirmative
vote of the holders of at least 66-2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
SHARES ELIGIBLE FOR FUTURE PUBLIC SALE
There are 19,940,654 shares of Common Stock outstanding. Of such shares
of Common Stock, approximately 2,753,000 shares, including the Shares offered
hereby, are "restricted securities" within the meaning of Rule 144 of the
regulations promulgated under the Securities Act. All or substantially all of
such shares are covered by currently effective registration statements and can
be offered and sold publicly by the beneficial owners at any time so long as the
registration statements remain effectively. Moreover, in general under Rule 144
as currently in effect, a person (or persons whose shares are aggregated),
including a person who may be deemed to be an "affiliate" of the Company as that
term is defined under the Act, is entitled to sell within any three-month period
a number of shares that does not exceed the greater of (i) one percent of the
then-outstanding shares of Common Stock, or (ii) the average weekly trading
volume in the Common Stock during the four calendar weeks preceding such sale.
If the shares in question were acquired from the Company in transactions not
involving a public offering, then they may not be sold under Rule 144 until they
have been outstanding for at least two years. Sales under Rule 144 are also
subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. However, a person
who is not deemed to have been an affiliate of the Company
15
<PAGE>
during the 90 days preceding a sale by such person is entitled to sell shares
that have been outstanding for at least three years without regard to the
volume, manner of sale or notice requirements. Of the 2,753,000 outstanding
shares of Common Stock constituting restricted shares, approximately 78,000 were
eligible as of August 31, 1995 to be resold publicly without restriction under
Rule 144(k).
No predictions can be made with respect to the effect, if any, that
sales of Common Stock in the market or the availability of shares of Common
Stock for sale pursuant to currently effective registration statements or under
Rule 144 will have on the market price of Common Stock prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities.
As of September 14, 1995, there were 3,633,030 shares of Common Stock
reserved for issuance upon the exercise of stock options outstanding under the
Company's stock option plans at exercise prices ranging from $2.25 to $8.25 per
share, of which options to purchase 2,861,396 shares are currently exercisable.
An additional 1,195,000 shares of Common Stock (plus any shares of Common Stock
covered by stock options currently outstanding under the Company's 1985
Incentive Stock Option Plan and 1985 Nonqualified Stock Option Plan which are
subsequently terminated or expire without being exercised) are reserved for
issuance upon the exercise of options available for future grant under the
Company's 1995 Stock Option Plan. In addition, the Company has outstanding
warrants to purchase an aggregate of 3,441,329 shares of Common Stock at
exercise prices ranging from $2.00 to $8.00 per share, all of which warrants are
currently exercisable. Substantially all of such warrants are subject to
currently effective registration statements covering the resale of the warrants
and the underlying warrant shares by the holders. The Company also has 162,612
shares of preferred stock outstanding which entitle holders thereof to receive,
upon surrender of the shares of preferred stock, 45,548 shares of Common Stock.
Such options, warrants and preferred stock could adversely affect the Company's
ability to obtain future financing. Such options and warrants are likely to be
exercised and such preferred stock is likely to be converted into shares of
Common Stock, if at all, only at a time when the exercise price or conversion
price, as the case may be, is less than the market price of the Common Stock.
For the life of such options, warrants and preferred stock, the holders are
given the opportunity to profit from a rise in the market price of the Common
Stock without assuming the risk of ownership. Moreover, the holders of those
options, warrants and preferred stock can be expected to exercise or surrender
them, as the case may be, at a time when the Company would be able to obtain
additional capital through a new offering of securities on terms more favorable
than those provided by such options, warrants or preferred stock. To the extent
the trading price of the Common Stock at the time of exercise of any such
options or warrants exceeds the exercise price, such exercise will also have a
dilutive effect on the Company's stockholders.
TRANSFER AGENT AND WARRANT AGENT
The Transfer Agent for the Common Stock is American Stock Transfer &
Trust Company, New York, New York.
LEGAL MATTERS
Troy & Gould Professional Corporation, Los Angeles, California, has
rendered an opinion to the effect that the securities offered hereby by the
Selling Securityholders, when sold and paid for, will be duly and validly
issued, fully paid and nonassessable. Such counsel owns 12,671 shares of Common
Stock as of the date of this Prospectus.
16
<PAGE>
EXPERTS
The financial statements and schedules of NTN Communications, Inc. as of
December 31, 1994, and for each of the years in the three-year period ended
December 31, 1994, incorporated by reference herein and elsewhere in the
registration statement have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick covering the December 31, 1994 financial statements
contains an explanatory paragraph that states that the Company is a defendant in
a class action lawsuit. The litigation is in its early stages and no prediction
can be made as to the likelihood of the ultimate outcome. Accordingly, no
provision for any liability that may result from adjudication has been
recognized in the financial statements. The report also refers to a change in
the method of accounting for investments in debt and equity securities in 1994.
17
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus, in connection with the offering hereby, and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Company or the Selling Securityholders. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any
securities to any person in any State or other jurisdiction in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or the facts herein set
forth since the date hereof.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................................... 2
Incorporation of Certain Documents by Reference......................... 2
Risk Factors............................................................ 3
Certain Recent Developments............................................. 8
Use of Proceeds......................................................... 9
Price Range of Common Stock and Dividend Policy......................... 9
Selected Consolidated Financial Data.................................... 10
Selling Securityholders................................................. 12
Plan of Distribution.................................................... 13
Description of Securities............................................... 13
Legal Matters........................................................... 16
Experts................................................................. 17
</TABLE>
================================================================================
================================================================================
1,200,000 Shares of Common Stock
83,750 WCA Warrants
NTN COMMUNICATIONS, INC.
____________
PROSPECTUS
____________
October __, 1995
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the distribution
described in this Registration Statement will be as follows. All expenses
incurred with respect to the distribution will be paid by the Company.
<TABLE>
<S> <C>
SEC registration fee........................ $ 2,177
Printing expenses........................... 5,000
Accounting fees and expenses................ 6,000
Legal fees and expenses..................... 20,000
Fees and expenses for qualification under
state securities laws...................... 1,000
Miscellaneous............................... 1,823
-------
Total...................................... $36,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws permit the Company to
indemnify officers and directors of the Company to the fullest extent permitted
by Section 145 of the Delaware General Corporation Law. Section 145 of the
Delaware General Corporation Law makes provision for the indemnification of
officers, directors and other corporate agents in terms sufficiently broad to
indemnify such persons, under certain circumstances, for liabilities (including
reimbursements of expenses incurred) arising under the Securities Act.
The Stock Purchase Agreement, dated as of April 24, 1995, between the
Company and the Selling Securityholders, provides that the Company shall
indemnify the Selling Securityholders under certain circumstances and the
Selling Securityholders shall indemnify the Company and the officers and
directors of the Company under certain circumstances.
The Company has entered into indemnity agreements with certain of its
outside directors. Pursuant to the indemnity agreement, the Company agrees to
indemnify each outside director who is a party to the indemnity agreement under
certain circumstances in which such outside director or the Company is named as
a party to a proceeding (as that term is defined).
II-1
<PAGE>
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference as a
part of this Registration Statement:
4.1 Specimen Common Stock certificate (previously filed as an exhibit to the
Company's registration statement on Form 8-A, File No. 0-19383, and
incorporated herein by reference)
4.2 Stock Purchase Agreements, dated as of April 24, 1995, between the
Company and the DFA Securityholders(1)
4.3 Warrant Certificate WCA-2026 to purchase 50,000 shares of Common Stock
4.4 Warrant Certificate WCA-2027 to purchase 37,500 shares of Common Stock
5 Opinion of Troy & Gould Professional Corporation
23.1 Consent of Troy & Gould Professional Corporation (included in Exhibit 5)
23.2 Consent of KPMG Peat Marwick (included on page II-5 hereof)
24 Power of Attorney (included on page II-4)
___________________
(1) Filed as an exhibit to the Company's report on Form 8-K dated April __,
1995 and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in this registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3, and the information required to be included
in a post-effective amendment is contained in periodic reports filed by
the registrant pursuant to section 13 or section 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Company hereby undertakes:
That for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section
15(d) of the
II-2
<PAGE>
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Carlsbad, State of California, on October 5,
1995.
NTN COMMUNICATIONS, INC.
By: /s/ Patrick J. Downs
----------------------------------
Patrick J. Downs,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Patrick J. Downs and Ronald E. Hogan, and each of
them, his true and lawful attorneys-in-fact and agents, each with power of
substitution, for him in any and all capacities, to sign this Registration
Statement and any amendments hereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as he might do or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his or their substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement on Form S-3 has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Patrick J. Downs Chairman of the Board of Directors October 5, 1995
- ------------------------- and Chief Executive Officer
Patrick J. Downs
/s/ Daniel C. Downs President, Chief Operating Officer October 5, 1995
- ------------------------- and Director
Daniel C. Downs
/s/ Kenneth B. Hamlet Executive Vice-President, General October 5, 1995
- ------------------------- Manager and Director
Kenneth B. Hamlet
/s/ Ronald E. Hogan Senior Vice President - Finance and October 5, 1995
- ------------------------- Secretary (Principal Financial
Ronald E. Hogan and Accounting Officer)
/s/ Donald C. Klosterman Director October 5, 1995
- -------------------------
Donald C. Klosterman
/s/ Norman Lear Director October 5, 1995
- -------------------------
Norman Lear
/s/ Alan P. Magerman Director October 5, 1995
- -------------------------
Alan P. Magerman
/s/ A. R. Rozelle Director October 5, 1995
- -------------------------
A. R. Rozelle
</TABLE>
II-4
<PAGE>
The Board of Directors
NTN Communications, Inc.:
We consent to the use of our reports incorporated by reference and to the
references to our firm under the headings "Selected Consolidated Financial Data"
and "Experts" in the Prospectus.
Our report dated March 28, 1995, contains an explanatory paragraph that
states that the Company is a defendant in a class action lawsuit. The
litigation is in its early stages and no prediction can be made as to the
likelihood of the ultimate outcome. Accordingly, no provision for any liability
that may result from adjudication has been recognized in the consolidated
financial statements. Our report also refers to a change in the method of
accounting for investments in debt and equity securities in 1994.
San Diego, California
October 5, 1995
II-5
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4.3 Warrant Certificate WCA-2026 to purchase 50,000 shares
of Common Stock
4.4 Warrant Certificate WCA-2027 to purchase 37,500 shares
of Common Stock
5 Opinion of Troy & Gould Professional Corporation
23.1 Consent of Troy & Gould Professional Corporation
(included in Exhibit 5)
23.2 Consent of KPMG Peat Marwick (included on page II-5)
</TABLE>
II-6
<PAGE>
EXHIBIT 4.3
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
Warrant to Purchase
WCA-2026 50,000
Shares
NTN COMMUNICATIONS INC.
(Incorporated under the laws of the State of Delaware)
WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF
THE $.005 PAR VALUE COMMON STOCK OF NTN COMMUNICATIONS INC.
EXERCISABLE ONLY AFTER MARCH 8, 1994, AND VOID AFTER MARCH 7, 1999.
Warrant Price: $7.50 (Seven Dollars Fifty Cents) per share.
1. THIS IS TO CERTIFY that, for value received, Continuum Capital, Inc. or
its registered assigns (either or both of whom are referred to herein as the
"Holder"), is entitled to purchase, subject to the terms and conditions
hereinafter set forth, at anytime from and after March 8, 1994, and on or before
March 7, 1999 (the "Warrant Period"), up to 50,000 shares of the $.005 par value
common stock ("Common Stock") of NTN Communications Inc. (the "Company"), and
to receive certificate(s) for the Common Stock so purchased. This warrant may
be exercised in whole or in part. Such exercise shall be accomplished by tender
to the Company of the purchase price set forth above as the warrant price (the
"Warrant Price"), either in cash or by certified check or bank cashier's check,
payable to the order of the Company, together with presentation and surrender to
the Company of this Warrant with an executed subscription in substantially the
form attached hereto as Exhibit A. Fractional shares of the Company's Common
Stock will not be issued upon the exercise of this Warrant.
2. The Company agrees at all times to reserve and hold available out of the
aggregate of its authorized but unissued Common Stock the number of shares of
its Common Stock issuable upon the exercise of this and all other Warrants of
like tenor then outstanding. The Company further covenants and agrees
1
<PAGE>
that all shares of Common Stock that may be delivered upon the exercise of this
Warrant will, upon delivery, be fully paid and nonassessable and free from all
taxes, liens and charges with respect to the purchase thereof hereunder.
This Warrant and the Common Stock issuable upon the exercise hereof may not
be sold, transferred, pledged or hypothecated unless the Company shall have been
supplied with evidence reasonably satisfactory to it that such transfer is not
in violation of the Securities Act of 1933, as amended (the "Act") and any
applicable state laws. Subject to the satisfaction of the aforesaid condition,
this Warrant shall be transferable by the Holder.
If this Warrant is transferred, in whole or in part, upon surrender of this
Warrant to the Company, the Company shall deliver to each transferee a Warrant
evidencing the rights of such transferee to purchase the number of shares of
Common Stock that such transferee is entitled to purchase pursuant to such
transfer.
The Company may place a legend on this Warrant or any replacement Warrant
and on each certificate representing shares issuable upon exercise of this
Warrant as to which the Company has not been supplied evidence that the transfer
of such security would not be in violation of the Act and any applicable state
laws.
Only the registered Holder may enforce the provisions of this Warrant
against the Company. A transferee of the original registered Holder becomes a
registered Holder only upon notice to the Company substantially in the form set
forth in Exhibit B hereto.
3. This Warrant does not entitle the Holder to any voting rights or other
rights as a stockholder of the Company, nor to any other rights whatsoever
except the rights herein set forth, and no dividend shall be payable or accrue
by reason of this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that, this
Warrant is exercised.
This Warrant is exchangeable upon its surrender by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the Holder at the time of such surrender.
At such time as the Common Stock is listed on any registered national
securities exchange, the Company shall, upon
2
<PAGE>
issuance of any shares for which this Warrant is exercisable, at its expense,
promptly obtain and maintain the listing of such shares.
The Company shall comply with the reporting requirements of Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended, for so long as and to
the extent that such requirements apply to the Company.
4. The Warrant Price and the number of shares purchasable upon the exercise
of this Warrant are subject to adjustment from time to time upon the occurrence
of any of the events specified in this Section 4.
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into smaller number of shares of Common Stock, or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of shares of Common Stock purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder of this Warrant
shall be entitled to receive the kind and number of shares of Common Stock or
other securities of the Company that he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Warrant Price
shall be adjusted by multiplying such Warrant Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of shares
of Common Stock purchasable upon the exercise of this Warrant immediately prior
to such adjustment, and of which the denominator shall be the number of shares
of Common Stock so purchasable immediately thereafter.
(c) For the purpose of this Section 4, the term shares of Common Stock
shall mean (i) the class of stock designated as the Common Stock of the Company
at the date of this Warrant, or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares consisting solely of
change in par value, or from par value to no par value, or from no par value to
par value.
3
<PAGE>
(d) If during the Warrant Period the Company consolidates with or merges
into another corporation or transfers all or substantially all of its assets the
Holder shall thereafter be entitled upon exercise hereof to purchase, with
respect to each share of Common Stock purchasable hereunder immediately prior to
the date upon which such consolidation or merger becomes effective, the
securities or property to which a holder of shares of Common Stock is entitled
upon such consolidation or merger, without any change in, or payment in addition
to the Warrant Price in effect immediately prior to such merger or
consolidation, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to ensure that all of the provisions
of this Warrant shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or property thereafter deliverable upon the
exercise of this Warrant. The Company shall not effect any such consolidation,
merger or asset transfer unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting therefrom shall assume by
written agreement executed and mailed to the registered Holder at his address
shown on the books and records of the Company, the obligation to deliver to such
Holder any such securities or property as in accordance with the foregoing
provisions such Holder shall be entitled to purchase.
(e) Upon the happening of any event requiring an adjustment of the
Warrant Price, the Company shall forthwith give written notice thereof to the
registered Holder of this Warrant, stating the adjusted Warrant Price and the
adjusted number of shares of Common Stock or other securities or property
purchasable upon the exercise hereof resulting from such event and setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based. The Board of Directors of the Company shall determine the
adjusted Warrant Price and the securities or property purchasable upon exercise.
If any voluntary or involuntary dissolution, liquidation, or winding up of the
Company is proposed, the Company shall give at least 20 days prior written
notice of such proposal to the registered Holder hereof stating the date on
which such event is to take place and the date (which shall be at least 20 days
after giving of such notice) as of which the holders of shares of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such dissolution, liquidation or winding up.
This Warrant and all rights hereunder shall terminate as of the date on which
such dissolution, liquidation, or winding up takes place. The notices pursuant
to this paragraph shall be given by first class mail, postage prepaid, addressed
to the registered
4
<PAGE>
Holder of this Warrant at his address appearing in the records of the Company.
(f) Irrespective of any adjustments pursuant to this Section 4 to the
Warrant Price or to the number of shares or other securities or other property
obtainable upon exercise of this Warrant, this Warrant may continue to state the
Warrant Price and the number of shares obtainable upon exercise, as the same
price and number of shares stated herein.
5. (a) In the event that the Company proposes, at any time subsequent to
March 8, 1995, but prior to March 8, 2001, whether or not this Warrant has yet
been exercised in whole or in part, to file a registration statement on a
general form of registration under the Act relating to securities issued or to
be issued by it, then it shall give written notice of such proposal to the
record owners of the Warrants and any shares of Common Stock issued upon the
exercise thereof. If, within 15 days after the giving of such notice, the
record owners of any of the Warrants or shares of Common Stock issued or
issuable upon their exercise shall request in writing that all or any of the
shares of Common Stock issued or issuable upon exercise of the Warrants be
included in such proposed registration, the Company will, at its own expense
(except as set forth below), also register such shares of Common Stock as shall
have been so requested in writing; provided, however, that
(i) the Company shall not be required to include any of such shares
of Common Stock if, by reason of such inclusion, the Company shall be
required to prepare and file a registration statement on a form promulgated
by the Securities and Exchange Commission different from that which the
Company otherwise would use;
(ii) such owners shall cooperate with the Company in the preparation
of such registration statement to the extent required to furnish
information concerning such owners therein; and
(iii) if any underwriter or managing agent is purchasing or
arranging for the sale of the securities then being offered by the Company
under such registration statement, then such owners (A) shall agree to have
the securities being so registered sold to or by such underwriter or
managing agent on terms substantially equivalent to the terms upon which
the Company is selling the securities so registered, or (B) shall delay the
sale of such securities for the 90 day period commencing with the effective
date of the registration statement.
5
<PAGE>
(b) In connection with the filing of a registration statement pursuant
to subsection 5(a), the Company shall:
(i) notify such owners as to the filing thereof and of all
amendments thereto filed prior to the effective date of said registration
statement;
(ii) notify such owners, promptly after it shall have received
notice thereof, of the time when the registration statement becomes
effective or any supplement to any prospectus forming a part of the
registration statement has been filed;
(iii) prepare and file without expense to such owners any necessary
amendment or supplement to such registration statement or prospectus as may
be necessary to comply with Section 10(a)(3) of the Act or advisable in
connection with the proposed distribution of the securities by such owners;
(iv) take all reasonable steps to qualify the shares of Common Stock
being so registered for sale under the securities or blue sky laws in such
states, but only in such states, as the Company would qualify the sales of
its securities absent any registration of the shares of Common Stock issued
or issuable hereunder;
(v) notify such registered owners of any stop order suspending the
effectiveness of the registration statement and use its reasonable best
efforts to remove such stop order; and
(vi) undertake to keep said registration statement and prospectus
effective until the earlier of (A) six months from the effective date
thereof (provided, that if the Holders are required to delay the sale of
the securities pursuant to Section 5(a)(iii)(B) hereof, then such period
shall be extended by the amount of such delay), or (B) the date the shares
of Common Stock are sold or become available for public sale without
restriction under the Act.
(c) The record owners of the shares of Common Stock being registered
under this Section 5 agree to pay all of the underwriting discounts and
commissions, registration fees and their own counsel fees with respect to the
securities owned by them and being registered. The Company agrees that the costs
and expenses which it is obligated to pay in connection with a registration
statement to be filed pursuant to subsection 5(a) hereof include, but are not
limited to, the fees and expenses of counsel for the Company, the fees and
expenses of
6
<PAGE>
its accountants and all other costs and expenses incident to the preparation,
printing and filing under the Act of any such registration statement, each
prospectus and all amendments and supplements thereto, the costs incurred in
connection with the qualification of such securities for sale in a reasonable
number of states, including fees and disbursements of counsel for the Company,
and the costs of supplying a reasonable number of copies of the registration
statement, each preliminary prospectus, final prospectus and any supplements or
amendments thereto to such registered owners.
6. In connection with the obligation of the Company to register shares of
Common Stock pursuant to the provisions of Section 5 hereof, the Company and
each Holder agree as follows:
(a) The Company hereby agrees to indemnify and hold harmless each Holder
and each person who controls each Holder within the meaning of Section 15 of the
Act or Section 20 of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), from and against any and all losses, claims, damages,
liabilities or actions to which each Holder or they or any of them may become
subject under the Act, the Exchange Act or otherwise and to reimburse the
persons indemnified above for any legal or other expenses (including the cost of
any investigation and preparation) reasonably incurred by them in connection
with any litigation or proceeding or threatened litigation or proceeding,
whether or not resulting in any liabilities, but only insofar as such losses,
claims, damages, liabilities or actions arise out of, or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement with respect to the shares of Common Stock (or
incorporated therein by reference) or any amendment or supplement thereto (such
registration statement, together with any such amendments or supplements, is
referred to herein as the "Registration Statement"), or the omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the employment
of the Company of any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in which
the Company shall participate, in connection with the sale pursuant to the
Registration Statement of any of the securities registered thereby; provided,
however, that the indemnity agreement contained in this paragraph (a) shall not
extend to any indemnified person in respect of any such losses, claims, damages,
liabilities or actions arising out of, or based upon,
7
<PAGE>
any such untrue statement or alleged untrue statement or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information furnished in writing to the Company by such person specifically for
use in connection with the preparation of the Registration Statement. The
Company agrees to pay any legal and other expenses for which it is liable under
this paragraph (a) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a bill therefor.
(b) Each Holder agrees to indemnify and hold harmless the Company, its
directors, its officers who shall have signed the registration statement, each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Holder but in each case to the extent, and
only to the extent, that any statement in or omission from or alleged omission
from the registration statement, any preliminary prospectus, the prospectus or
any amendment or supplement thereto was made in reliance upon information
furnished in writing to the Company by such Holder specifically for use in
connection with the preparation of the registration statement, any preliminary
prospectus or the prospectus or any such amendment or supplement thereto. Each
Holder agrees to pay any legal and other expenses for which it is liable under
this paragraph (b) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a bill therefor.
(c) If any action is brought against a person entitled to
indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified
Party") in respect of which indemnity may be sought against a person granting
indemnification (an "Indemnifying Party") pursuant to such subsections, such
Indemnified Party shall promptly notify such Indemnifying Party in writing of
the commencement thereof; but the omission so to notify the Indemnifying Party
of any such action shall not release the Indemnifying Party from any liability
it may have to such Indemnified Party otherwise than on account of the indemnity
agreement contained in paragraphs (a) or (b). In case any such action is brought
against an Indemnified Party and it notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party against which a claim is to be made
will be entitled to participate therein, and, to the extent that it may wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnified Party, provided, however, that if the defendants in any such action
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded based upon advice of counsel
that there may be legal defenses available to it and/or other Indemni-
8
<PAGE>
fied Parties which conflict with those available to the Indemnifying Party, the
Indemnified Party shall have the right to select separate counsel to assume such
legal defenses and otherwise to participate in the defense of such action on
behalf of such Indemnified Party or Parties. Upon receipt of notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense of such action and approval by the Indemnified Party of counsel, the
Indemnifying Party will not be liable to such Indemnified Party under this
agreement for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the Indemnifying Party
shall not be liable for the expenses of more than one separate counsel), (ii)
the Indemnifying Party shall not have employed counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of commencement of the action or (iii) the Indemnifying Party
has authorized the employment of such counsel for the Indemnified Party at the
expense of the Indemnifying Party. An Indemnifying Party shall not be liable for
any settlement of any action or proceeding effected without its written consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in paragraph (a) is
unavailable to a Holder in accordance with its terms, the Company and each
Holder shall contribute to the aggregate losses, claims, damages and liabilities
of the nature contemplated by said indemnity agreement incurred by each Holder
based on the relative fault of the Company on the one hand, and each Holder on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages and liabilities. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact, such statement or omission relates to
information supplied by the Company or such Holder and the party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by the Indemnified
Party as a result of the losses, claims, damages, or liabilities referred to
above in this paragraph shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending against or appearing as a third party witness in any such action or
claim. Notwithstanding the provisions of this paragraph, if a Holder is found to
be guilty of
9
<PAGE>
fraudulent misrepresentation within the meaning of Section 11(f) of
the Act, it shall not be entitled to contribution from the Company unless the
Company is also found to be guilty of such fraudulent misrepresentation.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officers, and the corporate seal hereunto affixed.
DATED: 03-08-94 NTN COMMUNICATIONS INC.
By: /s/ Ronald E. Hogan
-----------------------------
Ronald E. Hogan
Senior Vice President-Finance
[seal]
10
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder to Exercise the Rights To Purchase
Common Stock Evidenced by the Within Warrant)
The undersigned hereby irrevocably subscribes for ________ shares (the
"Stock") of the Common Stock of NTN COMMUNICATIONS INC. (the "Company") pursuant
to and in accordance with the terms and conditions of the attached Warrant and
hereby makes payment of $___________ therefor, and requests that a certificate
for such shares be issued in the name of the undersigned and be delivered to the
undersigned at the address stated below. If such number of shares is not all of
the shares purchasable pursuant to the attached Warrant, the undersigned
requests that a new Warrant of like tenor for the balance of the remaining
shares purchasable thereunder be delivered to the undersigned at the address
stated below.
In connection with the issuance of the Stock, I hereby represent to the
Company that I am acquiring the Stock for my own account for investment and not
with a view to, or for resale in connection with, a distribution of the shares
within the meaning of the Securities Act of 1933, as amended (the "Act"). I
also understand that the Company has not registered the Stock under the Act or
the California Corporate Securities Law of 1968, as amended (the "Law"), in
reliance upon the private offering exemptions contained in Section 4(2) of the
Act and Section 25102(f) of the Law, respectively, and that such reliance is
based in part upon my representations.
I understand that because the Stock has not been registered under the Act
or qualified under the Law, I must hold such Stock indefinitely unless such
Stock is subsequently registered and qualified under such statutes or is exempt
from such registration and qualification. Before I make any transfer or
disposition of any shares of the Stock, I agree to give to the Company written
notice of my intention to do so and to describe briefly the manner of such
proposed transfer or disposition. I shall make no such transfer or disposition
unless (a) such transfer or disposition can be made without registration under
the Act and qualification under the Law by reason of specific exemptions from
such registration and such qualification, or (b) a registration statement has
been filed pursuant to the Act and has been declared effective with respect to
such disposition, and an Application to Qualify Securities has been filed
pursuant to the Law and an appropriate permit or order respecting such
Application shall have been issued.
A-1
<PAGE>
I agree that each certificate representing the Stock delivered to me shall
bear substantially the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares may not be sold
or transferred in the absence of such registration or an exemption
therefrom under said Act."
I further agree that the Company may place stop orders on the certificates
evidencing the Stock with the transfer agent, if any, to the same effect as the
above legend. The legend and stop transfer notice referred to above shall be
removed only upon my furnishing to the Company an opinion of counsel (reasonably
satisfactory to the Company) to the effect that such legend may be removed.
Date:__________________ Signed:____________________________
Address: _____________________
_____________________
_____________________
SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL
SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY,
AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERNATION OR
ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
A-2
<PAGE>
ASSIGNMENT
(To be Executed by the Registered Holder to Effect Transfer of the Within
Warrant)
For Value Received _______________ hereby sells, assigns and transfers to
____________________ this warrant and the rights represented hereby to purchase
Common Stock in accordance with the terms and conditions hereof, and does hereby
irrevocably constitute and appoint _____________________________________ as
attorney to transfer this warrant on the books of the Company with full power of
substitution.
Dated:__________________ Signed:____________________________
Please print or typewrite Please insert Social Security
name and address of or other Tax Identification
assignee: Number of Assignee:
_________________________ ______-________-______________
_________________________
_________________________
_________________________
Zip
A-3
<PAGE>
EXHIBIT 4.4
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
Warrant to Purchase
WCA-2027 37,500
Shares
NTN COMMUNICATIONS INC.
(Incorporated under the laws of the State of Delaware)
WARRANT CERTIFICATE FOR THE PURCHASE OF SHARES OF
THE $.005 PAR VALUE COMMON STOCK OF NTN COMMUNICATIONS INC.
EXERCISABLE ONLY AFTER JUNE 16, 1994, AND VOID AFTER JUNE 15, 1999.
Warrant Price: $6.75 (Six Dollars Seventy-Five Cents) per share.
1. THIS IS TO CERTIFY that, for value received, Continuum Capital,
Inc. or its registered assigns (either or both of whom are referred to herein as
the "Holder"), is entitled to purchase, subject to the terms and conditions
hereinafter set forth, at anytime from and after June 16, 1994, and on or before
June 15, 1999 (the "Warrant Period"), up to 37,500 shares of the $.005 par value
common stock ("Common Stock") of NTN Communications Inc. (the "Company"), and
to receive certificate(s) for the Common Stock so purchased. This warrant may
be exercised in whole or in part. Such exercise shall be accomplished by tender
to the Company of the purchase price set forth above as the warrant price (the
"Warrant Price"), either in cash or by certified check or bank cashier's check,
payable to the order of the Company, together with presentation and surrender to
the Company of this Warrant with an executed subscription in substantially the
form attached hereto as Exhibit A. Fractional shares of the Company's Common
Stock will not be issued upon the exercise of this Warrant.
2. The Company agrees at all times to reserve and hold available out
of the aggregate of its authorized but unissued Common Stock the number of
shares of its Common Stock issuable upon the exercise of this and all other
Warrants of like tenor then outstanding. The Company further covenants and
agrees
1
<PAGE>
that all shares of Common Stock that may be delivered upon the exercise of this
Warrant will, upon delivery, be fully paid and nonassessable and free from all
taxes, liens and charges with respect to the purchase thereof hereunder.
This Warrant and the Common Stock issuable upon the exercise hereof
may not be sold, transferred, pledged or hypothecated unless the Company shall
have been supplied with evidence reasonably satisfactory to it that such
transfer is not in violation of the Securities Act of 1933, as amended (the
"Act") and any applicable state laws. Subject to the satisfaction of the
aforesaid condition, this Warrant shall be transferable by the Holder.
If this Warrant is transferred, in whole or in part, upon surrender of
this Warrant to the Company, the Company shall deliver to each transferee a
Warrant evidencing the rights of such transferee to purchase the number of
shares of Common Stock that such transferee is entitled to purchase pursuant to
such transfer.
The Company may place a legend on this Warrant or any replacement
Warrant and on each certificate representing shares issuable upon exercise of
this Warrant as to which the Company has not been supplied evidence that the
transfer of such security would not be in violation of the Act and any
applicable state laws.
Only the registered Holder may enforce the provisions of this Warrant
against the Company. A transferee of the original registered Holder becomes a
registered Holder only upon notice to the Company substantially in the form set
forth in Exhibit B hereto.
3. This Warrant does not entitle the Holder to any voting rights or
other rights as a stockholder of the Company, nor to any other rights whatsoever
except the rights herein set forth, and no dividend shall be payable or accrue
by reason of this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that, this
Warrant is exercised.
This Warrant is exchangeable upon its surrender by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may be
designated by the Holder at the time of such surrender.
At such time as the Common Stock is listed on any registered national
securities exchange, the Company shall, upon
2
<PAGE>
issuance of any shares for which this Warrant is exercisable, at its expense,
promptly obtain and maintain the listing of such shares.
The Company shall comply with the reporting requirements of Sections
13 and 15(d) of the Securities Exchange Act of 1934, as amended, for so long as
and to the extent that such requirements apply to the Company.
4. The Warrant Price and the number of shares purchasable upon the
exercise of this Warrant are subject to adjustment from time to time upon the
occurrence of any of the events specified in this Section 4.
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into smaller number of shares of Common Stock, or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of shares of Common Stock purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder of this Warrant
shall be entitled to receive the kind and number of shares of Common Stock or
other securities of the Company that he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is adjusted, as herein provided, the Warrant Price
shall be adjusted by multiplying such Warrant Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of shares
of Common Stock purchasable upon the exercise of this Warrant immediately prior
to such adjustment, and of which the denominator shall be the number of shares
of Common Stock so purchasable immediately thereafter.
(c) For the purpose of this Section 4, the term shares of Common Stock
shall mean (i) the class of stock designated as the Common Stock of the Company
at the date of this Warrant, or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares consisting solely of
change in par value, or from par value to no par value, or from no par value to
par value.
3
<PAGE>
(d) If during the Warrant Period the Company consolidates with or
merges into another corporation or transfers all or substantially all of its
assets the Holder shall thereafter be entitled upon exercise hereof to purchase,
with respect to each share of Common Stock purchasable hereunder immediately
prior to the date upon which such consolidation or merger becomes effective, the
securities or property to which a holder of shares of Common Stock is entitled
upon such consolidation or merger, without any change in, or payment in addition
to the Warrant Price in effect immediately prior to such merger or
consolidation, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to ensure that all of the provisions
of this Warrant shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or property thereafter deliverable upon the
exercise of this Warrant. The Company shall not effect any such consolidation,
merger or asset transfer unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting therefrom shall assume by
written agreement executed and mailed to the registered Holder at his address
shown on the books and records of the Company, the obligation to deliver to such
Holder any such securities or property as in accordance with the foregoing
provisions such Holder shall be entitled to purchase.
(e) Upon the happening of any event requiring an adjustment of the
Warrant Price, the Company shall forthwith give written notice thereof to the
registered Holder of this Warrant, stating the adjusted Warrant Price and the
adjusted number of shares of Common Stock or other securities or property
purchasable upon the exercise hereof resulting from such event and setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based. The Board of Directors of the Company shall determine the
adjusted Warrant Price and the securities or property purchasable upon exercise.
If any voluntary or involuntary dissolution, liquidation, or winding up of the
Company is proposed, the Company shall give at least 20 days prior written
notice of such proposal to the registered Holder hereof stating the date on
which such event is to take place and the date (which shall be at least 20 days
after giving of such notice) as of which the holders of shares of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such dissolution, liquidation or winding up.
This Warrant and all rights hereunder shall terminate as of the date on which
such dissolution, liquidation, or winding up takes place. The notices pursuant
to this paragraph shall be given by first class mail, postage prepaid, addressed
to the registered
4
<PAGE>
Holder of this Warrant at his address appearing in the records of the Company.
(f) Irrespective of any adjustments pursuant to this Section 4 to
the Warrant Price or to the number of shares or other securities or other
property obtainable upon exercise of this Warrant, this Warrant may continue to
state the Warrant Price and the number of shares obtainable upon exercise, as
the same price and number of shares stated herein.
5. (a) In the event that the Company proposes, at any time
subsequent to June 16, 1995, but prior to June 16, 2001, whether or not this
Warrant has yet been exercised in whole or in part, to file a registration
statement on a general form of registration under the Act relating to securities
issued or to be issued by it, then it shall give written notice of such proposal
to the record owners of the Warrants and any shares of Common Stock issued upon
the exercise thereof. If, within 15 days after the giving of such notice, the
record owners of any of the Warrants or shares of Common Stock issued or
issuable upon their exercise shall request in writing that all or any of the
shares of Common Stock issued or issuable upon exercise of the Warrants be
included in such proposed registration, the Company will, at its own expense
(except as set forth below), also register such shares of Common Stock as shall
have been so requested in writing; provided, however, that
(i) the Company shall not be required to include any of such
shares of Common Stock if, by reason of such inclusion, the Company shall
be required to prepare and file a registration statement on a form
promulgated by the Securities and Exchange Commission different from that
which the Company otherwise would use;
(ii) such owners shall cooperate with the Company in the
preparation of such registration statement to the extent required to
furnish information concerning such owners therein; and
(iii) if any underwriter or managing agent is purchasing or
arranging for the sale of the securities then being offered by the Company
under such registration statement, then such owners (A) shall agree to have
the securities being so registered sold to or by such underwriter or
managing agent on terms substantially equivalent to the terms upon which
the Company is selling the securities so registered, or (B) shall delay the
sale of such securities for the 90 day period commencing with the effective
date of the registration statement.
5
<PAGE>
(b) In connection with the filing of a registration statement pursuant
to subsection 5(a), the Company shall:
(i) notify such owners as to the filing thereof and of all
amendments thereto filed prior to the effective date of said registration
statement;
(ii) notify such owners, promptly after it shall have received
notice thereof, of the time when the registration statement becomes
effective or any supplement to any prospectus forming a part of the
registration statement has been filed;
(iii) prepare and file without expense to such owners any
necessary amendment or supplement to such registration statement or
prospectus as may be necessary to comply with Section 10(a)(3) of the Act
or advisable in connection with the proposed distribution of the securities
by such owners;
(iv) take all reasonable steps to qualify the shares of Common
Stock being so registered for sale under the securities or blue sky laws in
such states, but only in such states, as the Company would qualify the
sales of its securities absent any registration of the shares of Common
Stock issued or issuable hereunder;
(v) notify such registered owners of any stop order suspending
the effectiveness of the registration statement and use its reasonable best
efforts to remove such stop order; and
(vi) undertake to keep said registration statement and prospectus
effective until the earlier of (A) six months from the effective date
thereof (provided, that if the Holders are required to delay the sale of
the securities pursuant to Section 5(a)(iii)(B) hereof, then such period
shall be extended by the amount of such delay), or (B) the date the shares
of Common Stock are sold or become available for public sale without
restriction under the Act.
(c) The record owners of the shares of Common Stock being registered
under this Section 5 agree to pay all of the underwriting discounts and
commissions, registration fees and their own counsel fees with respect to the
securities owned by them and being registered. The Company agrees that the
costs and expenses which it is obligated to pay in connection with a
registration statement to be filed pursuant to subsection 5(a) hereof include,
but are not limited to, the fees and expenses of counsel for the Company, the
fees and expenses of
6
<PAGE>
its accountants and all other costs and expenses incident to the preparation,
printing and filing under the Act of any such registration statement, each
prospectus and all amendments and supplements thereto, the costs incurred in
connection with the qualification of such securities for sale in a reasonable
number of states, including fees and disbursements of counsel for the Company,
and the costs of supplying a reasonable number of copies of the registration
statement, each preliminary prospectus, final prospectus and any supplements or
amendments thereto to such registered owners.
6. In connection with the obligation of the Company to register shares of
Common Stock pursuant to the provisions of Section 5 hereof, the Company and
each Holder agree as follows:
(a) The Company hereby agrees to indemnify and hold harmless each
Holder and each person who controls each Holder within the meaning of Section 15
of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages,
liabilities or actions to which each Holder or they or any of them may become
subject under the Act, the Exchange Act or otherwise and to reimburse the
persons indemnified above for any legal or other expenses (including the cost of
any investigation and preparation) reasonably incurred by them in connection
with any litigation or proceeding or threatened litigation or proceeding,
whether or not resulting in any liabilities, but only insofar as such losses,
claims, damages, liabilities or actions arise out of, or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement with respect to the shares of Common Stock (or
incorporated therein by reference) or any amendment or supplement thereto (such
registration statement, together with any such amendments or supplements, is
referred to herein as the "Registration Statement"), or the omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the employment
of the Company of any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in which
the Company shall participate, in connection with the sale pursuant to the
Registration Statement of any of the securities registered thereby; provided,
however, that the indemnity agreement contained in this paragraph (a) shall not
extend to any indemnified person in respect of any such losses, claims, damages,
liabilities or actions arising out of, or based upon,
7
<PAGE>
any such untrue statement or alleged untrue statement or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information furnished in writing to the Company by such person specifically for
use in connection with the preparation of the Registration Statement. The
Company agrees to pay any legal and other expenses for which it is liable under
this paragraph (a) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a bill therefor.
(b) Each Holder agrees to indemnify and hold harmless the Company, its
directors, its officers who shall have signed the registration statement, each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Holder but in each case to the extent, and
only to the extent, that any statement in or omission from or alleged omission
from the registration statement, any preliminary prospectus, the prospectus or
any amendment or supplement thereto was made in reliance upon information
furnished in writing to the Company by such Holder specifically for use in
connection with the preparation of the registration statement, any preliminary
prospectus or the prospectus or any such amendment or supplement thereto. Each
Holder agrees to pay any legal and other expenses for which it is liable under
this paragraph (b) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a bill therefor.
(c) If any action is brought against a person entitled to
indemnification pursuant to the foregoing paragraphs (a) or (b) (an "Indemnified
Party") in respect of which indemnity may be sought against a person granting
indemnification (an "Indemnifying Party") pursuant to such subsections, such
Indemnified Party shall promptly notify such Indemnifying Party in writing of
the commencement thereof; but the omission so to notify the Indemnifying Party
of any such action shall not release the Indemnifying Party from any liability
it may have to such Indemnified Party otherwise than on account of the indemnity
agreement contained in paragraphs (a) or (b). In case any such action is
brought against an Indemnified Party and it notifies an Indemnifying Party of
the commencement thereof, the Indemnifying Party against which a claim is to be
made will be entitled to participate therein, and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party, provided, however, that if the defendants in any such
action include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded based upon advice of counsel
that there may be legal defenses available to it and/or other Indemni-
8
<PAGE>
fied Parties which conflict with those available to the Indemnifying Party, the
Indemnified Party shall have the right to select separate counsel to assume such
legal defenses and otherwise to participate in the defense of such action on
behalf of such Indemnified Party or Parties. Upon receipt of notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense of such action and approval by the Indemnified Party of counsel, the
Indemnifying Party will not be liable to such Indemnified Party under this
agreement for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the Indemnifying Party
shall not be liable for the expenses of more than one separate counsel), (ii)
the Indemnifying Party shall not have employed counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of commencement of the action or (iii) the Indemnifying Party
has authorized the employment of such counsel for the Indemnified Party at the
expense of the Indemnifying Party. An Indemnifying Party shall not be liable
for any settlement of any action or proceeding effected without its written
consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in paragraph (a) is
unavailable to a Holder in accordance with its terms, the Company and each
Holder shall contribute to the aggregate losses, claims, damages and liabilities
of the nature contemplated by said indemnity agreement incurred by each Holder
based on the relative fault of the Company on the one hand, and each Holder on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages and liabilities. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact, such statement or omission relates to
information supplied by the Company or such Holder and the party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by the
Indemnified Party as a result of the losses, claims, damages, or liabilities
referred to above in this paragraph shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending against or appearing as a third party witness in any
such action or claim. Notwithstanding the provisions of this paragraph, if a
Holder is found to be guilty of
9
<PAGE>
fraudulent misrepresentation within the meaning of Section 11(f) of the Act, it
shall not be entitled to contribution from the Company unless the Company is
also found to be guilty of such fraudulent misrepresentation.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officers, and the corporate seal hereunto affixed.
DATED: NTN COMMUNICATIONS INC.
By: /s/ Ronald E. Hogan
-------------------------------
Ronald E. Hogan
Senior Vice President-Finance
[seal]
10
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder to Exercise the Rights To Purchase
Common Stock Evidenced by the Within Warrant)
The undersigned hereby irrevocably subscribes for ________ shares (the
"Stock") of the Common Stock of NTN COMMUNICATIONS INC. (the "Company") pursuant
to and in accordance with the terms and conditions of the attached Warrant and
hereby makes payment of $___________ therefor, and requests that a certificate
for such shares be issued in the name of the undersigned and be delivered to the
undersigned at the address stated below. If such number of shares is not all of
the shares purchasable pursuant to the attached Warrant, the undersigned
requests that a new Warrant of like tenor for the balance of the remaining
shares purchasable thereunder be delivered to the undersigned at the address
stated below.
In connection with the issuance of the Stock, I hereby represent to the
Company that I am acquiring the Stock for my own account for investment and not
with a view to, or for resale in connection with, a distribution of the shares
within the meaning of the Securities Act of 1933, as amended (the "Act"). I
also understand that the Company has not registered the Stock under the Act or
the California Corporate Securities Law of 1968, as amended (the "Law"), in
reliance upon the private offering exemptions contained in Section 4(2) of the
Act and Section 25102(f) of the Law, respectively, and that such reliance is
based in part upon my representations.
I understand that because the Stock has not been registered under the Act or
qualified under the Law, I must hold such Stock indefinitely unless such Stock
is subsequently registered and qualified under such statutes or is exempt from
such registration and qualification. Before I make any transfer or disposition
of any shares of the Stock, I agree to give to the Company written notice of my
intention to do so and to describe briefly the manner of such proposed transfer
or disposition. I shall make no such transfer or disposition unless (a) such
transfer or disposition can be made without registration under the Act and
qualification under the Law by reason of specific exemptions from such
registration and such qualification, or (b) a registration statement has been
filed pursuant to the Act and has been declared effective with respect to such
disposition, and an Application to Qualify Securities has been filed pursuant to
the Law and an appropriate permit or order respecting such Application shall
have been issued.
A-1
<PAGE>
I agree that each certificate representing the Stock delivered to me shall
bear substantially the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares may not be sold or
transferred in the absence of such registration or an exemption therefrom
under said Act."
I further agree that the Company may place stop orders on the certificates
evidencing the Stock with the transfer agent, if any, to the same effect as the
above legend. The legend and stop transfer notice referred to above shall be
removed only upon my furnishing to the Company an opinion of counsel (reasonably
satisfactory to the Company) to the effect that such legend may be removed.
Date:__________________ Signed:____________________________
Address: _____________________
_____________________
_____________________
SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF A REGISTERED NATIONAL
SECURITIES EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK) OR TRUST COMPANY,
AND THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERNATION OR
ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
A-2
<PAGE>
EXHIBIT 5
<PAGE>
[LETTERHEAD OF TROY & GOULD]
FILE NO.
NTN 1.1
October 5, 1995
NTN Communications, Inc.
The Campus
5966 La Place Court
Carlsbad, California 92008
Re: Registration Statement on Form S-3
----------------------------------
Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") of NTN Communications, Inc. (the "Company") which
has been prepared for filing with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, relating to an aggregate of 1,253,445
shares of Common Stock (the "Shares") of the Company and WCA Warrants to
purchase an aggregate of 87,500 shares of Common Stock (collectively with the
Shares, the "Securities") that may be resold by the securityholders identified
in the Registration Statement. We are familiar with corporate proceedings
heretofore taken by the Company in connection with the sale of the Securities.
In addition, we have examined such records of the Company as in our judgment
were necessary or appropriate to enable us to render the opinions expressed
herein.
Based upon the foregoing, it is our opinion that the Securities have been
duly and validly authorized and issued, and are fully paid and nonassessable.
We consent to the use of our name under the caption "Legal Matters" in the
Prospectus and the Registration Statement, and to the filing of this opinion as
an exhibit to the Registration Statement. By giving you this opinion and
consent, we do not admit that we are experts with respect to
<PAGE>
[LETTERHEAD OF TROY & GOULD]
NTN Communications, Inc.
October 5, 1995
Page 2
any part of the Registration Statement or Prospectus within the meaning of the
term "expert" as used in Section 11 of the Securities Act of 1933, as amended,
or the rules and regulations promulgated thereunder, nor do we admit that we are
in the category of persons whose consent is required under Section 7 of said
Act.
Very truly yours,
/s/ TROY & GOULD
TROY & GOULD
Professional Corporation
