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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-11460 31-1103425
(Commission File Number) (I.R.S. Employer Identification No.)
5966 LA PLACE COURT 92008
CARLSBAD, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(760) 438-7400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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Item 5. Other Events.
------------
On October 31, 1997, NTN Communications, Inc., a Delaware corporation (the
"Company"), issued and sold to two institutional investors 70,000 shares of the
Company's Series B Convertible Preferred Stock, $100 stated value per share (the
"Series B Preferred Stock"), for an aggregate purchase price of $7,000,000. A
portion of the net proceeds from the private placement will be used to repay
approximately $3.9 million (including accrued interest) of indebtedness of the
Company to GTECH Corporation. The balance of the net proceeds will be used to
augment the Company's working capital and for general corporate purposes.
The Series B Preferred Stock provides for a cumulative annual dividend of
$4 per share, payable in quarterly installments of $1 per share on the last day
of January, April, July and October of each year, commencing January 31, 1998.
Under the terms of the Certificate of Designations, Preferences and Rights of
the Series B Preferred Stock, any holder of Series B Preferred Stock is entitled
to convert 25% of the Series B Preferred Stock owned by the holder into shares
of Common Stock (the "Conversion Shares") on or after the earlier (the "Initial
Conversion Date") of (i) the effective date of a Registration Statement (the
"Registration Statement") covering the Conversion Shares to be filed with the
Securities and Exchange Commission or (ii) February 28, 1998. An additional 25%
of the Series B Preferred Stock owned by a holder will become convertible on
each of the dates 60, 90 and 120 days, respectively, following the Initial
Conversion Date. Notwithstanding the foregoing, no holder will be entitled to
convert Series B Preferred Stock to the extent that the Conversion Shares
issuable upon such conversion would cause the aggregate shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.9% of the shares
of Common Stock outstanding following such conversion. Any outstanding shares of
the Series B Preferred Stock not converted by October 31, 2000 will
automatically be converted as of such date.
The number of Conversion Shares issuable upon conversion of each share of
Series B Preferred Stock will be determined by dividing the sum of $100 plus any
accrued and unpaid dividends on the Series B Preferred Stock by the "Conversion
Price" then in effect. The Conversion Price will be equal to the lesser of (a)
140% of the average of the closing bid prices of the Common Stock on the
American Stock Exchange on the five trading days immediately preceding the
Initial Conversion Date, but in no event higher than $3.50 per share (the
"Conversion Ceiling"); and (b) 85% of the lowest average of the closing bid
prices of the Common Stock on any three trading days during the 20 trading days
immediately preceding the conversion date. The Conversion Price and the
Conversion Ceiling are subject to adjustment in certain events, including stock
dividends or subdivisions or reclassifications of the Common Stock. The actual
number of Conversion Shares into which the Series B Preferred Stock shall be
converted will depend on the Conversion Price in effect on the relevant
conversion date, but the Company will not be required to issue Conversion Shares
to the extent that it is prohibited from doing so by applicable law or the rules
or regulations of the American Stock Exchange or other exchange on which the
Common Stock is then traded. Consequently, the Company will not issue any
Conversion Shares if, as a consequence of such issuance and all prior issuances
of Conversion Shares, the aggregate number of Conversion Shares would exceed
19.9% of the Common Stock outstanding as of October 31, 1997. In such event, the
holder may elect to have the Company either (i) redeem the Series B Preferred
Stock for cash at the redemption price described below, (ii) rescind the
conversion and retain the Series B Preferred Stock, subject to the future right
to convert on the terms described herein or (iii) issue shares of Common Stock
at a conversion price equal to the average of the closing bid prices of the
Common Stock for the five trading days immediately preceding the date on which
the Company receives the holder's election.
The Company's sale of Series B Preferred Stock described above was not
registered under the Securities Act of 1933 (the "Act") in reliance on
exemptions from registration under the Act for offers
2.
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and sales not involving a public offering. As a result, neither the Series B
Preferred Stock nor any Conversion Shares may be resold or transferred unless
subsequently registered under the Act or an exemption from such registration is
available. In this connection, the Company has agreed to file on behalf of the
Series B Preferred Stock holders a Registration Statement under the Act covering
the resale of the Conversion Shares.
If a Registration Statement under the Act covering the resale of the
Conversion Shares has not been declared effective on or before February 28,
1998, the Company will be required to pay the holders of the Series B Preferred
Stock, in cash, certain amounts until the Registration Statement is declared
effective, as follows: (i) for the 30-day period beginning March 1, 1998, an
amount equal to 1% of the quotient of $100 plus any accrued but unpaid
dividends, divided by the Conversion Price, for each share of Series B Preferred
Stock; and (ii) for each consecutive 30-day period beginning April 1, 1998, an
amount equal to 2% of the quotient of $100 plus any accrued and unpaid
dividends, divided by the Conversion Price, for each share of Series B Preferred
Stock. Moreover, in the event the Registration Statement shall not have been
declared effective on or before May 29, 1998, the Company will be required to
redeem the Series B Preferred Stock for cash at a redemption price per share of
Series B Preferred Stock equal to the number of Conversion Shares then issuable
upon conversion of a share of Series B Preferred Stock multiplied by the average
of the closing bid prices of the Common Stock on the five trading days preceding
May 29, 1998.
The terms of the sales of shares described above were determined by arm's-
length negotiations between the Company and the investors or their
representatives. The investors and the representatives are not affiliated with
the Company or any of its officers, directors or affiliates.
3.
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Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits.
The following exhibits included with this report are made part hereof:
4.1 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock of NTN Communications, Inc.
10.1 Securities Purchase Agreement, dated October 31, 1997, by and among
NTN Communications, Inc., Stark International and Shephard
International Investments, Ltd.
4.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NTN COMMUNICATIONS, INC.
Date: November 6, 1997 By /S/ Gerald Sokol, Jr.
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Gerald Sokol, Jr.
Chief Executive Officer and President
5.
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EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- --------- ------------------------------------------------------- ------------
4.1 Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of NTN
Communications, Inc.
10.2 Securities Purchase Agreement, dated October 31, 1997,
by and among NTN Communications, Inc., Stark
International and Shephard International Investments,
Ltd.
6.
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EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
NTN COMMUNICATIONS, INC.
NTN Communications, Inc. (the "COMPANY"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions (i) authorizing a new series of the Company's previously authorized
preferred stock, $.005 par value per share, and (ii) providing for the
designations, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions thereof, of eighty-five
thousand (85,000) shares of Series B Convertible Preferred Stock of the Company,
as follows:
RESOLVED, that the Company is authorized to issue 85,000 shares of
Series B Convertible Preferred Stock (the "SERIES B PREFERRED SHARES"),
$.005 par value per share, and the stated value shall be $100 per share
(the "STATED VALUE") which shall have the following powers, designations,
preferences and other special rights:
(1) Dividends. The holders of the outstanding Series B Preferred
---------
Shares shall be entitled to receive cumulative dividends at the annual rate
of $4.00 per Series B Preferred Share. Such dividends shall be payable in
quarterly payments of $1.00 per share on the last day of January, April,
July and October of each year, commencing on January 31, 1998 (each of such
dates being a "DIVIDEND PAYMENT DATE"). Such dividend shall accrue on each
Series B Preferred Share from October 31, 1997 and shall accrue from
day-to-day, whether or not earned or declared. Dividend payments made with
respect to Series B Preferred Shares may be made, subject to the terms
hereof, in cash or, at the option of and in the sole discretion of the
Board of Directors, in full or in part, (i) by issuing fully paid and
nonassessable Series B Preferred Shares such that the Stated Value of such
Series B Preferred Shares plus the amount of cash dividend paid in part, if
any, is equal to the amount of the cash dividend which would otherwise be
paid on such Dividend Payment Date if such dividend were paid entirely in
cash or (ii) by increasing
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the Stated Value of the Series B Preferred Shares by the amount of such
dividend such that the amount of such increase in the Stated Value of the
Series B Preferred Shares plus the amount of cash dividend paid in part, if
any, is equal to the amount of the cash dividend which would otherwise be
paid on such Dividend Payment Date if such dividend were paid entirely in
cash. If the Board of Directors shall elect to pay any part of a dividend
by such increase in Stated Value, the Company shall provide notice to such
effect to the holders of the Series B Preferred Shares by no later than the
applicable Dividend Payment Date. The issuance of such Series B Preferred
Shares or any such increase in the Stated Value (plus the amount of cash
dividend, if any, paid together therewith) shall constitute full payment of
such dividend. In no event shall an election by the Board of Directors to
pay dividends, in full or in part, in cash on any Dividend Payment Dates
preclude the Board of Directors from electing any other available
alternative in respect of all or any portion of any subsequent dividend.
Declared but unpaid dividends shall not bear interest.
(2) Holder's Conversion of Series B Preferred Shares. A holder of
------------------------------------------------
Series B Preferred Shares shall have the right, at such holder's option, to
convert the Series B Preferred Shares into shares of the Company's common
stock, $.005 par value per share (the "COMMON STOCK"), on the following
terms and conditions:
(a) Conversion Right. Subject to the provisions of Sections
----------------
2(f) below, any holder of Series B Preferred Shares shall be entitled to
convert at any time or times (i) 25% of the number of Series B Preferred
Shares owned by such holder on or after the earlier of (I) the date the
Registration Statement (as defined below) is declared effective by the
United States Securities and Exchange Commission (the "SEC") and (II) 120
days after the initial date of issuance of the Series B Preferred Shares
(the "SCHEDULED EFFECTIVE DATE"), (ii) an additional 25% of the Series B
Preferred Shares held by such holder commencing on or after 60 days after
the first 25% of such shares becomes convertible, (iii) an additional 25%
of the Series B Preferred Shares held by such holder commencing on or after
90 days after the first 25% of such shares becomes convertible and (iv) the
remaining 25% of the Series B Preferred Shares held by such holder
commencing on or after 120 days after the first 25% of such Shares becomes
convertible, into fully paid and nonassessable shares (rounded to the
nearest whole share in accordance with Section 2(g) below) of Common Stock,
at the Conversion Rate (as defined below); provided, however, that in no
event shall any holder be entitled to convert Series A Preferred Shares in
excess of that number of Series A Preferred Shares which, upon giving
effect to such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to exceed
4.9% of the outstanding shares of the Common Stock following such
conversion. For purposes of this paragraph beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended.
(b) Conversion Rate. The number of shares of Common Stock
---------------
issuable upon conversion of each of the Series B Preferred Shares pursuant
to
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Sections (2)(a) and 2(f) shall be determined according to the following
formula (the "CONVERSION RATE"):
$100 + amount of accrued but unpaid dividends
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Conversion Price
For purposes of this Certificate of Designations, the following terms shall
have the following meanings:
(i) "CONVERSION PRICE" means as of any Conversion Date (as
defined below) or other date of determination, the lower of (I) 140% of the
average Closing Bid Prices of the Common Stock on the five trading days
immediately preceding the date on which the first 25% of the Series B Preferred
Shares becomes convertible in accordance with Section 2(a), but in no event
greater than $3.50 (the "Conversion Ceiling") and (II) 85% of the lowest average
of Closing Bid Prices of the Common Stock on any three trading days during the
20 trading days immediately preceding the Conversion Date, subject to adjustment
as provided herein;
(ii) "CLOSING BID PRICES" means, for any security as of any
date, the last closing bid price on the American Stock Exchange ("AMEX") as
reported by Bloomberg, L.P. ("Bloomberg"), or, if the AMEX is not the principal
securities exchange for such security, the last closing bid price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., the
last closing trade price of such security as reported by Bloomberg; and
(iii) "AVERAGE MARKET PRICE" means the average of the Closing
Bid Prices of the Common Stock for the five trading days immediately preceding
the applicable date.
(c) Effect of Failure to Obtain and Maintain Effectiveness of
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Registration Statement. If the registration statement (the "REGISTRATION
- ----------------------
STATEMENT") covering the resale of the shares of Common Stock issuable upon
conversion of the Series B Preferred Shares and required to be filed by the
Company pursuant to the Registration Rights Agreement between the Company and
the initial holders of the Series B Preferred Shares (THE "REGISTRATION RIGHTS
AGREEMENT") is not declared effective by the SEC on or before the Scheduled
Effective Date, then each holder of Series B Preferred Shares shall be entitled
to the following payments until such time as the Registration Statement is
declared effective by the SEC (all such payments to be made in cash and
nonrefundable on the first day of the relevant thirty (30) day period):
(A) for the thirty (30) day period beginning immediately
following the Scheduled Effective Date and ending 30 days following the
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Scheduled Effective Date, an amount equal to the product of (I) (.01),
multiplied by (II) the quotient of (y) 100 (plus any accrued but unpaid
dividends thereon) divided by (z) the Conversion Price, multiplied by (III)
the number of Series B Preferred Shares held by such holder.
(B) for each consecutive thirty (30) day period beginning 31
days following the Scheduled Effective Date, an amount equal to the product
of (I) (.02), multiplied by (II) the quotient of (y) 100 (plus any accrued
but unpaid dividends thereon) divided by (z) the Conversion Price,
multiplied by (III) the number of Series B Preferred Shares held by such
holder; provided however that if, and only if, the Company has at all times
used its best efforts to have the Registration Statement declared effective
by the SEC and such Registration Statement shall not have been declared
effective within 90 days after the Scheduled Effective Date the Company
shall be required to redeem the Series B Preferred Shares in accordance
with Section 3(a) and in connection therewith the Company shall pay the
holders of the Series B Preferred Shares a price per Series B Preferred
Share equal to the Major Transaction Redemption Price.
(d) Adjustment to Conversion Price--Dilution and Other Events. In
---------------------------------------------------------
order to prevent dilution of the rights granted under this Certificate of
Designations, the Conversion Ceiling and the Closing Bid Prices for any days
during any measuring period prior to any of the events set forth below (the
"Adjusting Closing Bid Prices") will be subject to adjustment from time to time
as provided in this Section 2(d).
(i) Adjustment upon Declaration of Dividends and Other Events.
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If the Company shall (I) declare a dividend or make a distribution in shares of
Common Stock, (II) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares, or (III) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the Conversion Ceiling
and the Adjusting Closing Bid Prices in effect on the record date of such
dividend or distribution or the effective date of such subdivision, combination
or reclassification shall be proportionately adjusted.
(ii) Adjustment upon Issuance of Convertible Securities with
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Conversion Ceilings. If and whenever on or after the date of issuance of the
- -------------------
Series B Preferred Shares, the Company in any manner issues or sells any stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") and the price per share for which Common Stock is
issuable upon the conversion or exchange of such Convertible Securities is
subject to a Conversion Ceiling (the "New Convertible Securities Ceiling") which
is greater than the Conversion Ceiling immediately prior to such time, then from
and after the time of such issue or sale, the Conversion Ceiling shall be
increased, if necessary, so that it shall not be less than the New Convertible
Securities Ceiling.
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(iii) Notices.
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(A) Immediately upon any adjustment pursuant hereto of
the Conversion Price, the Company will give written notice thereof to each
holder of Series B Preferred Shares, setting forth in reasonable detail and
certifying the calculation of such adjustment.
(B) The Company will give written notice to each holder
of Series B Preferred Shares at least twenty (20) days prior to the date on
which the Company closes its books or takes a record (I) with respect to
any dividend or distribution upon the Common Stock, or (II) for determining
rights to vote with respect to any Organic Change, dissolution or
liquidation; provided that in no event shall such notice be provided to
such holder prior to such information being made known to the public.
"Organic Change" shall mean any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all
of the Company's assets to another Person or other transaction which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock. "Person" shall mean
an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
(C) The Company will also give written notice to each
holder of Series B Preferred Shares at least twenty (20) days prior to the
date on which any Organic Change, dissolution or liquidation will take
place.
(iv) Successive adjustments in the Conversion Ceiling and the
Adjusting Closing Bid Prices shall be made whenever any event specified
above shall occur. All calculations under this Section 2(d) shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case
may be. No adjustment in the Conversion Price shall be made if the amount
of such adjustment would be less than $0.01, but any such amount shall be
carried forward and an adjustment with respect thereto shall be made at the
time of and together with any subsequent adjustment which, together with
such amount and any other amount or amounts so carried forward, shall
aggregate $0.01 or more.
(e) Mechanics of Conversion. Subject to the Company's inability to
-----------------------
fully satisfy its obligations under a Conversion Notice (as defined below) as
provided for in Section 5 below:
(i) Holder's Delivery Requirements. To convert Series B
Preferred Shares into full shares of Common Stock on any date (the
"CONVERSION DATE"), the holder thereof shall (A) deliver or transmit by
facsimile, for receipt on or prior to 11:59 p.m., Pacific Time on such
date, a copy of a fully executed notice of conversion in the form attached
hereto as Exhibit I (the "CONVERSION NOTICE"), to the Company or its
designated transfer agent (the "TRANSFER AGENT"), and (B) surrender to a
common carrier
-5-
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for delivery to the Company or the Transfer Agent as soon as practicable
following such date, the original certificates representing the Series B
Preferred Shares being converted (or an indemnification undertaking with
respect to such shares in the case of their loss, theft or destruction)
(the "PREFERRED STOCK CERTIFICATES") and the originally executed Conversion
Notice.
(ii) Company's Response. Upon receipt by the Company of a
------------------
facsimile copy of a Conversion Notice, the Company shall immediately send,
via facsimile, a confirmation of receipt of such Conversion Notice to such
holder. Upon receipt by the Company or the Transfer Agent of the Preferred
Stock Certificates to be converted pursuant to a Conversion Notice,
together with the originally executed Conversion Notice, the Company or the
Transfer Agent (as applicable) shall, on the next business day following
the date of receipt (or the second business day following the date of
receipt if received after 11:00 a.m. local time of the Company or Transfer
Agent, as applicable), (I) issue and surrender to a common carrier for
overnight delivery to the address as specified in the Conversion Notice, a
certificate, registered in the name of the holder or its designee, for the
number of shares of Common Stock to which the holder shall be entitled, or
(II) credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder's or its designee's balance account
with The Depository Trust Company.
(iii) Dispute Resolution. In the case of a dispute as to the
------------------
determination of the Conversion Price, the Company shall promptly issue to
the holder the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one (1) business day of receipt of such
holder's Conversion Notice. If such holder and the Company are unable to
agree upon the determination of the Conversion Price within one (1)
business day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall within one (1) business day
submit via facsimile the disputed determination of the Conversion Price to
an independent, reputable accounting firm of national standing acceptable
to the Company and such holder of Series B Preferred Shares. The Company
shall cause such accounting firm to perform the determinations or
calculations and notify the Company and the holder of the results no later
than forty-eight (48) hours from the time it receives the disputed
determinations or calculations. Such accounting firm's determination, shall
be binding upon all parties absent manifest error.
(iv) Record Holder. The person or persons entitled to receive
-------------
the shares of Common Stock issuable upon a conversion of Series B Preferred
Shares shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert. If the Company shall
-----------------------------------
fail (other than as a result of the situations described in Section 4(a)
with respect to which the holder has elected, and the Company has satisfied
its obligations under, one of
-6-
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the options set forth in subparagraphs (i) through (iv) of Section 4(a)) to
issue to a holder on a timely basis as described in this Section 2(e), a
certificate for the number of shares of Common Stock to which such holder
is entitled upon such holder's conversion of Series B Preferred Shares, the
Company shall pay damages to such holder equal to the greater of (A) actual
damages incurred by such holder as a result of such holder's needing to
"buy in" shares of Common Stock to satisfy its securities delivery
requirements ("Buy In Actual Damages") and (B) after the effective date of
the Registration Statement if the Company fails to deliver such
certificates within five days after the last possible date which the
Company could have issued such Common Stock to such holder without
violating this Section 2(e), on each date such conversion is not timely
effected in an amount equal to 1% of the product of (A) the number of
shares of Common Stock not issued to the holder on a timely basis and to
which such holder is entitled and (B) the Closing Bid Price of the Common
Stock on the last possible date which the Company could have issued such
Common Stock to such holder without violating this Section 2(e).
(f) Mandatory Conversion. If any Series B Preferred Shares
--------------------
remain outstanding on the Mandatory Conversion Date (as defined below),
then all such Series B Preferred Shares shall be converted as of such date
in accordance with this Section 2 as if the holders of such Series B
Preferred Shares had given the Conversion Notice on the Mandatory
Conversion Date, and the Conversion Date had been fixed as of the Mandatory
Conversion Date, for all purposes of this Section 2, and all holders of
Series B Preferred Shares shall thereupon and within two (2) business days
thereafter surrender all Preferred Stock Certificates, duly endorsed for
cancellation, to the Company or the Transfer Agent. No person shall
thereafter have any rights in respect of Series B Preferred Shares, except
the right to receive shares of Common Stock on conversion thereof as
provided in this Section 2. "MANDATORY CONVERSION DATE" means October 31,
2000.
(g) Fractional Shares. The Company shall not issue any
-----------------
fraction of a share of Common Stock upon any conversion. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more
than one Series B Preferred Share by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the
issuance of a fraction of a share of Common Stock. If, after the
aforementioned aggregation, the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such fraction
of a share of Common Stock up or down to the nearest whole share.
(h) Taxes. The Company shall pay any and all taxes which may be
-----
imposed upon it with respect to the issuance and delivery of Common Stock
upon the conversion of the Series B Preferred Shares.
(3) Redemption.
----------
(a) Redemption Upon Major Transaction. After a Major Transaction
---------------------------------
(as defined below), the Company shall be required to redeem all of the
Series B Preferred
-7-
<PAGE>
Shares at a price per Series B Preferred Share equal to the product of (I)
the aggregate number of shares of Common Stock for which each such Series B
Preferred Share would be converted into on the date of the public
announcement of such Major Transaction or the next date on which the
exchange or market on which the Common Stock is traded is open if such
public announcement is made (X) after 12:00 p.m., Pacific Time, time on
such date or (Y) on a date on which the exchange or market on which the
Common Stock is traded is closed, multiplied by (II) the Average Market
Price of the Common Stock on such date ("Major Transaction Redemption
Price").
(b) Redemption Option Upon Triggering Event. In addition to all
---------------------------------------
other rights of the holders of Series B Preferred Shares contained herein,
after a Triggering Event (as defined below), each holder of Series B
Preferred Shares shall have the right in accordance with Section 3(f), at
such holder's option, to require the Company to redeem all or a portion of
such holder's Series B Preferred Shares at a price per Series B Preferred
Share equal to the product of (I) the aggregate number of shares of Common
Stock for which each such Series B Preferred Share would be converted into
as of the date immediately preceding such Triggering Event on which the
exchange or market on which the Common Stock is traded is open multiplied
by (II) the Average Market Price of the Common Stock on such date
("TRIGGERING EVENT REDEMPTION PRICE" and, collectively with "Major
TRANSACTION REDEMPTION PRICE," the "REDEMPTION PRICE").
(c) "Major Transaction". A "Major Transaction" shall be deemed
-----------------
to have occurred at such time as any of the following events:
(i) the consolidation or merger of the Company with or
into another Person (other than pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Company or pursuant to a merger after which the holders of the Company's
outstanding capital stock immediately prior to the merger own a number of
shares of the resulting company's outstanding capital stock sufficient to
elect a majority of the resulting company's board of directors);
(ii) the sale or transfer of substantially all of the
Company's assets (other than a sale or transfer to an entity controlling,
controlled by or under common control with the Company); or
(iii) a purchase, tender or exchange offer for more than
50% of the outstanding shares of Common Stock is made and accepted by the
holders thereof.
(d) "Triggering Event". A "Triggering Event" shall be deemed
----------------
to have occurred at such time as any of the following events:
(i) notice from the Company that Common Stock issued or
issuable upon conversion of the Series B Preferred Shares cannot be sold
under the Registration Statement (the "Suspension Period"), for any period
of 45 consecutive days that is (A) after the date the Registration
Statement has been declared effective by the SEC and (B) prior to the time
that the Conversion Shares may be sold without limitation
-8-
<PAGE>
in accordance with Rule 144(k) under the 1933 Act; provided that any demand
for redemption under this Section 3(d)(i) must be made by a holder of
Series B Preferred Shares within 10 days after receipt of notice from the
Company of the termination of the Suspension Period; and, provided further
that if the aggregate number of days in all Suspension Periods (the
"Suspension Days") is equal to or greater than forty-five (45) days, then
the Mandatory Conversion Date shall be extended by the number of Suspension
Days;
(ii) the failure of the Common Stock or the Conversion
Shares to be listed on the AMEX, The New York Stock Exchange or the Nasdaq
National Market System for a period of 15 consecutive days; provided
however that any demand for redemption under this Section 3(d)(ii) must be
made by a holder of Series B Preferred Shares within 30 days after receipt
of the Notice of Triggering Event (as defined in Section 3(f)); or
(iii) the Company's notice to any holder of Series B
Preferred Shares, including by way of public announcement, at any time, of
its intention not to comply with proper requests for conversion of any
Series B Preferred Shares into shares of Common Stock, including due to any
of the reasons set forth in Section 4(a) below, except in any case in which
the basis for such intention by the Company is a bona fide dispute as to
the right of such holder to such conversion.
(e) Mechanics of Redemption Upon Major Transaction. No sooner
----------------------------------------------
than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier ("NOTICE OF MAJOR
TRANSACTION") to each holder of Series B Preferred Shares.
(f) Mechanics of Redemption at Option of Holder Upon Triggering
-----------------------------------------------------------
Event. Within one (1) day after the occurrence of a Triggering Event, the
-----
Company shall deliver written notice thereof via facsimile and overnight
courier ("NOTICE OF TRIGGERING EVENT") to each holder of Series B Preferred
Shares. At any time after receipt of a Notice of Triggering Event, but only
for as long as the facts giving rise to the Triggering Event continue to
exist, the holders of at least two-thirds (2/3) of the Series B Preferred
Shares then outstanding may require the Company to redeem all of the Series
B Preferred Shares by delivering written notice thereof via facsimile and
overnight courier ("Notice of Redemption at Option of HolderUpon Triggering
Event") to the Company, which Notice of Redemption at Option of Holder Upon
Triggering Event shall indicate (i) the number of Series B Preferred Shares
that such holders are voting in favor of redemption and (ii) the applicable
Redemption Price, as calculated pursuant to Section 3(b) above.
(g) Payment of Redemption Price. Upon the occurrence of a Major
---------------------------
Transaction or the Company's receipt of a Notice(s) of Redemption at Option
of Holder Upon Triggering Event from the holders of at least two-thirds
(2/3) of the Series B Preferred Shares then outstanding, the Company shall
immediately notify each holder by
-9-
<PAGE>
facsimile of the mechanics of the delivery of each holder's Preferred Stock
Certificate and, if applicable, the Company's receipt of such requisite
notices necessary to effect a redemption and each holder of Series B
Preferred Shares shall thereafter promptly send such holder's Preferred
Stock Certificates to be redeemed to the Company or its Transfer Agent. The
Company shall deliver the applicable Redemption Price to such holder within
thirty (30) days after the Company's delivery of a Notice of Major
Transaction or the Company's receipt of the requisite notices required to
affect a redemption; provided that a holder's Preferred Stock Certificates
shall have been so delivered to the Company or its Transfer Agent; provided
further that if the Company is unable to redeem all of the Series B
Preferred Shares, the Company shall redeem an amount from each holder of
Series B Preferred Shares equal to such holder's pro-rata amount (based on
the number of Series B Preferred Shares held by such holder relative to the
number of Series B Preferred Shares outstanding) of all Series B Preferred
Shares being redeemed. If the Company shall fail to redeem all of the
Series B Preferred Shares submitted for redemption (other than pursuant to
a dispute as to the arithmetic calculation of the Redemption Price), in
addition to any remedy such holder of Series B Preferred Shares may have
under this Certificate of Designations and the Securities Purchase
Agreement between the Company and the initial holders of the Series B
Preferred Shares (the "SECURITIES PURCHASE AGREEMENT"), the Redemption
Price payable in respect of such unredeemed Series B Preferred Shares shall
bear interest at the rate of 1.25% per month (prorated for partial months)
until paid in full. In the case of a Triggering Event, until the Company
pays such unpaid Redemption Price in full to each holder, holders of at
least two-thirds (2/3) of the Series B Preferred Shares then outstanding,
including shares of Series B Preferred Shares submitted for redemption
pursuant to this Section 3 and for which the applicable Redemption Price
has not been paid, shall have the option (the "VOID OPTIONAL REDEMPTION
OPTION") to, in lieu of redemption, require the Company to promptly return
to each holder all of the Series B Preferred Shares that were submitted for
redemption by such holder under this Section 3 and for which the Redemption
Price has not been paid, by sending written notice thereof to the Company
via facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon the Company's
receipt of such Void Optional Redemption Notice(s) and prior to payment of
the full Redemption Price to each holder, (i) the Notice(s) of Redemption
at Option of Holder Upon Triggering Event shall be null and void with
respect to those Series B Preferred Shares submitted for redemption and for
which the Redemption Price has not been paid, and (ii) the Company shall
immediately return any Series B Preferred Shares submitted to the Company
by each holder for redemption under this Section 3(i) and for which the
Redemption Price has not been paid. Notwithstanding the foregoing, in the
event of a dispute as to the determination of the arithmetic calculation of
the Redemption Price, such dispute shall be resolved pursuant to Section
2(e)(iii) above. Payments provided for in this Section 3 shall have
priority to payments to other stockholders in connection with a Major
Transaction.
(4) Inability to Fully Convert.
--------------------------
(a) Holder's Option if Company Cannot Fully Convert. If, upon
-----------------------------------------------
the Company's receipt of a Conversion Notice, the Company cannot issue
shares of Common
-10-
<PAGE>
Stock registered for resale under the Registration Statement for any
reason, including, without limitation, because the Company (x) does not
have a sufficient number of shares of Common Stock authorized and
available, (y) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or its
Securities, including without limitation the AMEX, from issuing all of the
Common Stock which is to be issued to a holder of Series B Preferred Shares
pursuant to a Conversion Notice or (z) fails to have a sufficient number of
shares of Common Stock registered for resale under the Registration
Statement, then the Company shall issue as many shares of Common Stock as
it is able to issue in accordance with such holder's Conversion Notice and
pursuant to Section 2(e) above and, with respect to the unconverted Series
B Preferred Shares, the holder, solely at such holder's option, can elect
to (unless the Company issues and delivers the Conversion Shares underlying
the unconverted Series B Preferred Shares prior to the holder's election
hereunder, in which case such holder shall only be entitled to receive Buy
In Actual Damages under Section 2(e)(v)) :
(i) require the Company to redeem from such holder those
Series B Preferred Shares for which the Company is unable to issue Common
Stock in accordance with such holder's Conversion Notice ("MANDATORY
REDEMPTION") at a price per Series B Preferred Share (the "MANDATORY
REDEMPTION PRICE") equal to the Triggering Event Redemption Price as of
such Conversion Date;
(ii) if the Company's inability to fully convert Series B
Preferred Shares is pursuant to Section 4(a)(z) above, require the Company
to issue restricted shares of Common Stock in accordance with such holder's
Conversion Notice and pursuant to Section 2(e) above;
(iii) void its Conversion Notice and retain or have
returned, as the case may be, the nonconverted Series B Preferred Shares
that were to be converted pursuant to such holder's Conversion Notice; or
(iv) if the Company's inability to fully convert Series B
Preferred Shares is pursuant to the AMEX rules and regulations described in
Section 4(a)(y) above, require the Company to issue shares of Common Stock
in accordance with such holder's Conversion Notice and pursuant to Section
2(e) above at a Conversion Price equal to the Average Market Price of the
Common Stock for the five (5) consecutive trading days preceding such
holder's Notice in Response to Inability to Convert (as defined below).
(b) Mechanics of Fulfilling Holder's Election. The Company shall
------------------------------------------
immediately send via facsimile to a holder of Series B Preferred Shares,
upon receipt of a facsimile copy of a Conversion Notice from such holder
which cannot be fully satisfied as described in Section 4(a) above, a
notice of the Company's inability to fully satisfy such holder's Conversion
Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such Inability to Fully
Convert Notice shall indicate (i) the reason why the Company is unable
-11-
<PAGE>
to fully satisfy such holder's Conversion Notice, (ii) the number of Series
B Preferred Shares which cannot be converted and (iii) the applicable
Mandatory Redemption Price. Such holder must within five (5) business days
of receipt of such Inability to Fully Convert Notice deliver written notice
via facsimile to the Company ("NOTICE IN RESPONSE TO INABILITY TO CONVERT")
of its election pursuant to Section 4(a) above.
(c) Payment of Redemption Price. If such holder shall elect to
---------------------------
have its shares redeemed pursuant to Section 4(a)(i) above, the Company
shall pay the Mandatory Redemption Price in cash to such holder within
thirty (30) days of the Company's receipt of the holder's Notice in
Response to Inability to Convert. If the Company shall fail to pay the
applicable Mandatory Redemption Price to such holder on a timely basis as
described in this Section 4(c) (other than pursuant to a dispute as to the
determination of the arithmetic calculation of the Redemption Price), in
addition to any remedy such holder of Series B Preferred Shares may have
under this Certificate of Designations and the Securities Purchase
Agreement, such unpaid amount shall bear interest at the rate of 1.25% per
month (prorated for partial months) until paid in full. Until the full
Mandatory Redemption Price is paid in full to such holder, such holder may
void the Mandatory Redemption with respect to those Series B Preferred
Shares for which the full Mandatory Redemption Price has not been paid and
receive back such Series B Preferred Shares. Notwithstanding the foregoing,
if the Company fails to pay the applicable Mandatory Redemption Price
within such thirty (30) days time period due to a dispute as to the
determination of the arithmetic calculation of the Redemption Price, such
dispute shall be resolved pursuant to Section 2(e)(iii) above.
(d) Pro-rata Conversion and Redemption. In the event the Company
----------------------------------
receives a Conversion Notice from more than one holder of Series B
Preferred Shares on the same day and the Company can convert and redeem
some, but not all, of the Series B Preferred Shares pursuant to this
Section 4, the Company shall convert and redeem from each holder of Series
B Preferred Shares electing to have Series B Preferred Shares converted and
redeemed at such time an amount equal to such holder's pro-rata amount
(based on the number of Series B Preferred Shares held by such holder
relative to the number of Series B Preferred Shares outstanding) of all
Series B Preferred Shares being converted and redeemed at such time.
(5) Reissuance of Certificates. In the event of a conversion or
--------------------------
redemption pursuant to this Certificate of Designations of less than all of
the Series B Preferred Shares represented by a particular Preferred Stock
Certificate, the Company shall promptly cause to be issued and delivered to
the holder of such Series B Preferred Shares a preferred stock certificate
representing the remaining Series B Preferred Shares which have not been so
converted or redeemed.
(6) Reservation of Shares. The Company shall, so long as any of the
---------------------
Series B Preferred Shares are outstanding, reserve and keep available out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series B Preferred Shares, such number of
shares of Common Stock as shall from time to
-12-
<PAGE>
time be sufficient to effect the conversion of all of the Series B
Preferred Shares then outstanding; provided that the number of shares of
Common Stock so reserved shall at no time be less than 200% of the number
of shares of Common Stock for which the Series B Preferred Shares are at
any time convertible; provided further that such shares of Common Stock so
reserved shall be allocated for issuance upon conversion of Series B
Preferred Shares pro rata among the holders of Series B Preferred Shares
based on the number of Series B Preferred Shares held by such holder
relative to the total number of authorized Series B Preferred Shares.
(7) Voting Rights. Holders of Series B Preferred Shares shall have no
-------------
voting rights, except as required by law, including but not limited to the
General Corporation Law of the State of Delaware, and as expressly provided
in this Certificate of Designations.
(8) Liquidation, Dissolution, Winding-Up. In the event of any
------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Series B Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"PREFERRED FUNDS"), before any amount shall be paid to the holders of any
of the capital stock of the Company of any class junior in rank to the
Series B Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up
of the Company, an amount per Series B Preferred Share equal to the sum of
(i) $100 and (ii) all accrued and unpaid dividends (such sum being referred
to as the "LIQUIDATION VALUE"); provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Series B
Preferred Shares and holders of shares of other classes or series of
preferred stock of the Company that are of equal rank with the Series B
Preferred Shares as to payments of Preferred Funds (the "PARI PASSU
SHARES"), then each holder of Series B Preferred Shares and Pari Passu
Shares shall receive a percentage of the Preferred Funds equal to the full
amount of Preferred Funds payable to such holder as a liquidation
preference, in accordance with their respective Certificate of
Designations, Preferences and Rights, as a percentage of the full amount of
Preferred Funds payable to all holders of Series B Preferred Shares and
Pari Passu Shares. The purchase or redemption by the Company of stock of
any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as a liquidation, dissolution or winding up of the
Company. Neither the consolidation or merger of the Company with or into
any other Person, nor the sale or transfer by the Company of less than
substantially all of its assets, shall, for the purposes hereof, be deemed
to be a liquidation, dissolution or winding up of the Company.
(9) Preferred Rank. All shares of Common Stock shall be of junior
--------------
rank to all Series B Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up
of the Company. The rights of the shares of Common Stock shall be subject
to the preferences and relative rights of the Series B Preferred Shares. As
long as at least one-third (1/3) of the Series B Preferred Shares initially
issued remain outstanding, then without the prior express written consent
-13-
<PAGE>
of the holders of not less than two-thirds (2/3) of the then outstanding
Series B Preferred Shares, the Company shall not hereafter authorize or
issue additional or other capital stock that is of senior rank to the
Series B Preferred Shares in respect of the preferences as to distributions
and payments upon the liquidation, dissolution and winding up of the
Company. Without the prior express written consent of the holders of not
less than two-thirds (2/3) of the then outstanding Series B Preferred
Shares, the Company shall not hereafter authorize or make any amendment to
the Company's Certificate of Incorporation or bylaws, or file any
resolution of the board of directors of the Company with the Delaware
Secretary of State containing any provisions, which would adversely affect
or otherwise impair the rights or relative priority of the holders of the
Series B Preferred Shares relative to the holders of the Common Stock or
the holders of any other class of capital stock. In the event of the merger
or consolidation of the Company with or into another corporation, the
Series B Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein and no merger shall result
inconsistent therewith.
(10) Restriction on Redemption and Cash Dividends with respect to
------------------------------------------------------------
Other Capital Stock. Until all of the Series B Preferred Shares have been
-------------------
converted or redeemed as provided herein, the Company shall not, directly
or indirectly, declare or pay any cash dividend on its Common Stock without
the prior express written consent of the holders of not less than two-
thirds (2/3) of the then outstanding Series B Preferred Shares.
(11) Vote to Change the Terms of Series B Preferred Shares. The
-----------------------------------------------------
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3)
of the then outstanding Series B Preferred Shares, shall be required for
any change to this Certificate of Designations or the Company's Certificate
of Incorporation which would amend, alter, change or repeal any of the
powers, designations, preferences and rights of the Series B Preferred
Shares.
(12) Lost or Stolen Certificates. Upon receipt by the Company of
---------------------------
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Series B
Preferred Shares, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the holder to the Company and, in the case
of mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall
not be obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Company to convert such Series B Preferred
Shares into Common Stock.
-14-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by Gerald Sokol, its President and Chief Executive Officer, as of
the 31st day of October 1997.
NTN COMMUNICATIONS, INC.
By: /s/ Gerald Sokol, Jr.
----------------------------------
Name: Gerald Sokol
Its: President and Chief Executive
Officer
-15-
<PAGE>
EXHIBIT I
NTN COMMUNICATIONS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of
NTN Communications, Inc. (the "CERTIFICATE OF DESIGNATIONS"). In accordance
with and pursuant to the Certificate of Designations, the undersigned hereby
elects to convert the number of shares of Series B Convertible Preferred Stock,
$.005 par value per share (the "SERIES B PREFERRED SHARES"), of NTN
Communications, Inc., a Delaware corporation (the "COMPANY"), indicated below
into shares of Common Stock, $.005 par value per share (the "COMMON STOCK"), of
the Company, by tendering the stock certificate(s) representing the share(s) of
Series B Preferred Shares specified below as of the date specified below.
Date of Conversion: ________________________________________
Number of Series B
Preferred Shares to be converted: ________________________________________
Stock certificate no(s). of Series B
Preferred Shares to be converted: ________________________________________
Please confirm the following information:
Conversion Price: _________________________________________
Number of shares of Common Stock
to be issued: _________________________________________
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Series B Preferred Shares are being converted in
the following name and to the following address:
Issue to: _________________________________________
_________________________________________
_________________________________________
_________________________________________
Facsimile Number: _________________________________________
Authorization: _________________________________________
By:______________________________________
Title:___________________________________
Dated: _________________________________________
<PAGE>
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October
31, 1997, by and among NTN Communications, Inc., a Delaware corporation, with
headquarters located at 5966 La Place Court, Carlsbad, CA 92008 (the "COMPANY"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the following new series of its
Preferred Stock, $.005 par value per share (the "PREFERRED STOCK"): the
Company's Series B Convertible Preferred Stock ("SERIES B PREFERRED STOCK")
which shall be convertible into shares of the Company's Common Stock, $.005 par
value per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Designations,
Preferences and Rights of the Series B Preferred Shares, in the form attached
hereto as Exhibit A (the "CERTIFICATE OF DESIGNATIONS");
---------
C. The Buyers wish to purchase, upon the terms and conditions stated
in this Agreement, an aggregate of $7 million of Series B Preferred Stock in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers; and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS
---------
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES.
----------------------------------------------
a. Purchase of Series A Preferred Shares. Subject to the
-------------------------------------
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate of 70,000 shares of Series B Preferred Stock (the
"SERIES B PREFERRED SHARES"), in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers (the "CLOSING"). The per share purchase
price (the "PURCHASE PRICE") of the Preferred Shares shall be $100 or an
aggregate purchase price of $7 million.
<PAGE>
b. Closing Date. The date and time of the Closing (the "CLOSING
------------
DATE") shall be 10:00 a.m. Central Standard Time on October 31, 1997, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below (or such later date as is mutually agreed to by
the Company and the Buyers).
c. Form of Payment. On the Closing Date, (i) each Buyer shall
---------------
pay the Purchase Price to the Company for the Series B Preferred Shares to be
issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer, a stock certificate representing
such number of the Series B Preferred Shares which such Buyer is then purchasing
(as indicated opposite such Buyer's name on the Schedule of Buyers), duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee (the "STOCK CERTIFICATES").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Series B
------------------
Preferred Shares and (ii) upon conversion of the Series B Preferred Shares, will
acquire the Conversion Shares then issuable, for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any Series B Preferred Shares for any
minimum or other specific term and reserves the right to dispose of Series B
Preferred Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
----------------------
Series B Preferred Shares and the Conversion Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Series B Preferred
Shares and the Conversion Shares.
d. Information. Such Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Series B
Preferred Shares and the Conversion Shares which have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives
2
<PAGE>
shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. Such
Buyer understands that its investment in the Series B Preferred Shares and the
Conversion Shares involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Series B
Preferred Shares and the Conversion Shares.
e. No Governmental Review. Such Buyer understands that no
----------------------
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Series B
Preferred Shares or the Conversion Shares or the fairness or suitability of the
investment in the Series B Preferred Shares or the Conversion Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Series B Preferred Shares or the Conversion Shares.
f. Transfer or Resale. Such Buyer understands that except as
------------------
provided in the Registration Rights Agreement: (i) the Series B Preferred Shares
and the Conversion Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) such
Buyer shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable
assurance that such securities can be sold, assigned or transferred pursuant to
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("RULE
144"); (ii) any sale of such securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Such Buyer understands that the certificates or
-------
other instruments representing the Series B Preferred Shares and, until such
time as the sale of the Conversion Shares have been registered under the 1933
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
3
<PAGE>
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Series B Preferred Shares
or the Conversion Shares upon which it is stamped, if (i) the Series B Preferred
Shares or the Conversion Shares are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Series B Preferred Shares or the Conversion
Shares may be made without registration under the 1933 Act, or (iii) such holder
provides the Company with reasonable assurances that the Series B Preferred
Shares or the Conversion Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold. Each Buyer acknowledges, covenants and agrees to
sell the Series B Preferred Shares and the Conversion Shares represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act. In the event the above legend is removed from the Series B Preferred Shares
or the Conversion Shares, the Company may, upon reasonable advance notice to the
holder, require that the above legend be placed on any Series B Preferred Shares
or Conversion Shares that cannot then be sold pursuant to an effective
registration statement or Rule 144(k) under the 1933 Act (or any successor rule
thereto).
h. Authorization; Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country
---------
specified in the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the Buyers that
except as (i) set forth on the indicated Schedule or (ii) disclosed in the
Company's Form 10-K for the fiscal year ended December 31, 1996, the Company's
Quarterly Reports on Form 10-Q for the three months and six months ended March
31, 1997 and June 30, 1997, respectively, and the Company's 1997 Proxy Statement
(collectively, the "SEC DOCUMENTS"):
a. Organization and Qualification. The Company and its
------------------------------
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and
4
<PAGE>
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries taken as a whole
or on the transaction contemplated hereby.
b. Authorization; Enforcement; Compliance with Other
-------------------------------------------------
Instruments. (i) The Company has the requisite corporate power and authority to
- -----------
enter into and perform this Agreement and the Registration Rights Agreement, and
to issue the Series B Preferred Shares and the Conversion Shares in accordance
with the terms hereof and the Certificate of Designations, (ii) the execution
and delivery of this Agreement and the Registration Rights Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Series B Preferred
Shares and the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, except that, as
provided in the Certificate of Designations, the issuance of certain Conversion
Shares may be restricted in the absence of stockholder approval in accordance
with Section 713 of the AMEX Listing Standards Policies and Requirements, (iii)
this Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company, (iv) this Agreement and the Registration Rights
Agreement constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies, and (v) prior to the Closing Date, the Certificate of Designations
will have been filed with the Secretary of State of the State of Delaware and
will be in full force and effect, enforceable against the Company in accordance
with its terms.
c. Capitalization. As of the date hereof, the authorized
--------------
capital stock of the Company consists of 50,000,000 shares of Common Stock, of
which as of October 27, 1997, 23,672,001 shares were issued and outstanding, and
10,000,000 shares of Preferred Stock, of which as of October 27, 1997, 161,112
shares were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), no shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in Schedule 3(c), as
of the date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or
5
<PAGE>
rights convertible into, any shares of capital stock of the Company or any of
its subsidiaries, (ii) there are no outstanding debt securities and (iii) there
are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement). Except as disclosed in
Schedule 3(c), there are no securities or instruments containing anti-dilution
or similar provisions that will be triggered by the issuance of the Series B
Preferred Shares or the Conversion Shares as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.
d. Issuance of Securities. The Series B Preferred Shares are
----------------------
duly authorized and, upon issuance in accordance with the terms hereof, shall be
(i) validly issued, fully paid and non-assessable, (ii) free from all taxes,
liens and charges with respect to the issue thereof and (iii) entitled to the
rights and preferences set forth in the Certificate of Designations. Not less
than 200% of the number of shares of Common Stock necessary to provide for the
issuance of the Conversion Shares based on the trading price of the Common Stock
as of the date hereof have been duly authorized and reserved for issuance upon
conversion of the Series B Preferred Shares. Upon conversion in accordance with
the Certificate of Designations, the Conversion Shares will be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company, the performance by the Company of its
obligations under the Certificate of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby will not (i) result
in a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or By-laws or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the principal
market or exchange on which the Common Stock is traded or listed) applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e), neither the Company nor its subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock or By-laws or their organizational charter or by-laws, respectively, or
any material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its subsidiaries. The business of the Company and its subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
ordinance or
6
<PAGE>
regulation of any governmental entity, except for those violations that
individually or in the aggregate would not have a material adverse effect on the
business of the Company or any of its subsidiaries. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental or regulatory or self-
regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the Registration Rights
Agreement or perform its obligations under the Certificate of Designations in
accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing requirements of the American Stock Exchange. The
Company and its subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing or to delisting of the Common Stock by
the American Stock Exchange.
f. SEC Documents; Financial Statements. Since December 31,
-----------------------------------
1996, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the
"DESIGNATED SEC DOCUMENTS"). The Company has delivered to the Buyer or its
representative true and complete copies of the Designated SEC Documents. As of
their respective dates, the Designated SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the Designated SEC Documents, and
none of the Designated SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the Designated SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the Designated SEC Documents, including, without limitation,
information referred to in Section 2(d) of this Agreement, contains when read in
conjunction with the SEC Documents and the Schedules hereto any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
are or were made, not misleading.
7
<PAGE>
g. Absence of Certain Changes. Except as disclosed in Schedule
--------------------------
3(g) or the Company's Quarterly Report on Form 10-Q for the three months and six
months ended March 31, 1997 and June 30, 1997, and as filed with the SEC on May
20, 1997 and August 14, 1997, respectively, since December 31, 1996 there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company and its subsidiaries taken as a whole. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
---------------------
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or its subsidiaries or their respective directors or officers, or the Common
Stock, wherein an unfavorable decision, ruling or finding would (i) have a
material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement, the Registration
Rights Agreement, or any of the documents contemplated herein or (iii), except
as expressly set forth in the SEC Documents or in Schedule 3(h), have a material
adverse effect on the business, operations, properties, financial condition,
results of operation or prospects of the Company and its subsidiaries taken as a
whole.
i. Acknowledgment Regarding Buyers' Purchase of Series B
-----------------------------------------------------
Preferred Shares. The Company acknowledges and agrees that each of the Buyers is
- ----------------
acting solely in the capacity of arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any of the Buyers
or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Series B Preferred Shares or the Conversion Shares. The
Company further represents to each Buyer that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its representatives. The Company has not provided to any Buyer any
nonpublic information that, in the opinion of the Company, is material to a
decision to purchase or sell Common Stock.
j. No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Series B Preferred Shares or the Conversion Shares.
k. No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Series B Preferred Shares or the Conversion Shares under the
8
<PAGE>
1933 Act or cause this offering of Series B Preferred Shares and Conversion
Shares to be integrated with prior offerings by the Company for purposes of the
1933 Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the American Stock Exchange.
l. Employee Relations. Neither the Company nor any of its
------------------
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
m. Intellectual Property Rights. Except as set forth on
----------------------------
Schedule 3(m), the Company and its subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted. Except as set
forth on Schedule 3(m), none of the Company's trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights have expired or terminated, or are
expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company or its
subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(m), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service mark registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
n. Environmental Laws. The Company and its subsidiaries (i) are
------------------
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where the failure to
comply with such laws or regulations or to receive or comply with such permits,
licenses, approvals would not have a material adverse effect on the Company and
its subsidiaries taken as a whole.
o. Title. The Company and its subsidiaries have good and
-----
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each
9
<PAGE>
case free and clear of all liens, encumbrances and defects except such as are
described in Schedule 3(o) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
p. Insurance. The Company and each of its subsidiaries are
---------
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts is prudent and customary in the businesses in
which the Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
q. Regulatory Permits. The Company and its subsidiaries possess
------------------
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit except where the failure to possess such
certificates, authorizations and permits would not have a material adverse
effect on the business of the Company or any of its subsidiaries.
r. Internal Accounting Controls. The Company and each of its
----------------------------
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
s. No Materially Adverse Contracts, Etc. Neither the Company
------------------------------------
nor any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has a material adverse effect on
the business, properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries.
t. Tax Status. Except as set forth on Schedule 3(t), the
----------
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
10
<PAGE>
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply
and there are no unpaid taxes in any material amount.
u. Certain Transactions. Except as set forth on Schedule 3(u)
--------------------
or in the SEC Documents and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed on Schedule 3(c), none of the
officers, directors or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
v. Dilutive Effect. The Company understands and acknowledges
---------------
that the number of Conversion Shares issuable upon conversion of the Series B
Preferred Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Series B Preferred Shares in accordance with this Agreement and the
Certificate of Designations is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
------
the Series B Preferred Shares and the Conversion Shares as required under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Series B
Preferred Shares and the Conversion Shares for, or obtain exemption for the
Series B Preferred Shares and the Conversion Shares for, sale to the Buyers at
the Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Investors shall have sold all the
11
<PAGE>
Conversion Shares and (B) none of the Series B Preferred Shares is outstanding
(the "Registration Period"), the Company shall file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit such
termination.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Series B Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
---------------------
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii)
within one (1) day after release thereof, copies of all press releases issued by
the Company or any of its subsidiaries and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares based on the trading price of
the Common Stock at such time.
g. Listing. The Company shall promptly secure the listing of
-------
the Conversion Shares upon The American Stock Exchange, Inc. ("AMEX") (subject
to official notice of issuance) and shall maintain, so long as any other shares
of Common Stock shall be so listed, the listing of all Conversion Shares from
time to time issuable under the terms of this Agreement and the Registration
Rights Agreement on each national securities exchange and automated quotation
system (including the Nasdaq National Marketing System), if any, upon which
shares of Common Stock are then listed. The Company shall promptly provide to
each Buyer copies of any notices it receives from the AMEX regarding the
continued eligibility of the Common Stock for listing on the AMEX. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(g).
h. Expenses. Each of the Company and the Buyers shall each pay
--------
its respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement and the Registration Rights Agreement; provided, that, subject to
Section 9(l) below, at or following the Closing as the Buyers may request, the
Company shall reimburse the Buyers for Buyers' attorneys' fees and expenses in
connection with this Agreement and the Registration Rights Agreement up to an
aggregate of $12,500.
12
<PAGE>
i. Additional Issuances of Securities.
----------------------------------
(a) Right of First Refusal. For a period of 270 days from and
----------------------
after the Closing Date, if the Company shall desire to issue any Common Stock or
any security convertible, exchangeable or exercisable for Common Stock or any
other right to acquire any Common Stock pursuant to an offering under Regulation
D or Regulation S of the Securities Exchange Act of 1934, as amended (other than
pursuant to stock option plans with employees or directors of the Company) in
any such case with an acquisition price for each share of Common Stock that is
proposed to be less than the Average Market Price (as defined in the Certificate
of Designations) of the Common Stock on the date of such issuance (the
"Discounted Securities"), then the Company shall first comply with the terms of
this Section 4(i).
(b) Notice Requirements. The Company shall notify, or cause to
-------------------
be notified, the Buyers not less than ten (10) business days nor more than
twenty (20) business days prior to the time the Company intends to consummate
such issuance (the "Issuance Notice"). The Issuance Notice shall set forth all
of the terms of such proposed issuance.
(c) Exercise of Right of First Refusal. The right of first
----------------------------------
refusal provided for in this Section 4(i) may be exercised by the Buyers by
delivery of a written notice to the Company (the "Exercise Notice"), within ten
(10) business days following receipt of the Issuance Notice (the "Refusal
Period"). The Exercise Notice shall state that the Buyers agree to purchase all
or any specified part of the proposed issuance of Discounted Securities on terms
substantially equal to the terms set forth in the Issuance Notice.
(d) Right to Issue Discounted Securities. After expiration of
the Refusal Period, if the provisions of this Section 4(i) have been complied
with in all respects by the Company and no Exercise Notice has been given, or if
given, the Buyers have not agreed to purchase all of the Discounted Securities
set forth in the Issuance Notice, the Company shall have the right for ninety
(90) business days following the termination of the Refusal Period to issue the
Discounted Securities, or any portion thereof not being purchased by the Buyers,
specified in the Issuance Notice on the terms described in the Issuance Notice
without further notice to the Buyers, but after such ninety (90) business days,
no such issuance of Discounted Securities may be made without again giving
notice to the Buyers and complying with all of the requirements of this Section
4(i).
(e) The Company will not issue any Series B Preferred Shares
other than to the Buyers as contemplated hereby or as otherwise contemplated in
the Certificate of Designations.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent
(in the form attached hereto as Exhibit E) to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Series B Preferred Shares (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares
13
<PAGE>
under the 1933 Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act) will be given by the Company to its
transfer agent and that the Series B Preferred Shares and the Conversion Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Series B Preferred Shares or Conversion Shares. If a Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in form
and substance to the Company, that registration of a resale by such Buyer of any
of the Series B Preferred Shares or the Conversion Shares is not required under
the 1933 Act, the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Series B
Preferred Shares to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. Such Buyer shall have delivered to the Company the Purchase
Price for the Series B Preferred Shares being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
14
<PAGE>
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Series B
Preferred Shares at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to such Buyer.
b. The Certificate of Designations, shall have been filed with
the Secretary of State of the State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to such Buyer.
c. The Common Stock shall be authorized for quotation on the
AMEX, trading in the Common Stock issuable upon conversion of the Series B
Preferred Shares to be traded on the AMEX shall not have been suspended by the
SEC or the AMEX and all of the Conversion Shares issuable upon conversion of the
Series B Preferred Shares to be sold at the Closing shall be listed upon the
AMEX.
d. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer including,
without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
e. Such Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit C attached
---------
hereto.
f. The Company shall have executed and delivered to such Buyer
the Stock Certificates (in such denominations as such Buyer shall request) for
the Series B Preferred Shares being purchased by such Buyer at the Closing.
g. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit D attached hereto.
---------
15
<PAGE>
h. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Series B Preferred Shares, at least 200% of the number of
shares of Common Stock necessary to provide for the issuance of the Conversion
Shares based on the trading price of the Common Stock as of the Closing Date.
i. The Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and acknowledged in
- ---------
writing by the Company's transfer agent.
j. The transactions contemplated hereby shall not violate any
law, regulation or order then in effect and applicable to Buyers or the Company.
8. INDEMNIFICATION.
---------------
(a) In consideration of each Buyer's execution and delivery of this
Agreement and acquiring the Series B Preferred Shares and Conversion Shares
hereunder and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of Series B Preferred Shares and Conversion Shares
and all of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "BUYER INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Buyer Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "BUYER INDEMNIFIED LIABILITIES"), incurred by any Buyer
Indemnitee (and shall advance the same) as a result of, or arising out of, or
relating to (a) subject to Section 9(i), any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Certificate of Designations or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, the Certificate of Designations or the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
or (c) any cause of action, suit or claim brought or made against such Buyer
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Buyer Indemnitees, any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Series B Preferred Shares
or the status of such Buyer or holder of the Series B Preferred Shares or the
Conversion Shares as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Buyer Indemnified Liabilities which is permissible under applicable
law.
(b) In consideration of the Company's execution and delivery of
this Agreement and selling the Series B Preferred Shares and Conversion Shares
hereunder and in
16
<PAGE>
addition to all of the Buyers' other obligations under this Agreement, the
Buyers shall defend, protect, indemnify and hold harmless the Company and all of
its officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "COMPANY INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Company Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "COMPANY INDEMNIFIED LIABILITIES"), incurred by any
Company Indemnitee (and shall advance the same) as a result of, or arising out
of, or relating to (a) subject to Section 9(i), any misrepresentation or breach
of any representation or warranty made by the Buyers in this Agreement or the
Registration Rights Agreement, or (b) any breach of any covenant, agreement or
obligation of the Buyers contained in this Agreement or the Registration Rights
Agreement. To the extent that the foregoing undertaking by the Buyers may be
unenforceable for any reason, the Buyers shall make the maximum contribution to
the payment and satisfaction of each of the Company Indemnified Liabilities
which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience
--------
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
----------------------------
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
17
<PAGE>
f. Notices. Any notices, consents, waivers or other
-------
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
NTN Communications, Inc.
5966 La Place Court
Carlsbad, CA 92008
Telephone: (760) 438-7400
Facsimile: (760) 930-1187
Attention: President
With a copy to:
Troy & Gould
1801 Century Park East
16th Floor
Los Angeles, CA 90067
Telephone: (310 ) 553-4441
Facsimile: (310) 201-4746
Attention: William D. Gould
If to the Transfer Agent:
American Stock Transfer & Trust Co.
6201 16th Avenue
3rd Floor
Brooklyn, NY 11219
Telephone: (718) 921-8275
Facsimile: (718) 921-8331
Attention: Paul Caroppoli
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Series B Preferred Shares. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Buyers, except pursuant to a Major Transaction
(as defined in Section 3(c) of the Certificate of Designations)
18
<PAGE>
with respect to which the Company is in compliance with Section 3 of the
Certificate of Designations. A Buyer may assign some or all of its rights
hereunder without the consent of the Company, provided, however, that (i) any
such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption and (ii) no Buyer may assign its
rights hereunder in a manner that would cause the offering of Series B Preferred
Shares hereunder to be required to be registered under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 3 and 2, respectively, shall survive the Closing until one year
after the Company has filed its Form 10-K for the fiscal year ended December 31,
1997 including without limitation all financial statements thereto. Unless this
agreement is terminated under Section 9(l), the agreements and covenants set
forth in Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred with respect to a Buyer on or before five (5) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the Buyers
for the expenses described in Section 4(h) above.
m. Placement Agent. The Company acknowledges that it has
---------------
engaged a placement agent in connection with the sale of the Series B Preferred
Shares, which placement
19
<PAGE>
agent may have formally or informally engaged other agents on its behalf. The
Company shall be responsible for the payment of any placement agent's fees or
broker's commissions relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney's fees and
out of pocket expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this
----------------------
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
20
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
- ------- ------
NTN COMMUNICATIONS, INC. STARK INTERNATIONAL
By: /s/ Gerald Sokol, Jr. By: /s/
--------------------------------- -------------------------------
Name: Gerald Sokol Name:
Its: President and Chief Executive Its:
Officer
SHEPHERD INVESTMENTS
INTERNATIONAL, LTD.
By: /s/
------------------------------
Name:
Its:
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
Number of
Investor Address and Series B Investor's Advisors and Legal
Investor Name Facsimile Number Preferred Shares Counsel Address
- --------------------- -------------------------- ---------------- -----------------------------
<S> <C> <C> <C>
Stark International c/o Staro Asset Management 35,000 Eleazer Klein, Esq.
(United States) 1500 West Market Street Schulte Roth Zabel LLP
Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
Shepherd International c/o Staro Asset Management 35,000 Eleazer Klein, Esq.
Investments, Ltd. 1500 West Market Street Schulte Roth Zabel LLP
(Bermuda) Mequon, Wisconsin 53092 New York, NY 10022
Fax: (414) 241-1888 Fax: (212) 593-5955
</TABLE>
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(a)
Subsidiaries
------------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(c)
-------------
Capitalization
--------------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(e)
-------------
Conflicts
---------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(g)
-------------
Material Changes
----------------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(h)
-------------
Litigation
----------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(m)
-------------
Intellectual Property
---------------------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(t)
-------------
Tax Status
----------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 3(u)
-------------
Certain Transactions
--------------------
<PAGE>
Schedules to Securities Purchase Agreement of October 1997
SCHEDULE 4(d)
-------------
Use of Proceeds
---------------
<PAGE>
EXHIBIT A
Form of Certificate of Designations, Preferences
and Rights of the Series B Preferred Shares
<PAGE>
EXHIBIT B
Form of Registration Rights Agreement
<PAGE>
EXHIBIT C
Form of Company Counsel Opinion
<PAGE>
EXHIBIT D
Form of Resolutions Adopted by the Company's Board of Directors
<PAGE>
EXHIBIT E
Form of Irrevocable Transfer Agent Instructions
