<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NTN COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NTN COMMUNICATIONS, INC.
5966 La Place Court
Carlsbad, California 92008
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 3, 1997
--------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of NTN Communications, Inc. will be held in the Theatre Room of La
Costa Resort, Costa Del Mar Road, Carlsbad, California, on November 3, 1997, at
10:00 A.M., local time, for the following purposes, as more fully described in
the attached Proxy Statement:
1. To elect three directors to the Board of Directors; and
2. To consider and act upon such other matters as may properly come
before the meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on September 12,
1997 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting or at any adjournment thereof.
You are cordially invited to attend the Annual Meeting in person. In order
to ensure your representation at the meeting, however, please promptly complete,
date, sign, and return the enclosed proxy in the accompanying envelope. The
prompt return of your proxy will help to save expenses involved in further
communication. Your proxy is revocable and will not affect your right to vote
in person should you decide to attend the Annual Meeting.
By Order of the Board of Directors
Laura J. Kass
Secretary
Carlsbad, California
September 24, 1997
<PAGE>
NTN COMMUNICATIONS, INC.
5966 La Place Court
Carlsbad, California 92008
--------------------
PROXY STATEMENT
ANNUAL MEETING TO BE HELD NOVEMBER 3, 1997
--------------------
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors (sometimes
hereinafter referred to as the "Board") of NTN Communications, Inc. ("NTN") for
use at the annual meeting of stockholders to be held November 3, 1997, and at
any adjournment or postponement thereof (the "Annual Meeting"). The accompanying
proxy names Gerald Sokol, Jr. and Laura Kass, and each of them, as proxies for
purposes of the Annual Meeting.
All shares of common stock of NTN represented by a properly completed proxy
received in time for the Annual Meeting will be voted by the proxy holders as
provided therein. If no direction is given in the proxy, it will be voted "FOR"
the election as directors of the nominees named herein. With respect to any
other item of business that may come before the Annual Meeting, the proxy
holders will vote the proxy in accordance with their best judgment.
The proxy may be revoked at any time before it has been exercised by giving
written notice of revocation to the Secretary of the NTN, by executing and
delivering to the Secretary a proxy dated as of a later date than the
accompanying proxy, or by attending the Annual Meeting and voting in person.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to stockholders on or about September 26, 1997.
<PAGE>
VOTING SECURITIES
NTN has one class of voting stock outstanding, designated common stock,
$.005 par value ("Common Stock"). Each share of Common Stock is entitled to one
vote for each director to be elected at the Annual Meeting. Only holders of
record of Common Stock at the close of business on September 12, 1997 are
entitled to notice of and to vote at the Annual Meeting. There were 23,672,001
shares of Common Stock outstanding as of the record date. The presence, in
person or by proxy, at the Annual Meeting of stockholders entitled to cast at
least a majority of the votes entitled to be cast by all stockholders will
constitute a quorum for the transaction of business at the Annual Meeting.
Pursuant to Delaware law, shares represented at the Annual Meeting by proxies
that reflect abstentions or so-called broker non-votes will be counted for
purposes of determining the presence of a quorum.
ELECTION OF DIRECTORS
NOMINEES
The Bylaws of NTN provide that the Board of Directors is to consist of not
less than five nor more than thirteen directors, with the exact number of
directors within such range to be determined by the Board of Directors. In
August 1997, three directors -- Patrick J. Downs, Daniel C. Downs and Alan P.
Magerman -- resigned from the Board of Directors, leaving four remaining
directors. In connection with these resignations, the Board of Directors
resolved to reduce the authorized number of directors from seven to five and
appointed Esther L. Rodriguez to fill the vacancy on the Board. At present,
therefore, there are five authorized directors.
The Bylaws of NTN provide that the Board is to be classified, with respect
to the time for which the Directors hold office, into three classes, as nearly
equal in number as possible. At each annual meeting of stockholders, the
successors of the class of directors whose term expires at that meeting are to
be elected to hold office for a term of three years.
The Board of Directors has selected the following nominees for election as
directors of the class of directors to be elected at the Annual Meeting. The
following table sets forth certain information with respect to the persons
nominated by the Board of Directors for election as class directors. As
indicated in the table below, if elected, Messrs. Frazier and Sokol will hold
office until the annual meeting of stockholders in 2000 and Mr. Bennett will
hold office until the annual meeting in 1998, in each case until their
respective successors are duly elected and qualified.
<TABLE>
<CAPTION> New Term
Name Age Position Held Director Since to Expire
---- --- ------------- -------------- ---------
<S> <C> <C> <C> <C>
Edward C. Frazier 44 Chairman of the Board of 1996 2000
Directors
Gerald Sokol, Jr. 34 Director, President and 1997 2000
Chief Financial Officer
Robert M. Bennett 70 Director 1996 1998
</TABLE>
The nominees have indicated a willingness to serve as directors. If any of
them should decline or be unable to act as a director, however, the proxy
holders will vote for the election of another person as the Board of Directors
recommends.
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<PAGE>
Nominees receiving the highest number of affirmative votes cast at the
Annual Meeting, up to the number of directors to be elected, will be elected as
directors. Proxies may not be voted for a greater number of persons than the
number of nominees named herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED. PROXIES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED IF NO
DIRECTION IS GIVEN IN THE PROXIES.
3
<PAGE>
BOARD OF DIRECTORS
DIRECTORS
The following table lists the names of the directors of NTN, along with
their respective ages, positions, and offices held with NTN and terms of office
as director, the periods they have served as such, and the year their current
term will expire:
<TABLE>
<CAPTION>
Current
Director Term
Name Age Position(s) Held Since Expires
---- --- ---------------- -------- -------
<S> <C> <C> <C> <C>
Edward C. Frazier(1) 44 Chairman of the Board of 1996 1997
Directors and Interim Chief
Executive Officer
Gerald Sokol, Jr. 34 Director, President and Chief 1997 1997
Financial Officer
Robert M. Bennett(1) 70 Director 1996 1997
Donald C. Klosterman 67 Director 1985 1999
Esther L. Rodriguez 55 Director 1997 1998
</TABLE>
______________
(1) Member of the Audit Committee and Compensation Committee.
The following biographical information is furnished with respect to the
directors of NTN:
EDWARD C. FRAZIER has been a director since August 1996 and Chairman of the
Board since March 1997. In March 1997, in connection with the previously
announced reorganization of NTN's executive management personnel, Mr. Frazier
agreed on an interim basis to assume the further responsibilities of Chief
Executive Officer of NTN. From 1989 until 1996, Mr. Frazier was the President
and Chief Executive Officer of Liberty Sports. In August 1996, Mr. Frazier
founded Frazier/King Media Holding Co., a private media property holding company
and consulting firm.
GERALD SOKOL, JR. joined NTN in July 1996 as Chief Financial Officer and
was appointed Chief Operating Officer in November 1996 and President in February
1997. In April 1997, he was appointed to the Board of Directors. Prior to
joining NTN, Mr. Sokol served as Vice President of Finance and Treasurer of
Tele-Communications, Inc. He had been with Tele-Communications, Inc. since 1987.
ROBERT M. BENNETT has been a director since August 1996. From 1989 to the
present, Mr. Bennett has been the President of Trans Atlantic Entertainment, a
film distribution company. Prior to 1989, Mr. Bennett was the President of
Metromedia Broadcasting, a division of Metromedia, Inc.
DONALD C. KLOSTERMAN has been a director of NTN (or its predecessor) since
1983 and served as Chairman of the Board from 1985 to April 1, 1994. From 1982
to March 1997, Mr. Klosterman also has acted as a consultant to NTN. Mr.
Klosterman currently serves as the President of Pacific Casino Management,
Inglewood, California, and served as Vice President and General Manager of the
Los Angeles Express football team of the U.S.F.L until the summer of 1985. Mr.
Klosterman also serves as a director of Aldila Shaft Manufacturer, a
manufacturer of premium golf shafts.
ESTHER L. RODRIGUEZ was appointed as a director of NTN in September 1997.
She retired as a Vice President of Next Level Systems, Inc. (formerly General
Instrument), a leading telecommunications company, in November 1996 after having
served in various executive
4
<PAGE>
capacities since joining General Instrument in 1987. For the two years prior to
her retirement, Ms. Rodriguez served as head of worldwide business development
and sales teams for private commercial business and educational network systems.
Following her retirement, she founded and has served as Chief Executive Officer
of Rodriguez Consulting Group, a management consulting firm. Ms. Rodriguez has
over 25 years' experience in general management, business development and
marketing, including 17 years' experience in worldwide telecommunications.
MEETINGS AND ORGANIZATION
The business affairs of NTN are managed by and under the direction of the
Board of Directors. During the fiscal year ended December 31, 1996 the Board met
on five occasions. Each director attended at least 75% of the meetings of the
Board and of each Committee of the Board on which he served.
The Board has standing Audit and Compensation Committees. Edward C.
Frazier and Robert M. Bennett were appointed as the members of both committees
after becoming directors in August 1996.
The primary functions of the Audit Committee are to periodically review
NTN's accounting and financial reporting and control policies and procedures, to
recommend to the Board the firm of certified public accountants to be retained
as NTN's independent auditors, and to review NTN policies and procedures
relating to business conduct and conflicts of interest. The Audit Committee met
on at least one occasion in 1996.
The primary functions of the Compensation Committee are to review and
advise the Board on salaries, bonuses, and other executive compensation matters.
The Compensation Committee met one time in 1996.
BOARD NOMINATIONS
The Board has no standing Nominating Committee. The Board in its entirety
acts upon matters that would otherwise be the responsibility of such a
committee. The Board will consider as prospective nominees for election as
directors persons recommended by NTN's stockholders. Any such recommendations
should be in writing and should be mailed or delivered to NTN, marked for the
attention of the Secretary of NTN, on or before the date for timely submission
of stockholder proposals. See "Stockholder Proposals for 1998 Annual Meeting."
5
<PAGE>
EXECUTIVE OFFICERS
The following table lists the names of the executive officers of NTN, along
with their respective ages, positions, and offices held with NTN:
<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
Edward C. Frazier 44 Chairman of the Board of Directors
Gerald Sokol, Jr. 34 President and Chief Financial Officer
Geoffrey D. Labat 37 Chief Operating Officer
</TABLE>
See "Board of Directors" for the biographies of NTN's executive officers
who also serve as directors. The following biographical information is
furnished with respect to the other executive officers of NTN:
GEOFFREY D. LABAT has served as Chief Operating Officer since September 5,
1997. Prior to joining NTN as Chief Technology Officer in May 1997, from July
1995 to May 1997, Mr. Labat served as Regional Director, Engineering/Operations
of GST Telecommunications, a public competitive local exchange
telecommunications of GST Telecommunications, public competitive local exchange
telecommunications carrier, deploying fiber optic communication networks in the
southwest United States. From December 1992 to June 1995, Mr. Labat was Director
of Telecommunications for Autotote Corporation, a provider of wagering systems,
wagering facility management, lottery systems and satellite television broadcast
services. Mr. Labat is a 19-year veteran of the telecommunications/broadcast
television industry, experienced in the design, implementation, and management
of telecommunications/broadcast networks worldwide.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid or accrued as of each of
the last three fiscal years to the Chief Executive Officer of NTN and to the
four most highly compensated executive officers of NTN who were serving in such
capacities at December 31, 1996 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------- ------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary(1) Bonus Compensation Options
- ------------------------------------ ---- ------------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Gerald Sokol, Jr.(3)................ 1996 $ 87,423 $ -- $164,480(4) 875,000
Chief Operating Officer and
Chief Financial Officer
Patrick J. Downs(2)................. 1996 $192,885 $ -- $930,879(5) 200,000
Chief Executive Officer 1995 192,044 -- -- 200,000
1994 169,950 -- -- 200,000
Daniel C. Downs(2).................. 1996 $192,885 $ -- $629,141(5) 200,000
President 1995 192,044 -- -- 200,000
1994 169,950 -- -- 200,000
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Gerald P. McLaughlin(2)............. 1996 $186,100 $ -- $492,690(5) 25,000
Senior Vice President - Systems 1995 184,333 -- -- 75,000
1994 163,126 -- -- 75,000
Ronald E. Hogan(2).................. 1996 $151,617 $ -- $445,384(5) 20,000
Senior Vice President - 1995 150,177 -- -- 50,000
Administration 1994 132,900 -- -- 75,000
</TABLE>
_________________
(1) Includes amounts, if any, deferred under NTN's 401(k) Plan and Deferred
Compensation Plan.
(2) In March 1997, NTN announced a reorganization of its executive management
personnel in which Patrick J. Downs resigned as Chairman of the Board and
Chief Executive Officer of NTN and Daniel C. Downs resigned as NTN's
President. In connection with the reorganization, Ronald E. Hogan resigned
as Senior Vice President and Gerald P. McLaughlin, formerly Executive Vice
President of NTN, was terminated.
(3) Mr. Sokol joined NTN in July 1996. No data is available for prior years.
(4) Represents a $150,000 advance made to Mr. Sokol in August 1996, which in
accordance with its terms was forgiven in March 1997, and moving expenses
paid or reimbursed by NTN in connection with Mr. Sokol's joining NTN. See
"Certain Transactions -- Loans to Officers and Directors."
(5) In March 1997, NTN entered into separate Resignation and General Release
Agreements (the "Resignation Agreements") with each of the Named Executive
Officers indicated for the purpose of settling their prior employment
agreements and other contracts and arrangements with NTN. See "Certain
Transactions -- Termination of Employment and Change in Control
Arrangements." Each of the former Named Executive Officers was indebted to
NTN for prior loans extended to them by NTN in the amounts shown in the
table. In accordance with the original terms of the loans, pursuant to the
Resignation Agreements NTN agreed to cancel such indebtedness as of December
31, 1996. Pursuant to the Resignation Agreements, each of the former
executives agreed to enter into Consulting Agreements with NTN, in
consideration of which NTN agreed to honor certain provisions of the prior
employment agreements of the Named Executive Officers which called for NTN's
payment of the former Named Executive Officers' annual salaries for the
remaining terms of such employment agreements. These payments, along with
payments for accrued vacation and certain other amounts which NTN paid or
has agreed to pay to the former Named Executive Officers, will be reported
as required in future reports of NTN relating to the periods for which
such payments are made.
STOCK OPTION GRANTS
The following table contains information concerning grants of stock options
during fiscal 1996 with respect to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants For Option Term(1)
- ---------------------------------------------------------------------------------------- -----------------------
% of Total
Number of Shares Options Granted
Underlying to Employees Exercise Expiration
Name Options Granted In Fiscal Year Price Date 5% 10%
- ---- ---------------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerald Sokol, Jr....... 78,740(2) 2.8% $2.81 07/16/06 $139,149 $ 352,631
221,260(3) 7.9% 2.81 08/15/06 391,009 990,894
400,000(4) 14.3% 2.81 08/15/06 706,878 1,791,367
175,000(5) 6.2% 2.81 11/03/06 309,259 783,723
Patrick J. Downs....... 200,000(6) 7.2% 3.50 11/03/06 440,226 1,115,620
Daniel C. Downs........ 200,000(6) 7.2% 3.50 11/03/06 440,226 1,115,620
Gerald P. McLaughlin... 25,000(7) 0.9% 3.50 11/03/06 55,028 139,452
Ronald E. Hogan........ 20,000(8) 0.7% 3.50 11/03/06 44,023 111,562
</TABLE>
________________________
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<PAGE>
(1) The 5% and 10% assumed rates of appreciation are prescribed by the rules and
regulations of the Securities and Exchange Commission and do not represent
management's estimate or projection of future value of the Common Stock.
(2) Represents an option granted under NTN's 1995 Option Plan. The option was
immediately exercisable upon grant as to 19,685 shares covered thereby and
was to become exercisable as to the balance of the covered shares in three
installments of 19,685 shares each on the first, second, and third
anniversaries of the date of the grant, subject to acceleration in the event
of a "Change of Control Event" (as defined). Such a Change of Control Event
occurred in March 1997 as a consequence of the reorganization of NTN's
management, and the option shown became vested and exercisable in full as of
that time. The original exercise price of the option of $5.00 per share was
reduced in May 1997 to the exercise price shown. See "Certain Transactions--
Employment Agreements."
(3) Represents an option granted under NTN's 1995 Option Plan. The option was
immediately exercisable upon grant as to 80,315 shares covered thereby and
was to become exercisable as to the balance of 140,945 covered shares in
three equal installments on each of the first, second, and third
anniversaries of the date of the grant, subject to acceleration in the event
of a "Change of Control Event" (as defined). Such a Change of Control Event
occurred in March 1997 as a consequence of the reorganization of NTN's
management, and the option shown became vested and exercisable in full as of
that time. The original exercise price of the option of $5.00 per share was
reduced in May 1997 to the exercise price shown.
(4) Represents a special option which is to become exercisable only if the
closing price of the Common Stock is at least $11 per share for more than
ten consecutive days prior to August 15, 1998, subject to acceleration in
the event of a "Change of Control Event" (as defined). Such a Change of
Control Event occurred in March 1997 as a consequence of the reorganization
of NTN's management, and the option shown became vested and exercisable in
full as of that time. The original exercise price of the option of $5.00 per
share was reduced in May 1997 to the exercise price shown.
(5) Represents an option granted under NTN's 1995 Option Plan which is to become
exercisable in three equal installments on each of the first, second and
third anniversaries of the date of grant only in the event NTN meets its
1997 operating budget, subject to acceleration in the event of a "Change in
Control Event" (as defined). If NTN does not meet its operating budget for
1997, the options then become exercisable in three equal installments on
each of the first, second and third anniversaries of the date of grant only
in the event NTN meets its 1998 operating budget, subject to acceleration in
the event of a Change in Control Event. The original exercise price of the
option of $3.50 per share was reduced in May 1997 to the exercise price
shown.
(6) Represents options granted under NTN's 1995 Plan which were immediately
exercisable upon grant.
(7) Represents options granted under NTN's 1995 Plan which became exercisable in
March 1997.
(8) These options were cancelled in March 1997 in connection with Mr. Hogan's
resignation from NTN.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table contains information concerning stock options
unexercised at the end of fiscal 1996 with respect to the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options At In-the-Money Options
Fiscal Year-End at Fiscal Year-End (1)
Shares Acquired Value ----------------------------- ----------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----- --------------- -------- ----------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Sokol, Jr....... -- -- 100,000 775,000 $100,250 776,938(2)
Patrick J. Downs....... -- -- 750,000 --(3) 146,875 *
Daniel C. Downs........ -- -- 750,000 --(4) 146,875 *
Gerald P. McLaughlin... 1,070 $ 869 250,000 --(5) * *
Ronald E. Hogan........ 15,577 12,656 413,000 --(6) 175,313 *
</TABLE>
________________
(1) Represents the amount by which the aggregate market price on December 31,
1996 of the shares of Common Stock subject to such options exceeded the
respective exercise prices of such options. An asterisk denotes that the
respective exercise prices of the options shown exceeded the market price of
the underlying shares of Common Stock at December 31, 1996.
(2) Based on the exercise price of the options as amended in May 1997. See
"Certain Transactions -- Employment Agreements."
(3) The options shown do not include options to purchase 634,000 shares of
Common Stock of NTN which Patrick J. Downs surrendered to NTN for
cancellation effective December 31, 1996.
(4) The options shown do not include options to purchase 684,000 shares of
Common Stock of NTN which Daniel C. Downs surrendered to NTN for
cancellation effective December 31, 1996.
(5) The options shown do not include options to purchase 200,000 shares of
Common Stock of NTN which Gerald P. McLaughlin surrendered to NTN for
cancellation effective December 31, 1996.
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<PAGE>
(6) The options shown do not include options to purchase 245,000 shares of
Common Stock of NTN which Ronald E. Hogan surrendered to NTN for
cancellation effective December 31, 1996.
DIRECTOR COMPENSATION
Directors currently receive cash compensation of $2,000 per month for their
services as directors. Directors also are eligible for the grant of options or
warrants to purchase Common Stock from time to time for services in their
capacity as directors.
Upon joining the Board in August 1996, Messrs. Bennett and Frazier were
granted options to purchase 100,000 shares of Common Stock each at an exercise
price of $5.00 per share. The options became vested and exercisable as to one-
third of the shares covered thereby on the first anniversary of grant date and
will become vested and exercisable as to the balance of the covered shares in
two equal installments on the second and third anniversaries of the grant date,
subject to Messrs. Bennett and Frazier remaining as directors. The options were
amended in May 1997 to reduce their exercise prices to $2.81 per share and to
provide for immediate vesting and exercisability in the event of a "Change of
Control Event" (as defined).
Upon joining the Board in September 1997, Ms. Rodriguez was granted options
to purchase 100,000 shares of Common Stock at an exercise price of $2.56 per
share. Ms. Rodriguez's options will become vested and exercisable in three equal
installments on the first, second and third anniversaries of the grant date,
subject to Ms. Rodriguez remaining as a director. The options provide for
immediate vesting in full in the event of a "Change of Control Event" (as
defined).
EMPLOYMENT AGREEMENTS
In May 1997, NTN entered into a written Employment Agreement with Gerald
Sokol, Jr. memorializing the terms on which Mr. Sokol would serve as President
and Chief Operating Officer of NTN for a period of three years ending May 15,
2000. Under the Employment Agreement, Mr. Sokol is to receive an annual salary
of $250,000, which will increase by 5% (plus any increase in the consumer price
index) during each of the second and third years of the term of employment. Mr.
Sokol also is entitled to an annual bonus based on NTN's "Operating Cash Flow"
(as defined) as follows: 2.5% of the first $5,000,000 of Operating Cash Flow;
1.5% of any Operating Cash Flow in excess of $5,000,000 and up to $10,000,000;
and 1% of any Operating Cash Flow in excess of $10,000,000. NTN also has agreed
pursuant to the Employment Agreement to provide Mr. Sokol and his dependents
certain medical insurance and to purchase $1,000,000 of life insurance
($2,000,000 in the event of accidental death or dismemberment) on Mr. Sokol
payable to his beneficiaries.
Mr. Sokol's Employment Agreement may be terminated by NTN in the event of
his disability, in which event Mr. Sokol or his representatives will be entitled
to be paid severance in an amount equal to 75% of his compensation (including
the annual bonus calculated as described above) for the remainder of the term of
the Employment Agreement. The Employment Agreement also may be terminated by NTN
in the event of Mr. Sokol's personal dishonesty, willful misconduct or breach of
fiduciary duty, or if he breaches the Employment Agreement and fails to cure the
breach within 30 days. In the event NTN terminates the Employment Agreement
without cause, attempts to reassume Mr. Sokol's duties or to change his duties
without cause, Mr. Sokol will be entitled to a liquidated amount equal to his
entire compensation under the Employment Agreement for the remainder of its
term.
Mr. Sokol may terminate the Employment Agreement at any time after one year
on three months' notice to NTN and at any time following a "Change of Control
Event" (as defined). In the event Mr. Sokol or NTN terminates Mr. Sokol's
employment following a Change of Control Event, he will be entitled to receive
severance in an
9
<PAGE>
amount equal to one year's salary plus a prorated portion of the annual bonus
called for under the Employment Agreement.
In connection with his agreeing to join NTN as its Chief Financial Officer,
in August 1996 Mr. Sokol was granted various options to purchase an aggregate of
up to 200,000 shares of Common Stock. See "Executive Compensation -- Stock
Option Grants." All of these options, as well as additional options held by Mr.
Sokol to purchase an aggregate of 675,000 shares of Common Stock, were amended
in May 1997 to reduce the respective exercise prices of the options to $2.81 per
share. In February 1997, Mr. Sokol was granted additional options to purchase
600,000 shares of Common Stock at an exercise price of $2.81 per share.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
In March 1997, following an internal review by NTN's independent directors
acting with advice of separate counsel to the independent directors, NTN agreed
with Patrick J. Downs, Daniel C. Downs, Gerald P. McLaughlin, and Ronald E.
Hogan that each officer would resign or be terminated. Pursuant to Resignation
Agreements between each former officer and NTN, the existing employment
agreements of the former officers were terminated and each former officer
entered into Consulting Agreements with NTN, under which each former officer
agreed to consult with NTN on such matters as it may request from time to time.
The three-year terms of the Consulting Agreements coincide with the remaining
terms of the prior employment agreements.
Pursuant to the Resignation Agreements, NTN agreed to honor certain
provisions of the prior employment agreements of the former officers which
called for payment of the former officers' annual salaries for the remaining
terms of such employment agreements and to pay the former officers all deferred
compensation and accrued vacation accumulated by them through December 31, 1996.
The former officers relinquished any right under the prior employment agreements
to certain bonuses based on future performance of NTN and surrendered to NTN for
cancellation certain options held by them to purchase an aggregate of 1,763,000
shares of Common Stock. The Resignation Agreements also contain mutual, general
releases between NTN and each of the former officers with respect to their prior
employment and other relations between the parties.
Patrick J. Downs, Daniel C. Downs, Gerald P. McLaughlin, and Ronald E. Hogan
will receive under their Consulting Agreements the sum of $746,160, $746,160,
$812,887, and $583,492, respectively. The resigning officers also will continue
to receive medical benefits and life insurance paid for by NTN and, for 36
months, Patrick J. Downs, Daniel C. Downs and Gerald P. McLaughlin will continue
to receive a monthly car allowance.
In connection with the Consulting Agreements, NTN also agreed to extend the
expiration dates of certain options and warrants held by the former officers
and, with respect to Patrick J. Downs and Daniel C. Downs, to waive provisions
of their respective stock options which required the exercise of certain options
within a specified period of time following termination. Using the 5% and 10%
assumed rates of appreciation prescribed by the rules and regulations of the
Securities and Exchange Commission, the potential realizable value to the former
officers of these option and warrant extensions and waivers is as follows:
Patrick J. Downs -- $850,670 and $2,076,507, respectively; Daniel C. Downs --
$931,443 and $2,259,752, respectively; Gerald P. McLaughlin -- $392,543 and
$947,099, respectively; and Ronald E. Hogan -- $527,940 and $1,231,620,
respectively.
In connection with the management reorganization, NTN agreed to the vesting
of certain options held by Mr. McLaughlin to purchase 100,000 shares and issued
to Mr. McLaughlin a fully vested option to purchase 150,000 shares of Common
Stock of NTN. NTN also paid Alan P. Magerman, a Director of NTN an aggregate of
$225,000 and purchased from Mr. Magerman for a price of $81,250 certain warrants
to purchase 325,000 shares of Common Stock held by Mr. Magerman.
10
<PAGE>
As previously reported, each of the former officers was indebted to NTN for
certain prior loans extended to them by NTN, which by their terms were
cancelable under certain circumstances in the event of termination of the
officers' employment. As a result, the management reorganization triggered the
cancellation of indebtedness of Patrick J. Downs, Daniel C. Downs, Gerald P.
McLaughlin, and Ronald E. Hogan to NTN in the amounts of $930,879, $629,141,
$492,690 and $445,384 respectively.
BOARD COMPENSATION REPORT
Executive Compensation Policy
- -----------------------------
During 1996, the Board of Directors as a whole acted on matters of executive
compensation and makes the following Report:
NTN's executive compensation policy is intended to foster job satisfaction
and encourage continuous service by NTN's executive officers by providing
reasonable short-term cash compensation and long-term stock-based incentives.
NTN's policies apply equally to its Chief Executive Officer and other
executives. For 1996, NTN made several changes to its executive compensation
policy as described below:
. In connection with the reorganization of its management in early 1997,
NTN discontinued its prior profit-sharing program, which provided for
NTN's establishment of an annual profit-sharing pool based on the
achievement of certain specified pre-tax income levels to be allocated
among NTN's executive officers and other employees. NTN consistently
failed to achieve the specified income levels and, thus, the Plan was not
affording incentives to executive officers or other employees. The Board
may in the future consider the establishment of an alternative cash bonus
plan or program for executive officers based on NTN's results of
operations, but it has no present plan to do so.
. For 1996, the Board also terminated its Performance Associated Senior
Executive Retirement Plan, and NTN currently maintains no retirement plan
for executive officers or other employees.
. NTN has established a 401(k) Plan and nonqualified Deferred Compensation
Plan for executive officers and other eligible employees under which
participants may elect to defer current compensation, subject to
applicable limitations. NTN may, in the Board's discretion, make annual
contributions to the 401(k) Plan, subject to applicable limitations, but
it has never made any such contributions and the Board anticipates that
it will not do so until NTN achieves consistent, profitable operations.
. Short-term cash compensation to executives for 1996 consists primarily of
salaries payable to executives, subject to any written employment
agreement between NTN and any executive.
. In August 1996, NTN hired Gerald Sokol, Jr. as Chief Financial Officer,
and he was appointed Chief Operating Officer in November 1996. He has
since been appointed President and has relinquished his office as Chief
Operating Officer. In connection with Mr. Sokol's employment, NTN entered
into a written Employment Agreement with Mr. Sokol, the terms of which
are described elsewhere in this Proxy Statement. The terms of Mr. Sokol's
employment, which provides for an annual salary and an annual cash bonus
based on the results of operations of NTN, as well as the grant of
certain stock options also described elsewhere in this Report, were
determined by arm's-length negotiations between NTN and Mr. Sokol. Among
the criteria the Board considered in approving the terms of Mr. Sokol's
Employment Agreement were the compensation then being paid to NTN's other
executive officers, Mr. Sokol's prior compensation as Treasurer of Tele-
Communications, Inc., and the scope of Mr. Sokol's responsibilities at
NTN. As part of Mr. Sokol's compensation package, the Board authorized a
$150,000 advance to Mr. Sokol described elsewhere in the Proxy Statement
for his use in purchasing a residence in California. The Board considered
the advance necessary and appropriate, in light of California's high cost
of housing, to persuade Mr. Sokol to relocate from Colorado.
. Equity compensation, in the form of stock options and stock purchase
warrants, constitute the principal element of long-term compensation for
NTN's executive officers. The grant of stock options and warrants
increases management's equity ownership in the Company with the goal of
ensuring that the interests of management remain closely aligned with
those of the Company's stockholders. Attaching vesting requirements to
stock options and warrants also creates an incentive for executive
officers to remain with NTN for the long term. In appropriate
circumstances, the Board also will consider repricing previously granted
stock options if necessary so that the options continue to afford
realistic incentives to executives.
. Compensation to NTN's executive officers is subject to a $1 million
compensation deduction cap pursuant to Section 162(m) of the Internal
Revenue Code, as amended. In 1996, no executive officer received
aggregate compensation of $1 million or more. However, the Board is aware
that the grant of stock options and stock purchase warrants to the
executive officers may subject NTN to the deduction cap in subsequent
years. With respect to incentive stock options, the Board does not
anticipate NTN taking a deduction in the absence of a disqualifying
disposition by an executive officer. With respect to nonqualified
options and warrants, the Board is aware that any deduction that NTN may
have at the time of exercise will be subject to the $1 million cap. The
Board does not anticipate that the compensation deduction cap will
significantly affect its executive compensation policies.
Chief Executive Officer Compensation
- ------------------------------------
As indicated above, subject to any written employment agreement, the factors
and criteria upon which the compensation of NTN's Chief Executive Officer is
based are identical to the criteria used in evaluating the compensation packages
of the other executive officers of the Company.
EDWARD C. FRAZIER ROBERT M. BENNETT
GERALD SOKOL, JR. DONALD C. KLOSTERMAN
ESTHER L. RODRIGUEZ
Notwithstanding anything to the contrary set forth in any of NTN's previous
filings under the Securities Act of 1933, as amended, or the Exchange Act that
might incorporate future filings, including this Proxy Statement in whole or in
part, the foregoing Board Compensation Report and the following Performance
Graph shall not be incorporated by reference into any such filings.
PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total returns for
NTN, the American Stock Exchange Index, and an NTN-constructed Industry Index
for 1996 ("Industry Index"). The Industry Index consists of all companies (i)
that are listed in the same industry group as NTN in the Media General Industry
Group Stock Index, and (ii) whose securities have been registered under Section
12 of the Exchange Act during the period covered by the performance graph.
11
<PAGE>
The companies contained in the Industry Index are as follows:
Adelphia Communication A
Advanced Radio Telecom
American Telecasting Inc.
Ascent Entertain Gr Inc.
Cablevision Systems Cl A
CAI Wireless Systems Inc.
Cellularvision USA Inc.
Century Communications
Comcast UK Cable Prt Ltd
Cox Communications Inc.
Digitale Telekabl Ag Adr
General Cable PLC ADR
Heartland Wireless Comm
Internat Fibercom Inc.
Jones Intercable Inc. A
Jones Intercable Invest.
Lodgenet Entertainment
Matv-Cable Sys Media
Multicanal Participacoes
National Wireless Hldgs
Network Event Theater
NTL Inc.
NTN Canada Inc.
On Command Corporation
Peoples Choice TV Corp.
TCA Cable TV Inc.
TCA Satellite Ent Inc. A
Tel-Com Wireless Cable
Tele-Comm Inc. A Liberty
Tele-Comm Comm. PLC ADR
Tescorp Inc.
TV Filme Inc.
United Internat Hldg CLA
United Video Satl Grp A
Wireless One Inc.
12
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG NTN COMMUNICATIONS, INC., AMEX MARKET INDEX AND SIC CODE INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION> NTN
Measurement Period COMMUNICATIONS INDUSTRY BROAD
(Fiscal Year Covered) INC INDEX MARKET
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
1991 $100 $100 $100
1992 $158.00 $121.83 $101.37
1993 $320.00 $170.65 $120.44
1994 $192.00 $123.72 $106.39
1995 $144.00 $142.83 $137.13
1996 $122.00 $116.11 $144.70
</TABLE>
The graph assumes that the value of the investment in NTN's Common
Stock, the AMEX Market Index and the Industry Index of companies each was $100
on January 1, 1992 and that all dividends were reinvested.
13
<PAGE>
BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION
All compensation determinations for 1996 for NTN's executives were made
by the Board of Directors of NTN as a whole upon the advice of the Compensation
Committee of the Board. None of the directors or executive officers of NTN has
served on the Board of Directors or the compensation committee of any other
company or entity, any of whose officers served either on the Board of Directors
or on the Compensation Committee of the Board.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 5, 1997 the number and
percentage ownership of Common Stock by (i) all persons known to NTN to own
beneficially more than 5% of the outstanding shares of Common Stock based upon
reports filed by each such person with the Commission, (ii) each director of
NTN, (iii) each of the Named Executive Officers, and (iv) all of the executive
officers and directors of NTN as a group. Except as otherwise indicated, and
subject to applicable community property and similar laws, each of the persons
named has sole voting and investment power with respect to the shares of Common
Stock shown. An asterisk denotes beneficial ownership of less than 1%.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned Common Stock(1)
---- ------------------ ------------
<S> <C> <C>
Edward C. Frazier............................. 525,833(2) 2.2%
Gerald Sokol, Jr.............................. 1,030,000(3) 4.2%
Daniel C. Downs(4)............................ 928,294(5) 4.0%
Patrick J. Downs(4)........................... 887,819(6) 3.6%
Donald C. Klosterman.......................... 687,749(7) 2.8%
Robert M. Bennett............................. 103,333(8) *
Esther L. Rodriguez........................... 1,000(9) *
Ronald E. Hogan(4)............................ 592,047(10) 2.4%
Gerald P. McLaughlin(4)....................... 297,462(11) 1.2%
All executive officers and directors of the
Company as a group (six persons)............. 2,347,915(12) 9.0%
</TABLE>
_______________
(1) Included as outstanding for purposes of this calculation are 23,672,001
shares of Common Stock (the amount outstanding as of September 5, 1997)
plus, in the case of each particular holder, the shares of Common Stock
subject to currently exercisable options, warrants or other instruments
exercisable for or convertible into shares of Common Stock (including such
instruments exercisable within 60 days after August 21, 1997) held by that
person, which instruments are specified by footnote. Shares issuable as
part or upon exercise of outstanding options, warrants or other instruments
other than as described in the preceding sentence are not deemed to be
outstanding for purposes of this calculation.
(2) Includes 33,333 shares subject to currently exercisable options and
82,500 shares subject to currently exercisable warrants held by Mr.
Frazier. Also includes 400,000 shares subject to currently exercisable
warrants held by Frazier/King Media Holding Co., of which Mr. Frazier is a
principal. As a principal of Frazier/King Media Holding Co., Mr. Frazier
shares voting and investment power with respect to such warrant shares with
Jeffrey Joe King, the other principal of Frazier/King Media Holding Co.
(3) Includes 1,000,000 shares subject to currently exercisable options held by
Mr. Sokol.
(4) Patrick J. Downs, Daniel C. Downs, Ronald E. Hogan, and Gerald P.
McLaughlin are no longer directors or officers of NTN.
(5) Includes 350,000 shares subject to currently exercisable warrants and
400,000 shares subject to currently exercisable options held by Mr. Downs.
14
<PAGE>
(6) Includes 350,000 shares subject to currently exercisable warrants and
400,000 shares subject to currently exercisable options held by Mr. Downs.
(7) Includes 200,000 shares subject to currently exercisable warrants and
150,000 shares subject to currently exercisable options held by Mr.
Klosterman.
(8) Includes 33,333 shares subject to currently exercisable options held by Mr.
Bennett.
(9) The shares shown are owned of record by The Rodriguez Family Trust, of
which Ms. Rodriguez is a co-trustee with members of her immediate family.
As co-trustee, Ms. Rodriguez shares voting and investment power with
respect to the shares.
(10) Includes 200,000 shares subject to currently exercisable warrants and
213,000 shares subject to currently exercisable options held by Mr. Hogan.
(11) Includes 200,000 shares subject to currently exercisable options owned by
Mr. McLaughlin.
(12) Includes 600,000 shares subject to currently exercisable warrants and
1,299,167 shares subject to currently exercisable options held by executive
officers and directors, including those described in the above notes.
CERTAIN TRANSACTIONS
LOANS TO OFFICERS AND DIRECTORS
Loans to Certain Directors and Former Officers
As previously reported, as of the beginning of fiscal 1996, NTN had
outstanding loans to a director and certain of its officers, including an
aggregate of $174,927 principal amount of loans made during fiscal 1996. The
loans represent withholding amounts paid by NTN on behalf of the director and
officers to taxing authorities in order to obtain a tax deduction for federal
and state income tax purposes relating to compensation to the director and
officers for prior years. The loans were evidenced by individual promissory
notes in favor of NTN which bore interest at annual rates of between 6% and 8%,
were unsecured and were due on demand.
In April 1996, NTN restructured the outstanding loans to the director
and officers. Pursuant to the restructuring, each director and officer executed
a three-year promissory note in favor of NTN in a principal amount equal to the
aggregate outstanding principal balance and accrued interest on the loans as
follows: Donald C. Klosterman -$1,179,043; Patrick J. Downs - $680,429; Daniel
C. Downs - $629,141; Gerald P. McLaughlin - $492,691; Ronald E. Hogan -
$445,384; and Robert Klosterman -$237,383. The terms of the notes were as
follows: 10% of the principal amount was due at the end of 12 months from the
date of the note; an additional 30% of the principal amount was due at the end
of 24 months; and the balance of the principal amount (i.e., 60%) was due at the
end of 36 months. The notes were prepayable at any time without penalty and bore
interest at the rate of 6% per annum, which was payable annually in arrears.
The maker of each note had the option to satisfy amounts outstanding
under his note by relinquishing to NTN for cancellation either (i) shares of
NTN's Common Stock (valued for this purpose at the closing market price on the
date of transfer), or (ii) warrants to purchase NTN's Common Stock (valued for
this purpose at the fair market value on the date of transfer as determined in
good faith by the Board of Directors of NTN). To the extent the maker of a note
surrendered to NTN shares of Common Stock in satisfaction of all or part of his
note or interest thereon, the executive was to be granted a 10-year
nontransferable option (an incentive stock option to the extent permissible) to
purchase the same number of shares of Common Stock as was being surrendered,
which would be immediately exercisable at an exercise price equal to the value
ascribed to the Common Stock which was surrendered to NTN in satisfaction of the
note, subject to stockholder approval if required by law or stock exchange
rules.
Under the terms of the notes, if any officer was terminated by NTN for
any reason other than for "cause" at any time within the three-year term of his
note (or in the case of Donald C. Klosterman, if the stockholders failed to
reelect
15
<PAGE>
him to the Board of Directors), the balance of the note and any interest accrued
thereon was to have been be canceled. "Cause" for this purpose was defined as
personal dishonesty or willful misconduct which materially and adversely
affected NTN.
In March 1997, Patrick J. Downs, Daniel C. Downs, Ronald E. Hogan, and
Gerald P. McLaughlin resigned or were terminated as executive officers of NTN.
Pursuant to Resignation Agreements entered into between NTN and each resigning
officer, in accordance with the terms of the notes with the former executives
NTN canceled the obligations of Patrick J. Downs, Daniel C. Downs, Ronald E.
Hogan and Gerald P. McLaughlin under their notes, which totaled $930,879,
$629,141, $445,384 and $492,690, respectively. See "Executive Compensation -
Termination of Employment and Change in Control Arrangements."
In January and March 1996, NTN loaned additional amounts to certain
directors and executive offices. The loans were made to Donald C. Klosterman,
Alan P. Magerman, Patrick J. Downs, and Ronald E. Hogan in the amounts of
$129,500, $35,000 $106,000 and $90,500, respectively. The loans were evidenced
by promissory notes, which were secured by a pledge of shares of Common Stock
owned by the maker of the note, and bore interest at the rate of 10% per annum.
The principal amount and all accrued interest of the notes were paid on December
31, 1996.
In August 1997, Patrick J. Downs, Daniel C. Downs, and Alan P. Magerman
resigned as directors of NTN. No compensation was paid to the former directors
in connection with their resignations.
Advance to Mr. Sokol
In August 1996, in connection with his agreeing to join NTN, NTN
advanced Mr. Sokol $150,000 for use in purchasing a residence in California. The
advance was to be forgiven upon the occurrence of a change in control of NTN.
Such a change of control occurred in March 1997 as a consequence of the
reorganization of NTN's management, and the advance was forgiven at that time.
CONSULTING ARRANGEMENTS
In December 1996, NTN retained Frazier/King Media Holding Co.
("Frazier/King"), a media consulting firm of which Edward C. Frazier is a
principal, to provide consulting services to NTN relating to the development of
a local advertising sales program. Under the terms of the one-year engagement,
NTN agree to pay Frazier/King $10,000 upon being engaged and an additional
$10,000 per month during the term of the engagement, plus reimbursement of
expenses incurred by Frazier/King.
In early 1997, NTN entered into additional Consulting Agreements with
Frazier/King and Mr. Frazier, under which they agreed to review and consult with
NTN regarding its strategic business plan, current operations, and financing
needs. Under the Consulting Agreements, Mr. Frazier was granted a five-year
option to purchase 250,000 shares of Common Stock at an exercise price of $4.50
per share, which will vest and become exercisable in 24 monthly installments of
approximately 10,416 shares each so long as Mr. Frazier remains engaged as a
consultant. In May 1997, the option granted to Mr. Frazier was amended to reduce
the exercise price to $2.81 and to provide that the option would become
immediately exercisable in full in the event of a "Change of Control Event" (as
defined). Frazier/King also was granted a warrant to purchase 1,000,000 shares
of Common Stock at an exercise price of $2.81, and NTN agreed to reimburse
Frazier/King for expenses (other than normal operating expenses) incurred by it
in performing its consulting services. Frazier/King's warrant was immediately
vested and exercisable as to 200,000 shares of Common Stock covered thereby and
will become vested and exercisable as to the balance of 800,000 covered shares
in quarterly installments of
16
<PAGE>
100,000 shares each as of the 15th day of each July, October, January and April
commencing July 15, 1997 and ending April 15, 1999, provided that the Board of
Directors of NTN has determined that Frazier/King is performing satisfactorily
under its Consulting Agreement.
The Consulting Agreement with Frazier/King may be terminated by NTN any
time upon ten days notice to Frazier/King in the event the Board of Directors
determines in good faith that Frazier/King has failed materially to perform, or
has breached its duties, under the Consulting Agreement.
INDEMNITY AGREEMENTS
In connection with their appointment to the Board of Directors in August
1996, NTN entered into indemnity agreements with each of Edward C. Frazier and
Robert M. Bennett. NTN entered into similar indemnity agreements with Gerald
Sokol, Jr. and Geoffrey D. Labat in connection with their joining NTN and
entered into a similar indemnity agreement with Esther L. Rodriguez in
connection with her appointment to the Board. The indemnity agreements provide
in each case that NTN will indemnify these individuals under certain
circumstances against certain liabilities and expenses they may incur in their
capacities as directors of NTN. NTN believes that the use of such indemnity
agreements is customary among corporations and that the terms of the indemnity
agreements are fair and in its best interests to retain experienced outside
directors.
17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, NTN's directors and officers and any
persons holding more than 10% of NTN's Common Stock are required to report their
ownership of Common Stock and any changes in that ownership to the Commission.
Specific due dates for these reports have been established, and NTN is required
to report in this Proxy Statement any failure to file by these dates. During
1996, all of these filing requirements were satisfied by its directors, officers
and 10% stockholders, except as follows:
Patrick J. Downs, a director of NTN and its former Chairman of the Board
and Chief Executive Officer, failed to report under Section 16 a gift by him of
5,156 shares of NTN's Common Stock in July 1996. Jon Van Caneghem, the former
President of NTN's New World Computing, Inc. subsidiary, failed to report a
private sale by him to NTN in January 1996 of 25,000 shares of Common Stock and
a subsequent public sale in June 1996 of 34,000 shares of Common Stock. Donald
C. Klosterman, a director of NTN, failed to report a change in beneficial
ownership of 70,000 shares of Common Stock when his former wife was assigned
these shares in April 1996 as part of a marital dissolution. In each case, the
officer or director involved failed to notify appropriate persons at NTN
responsible for assisting officers and directors in meeting their Section 16
reporting obligations.
In making these statements, NTN has relied upon a review of Forms 3 and
4 and amendments thereto furnished to NTN pursuant to Rule 16a-3 under the
Exchange Act during fiscal year 1996 and the written representations of its
incumbent directors and officers.
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP independent
accountants of NTN for the fiscal year ending December 31, 1997.
KPMG Peat Marwick LLP is a nationally recognized firm of independent
accountants and has audited NTN's financial statements for the fiscal years
ended December 31, 1989 through December 31, 1996. A KPMG Peat Marwick LLP
representative will be present at the Annual Meeting and will be available to
make a statement, if he or she desires to do so, and to respond to appropriate
questions.
OTHER MATTERS
Accompanying this Proxy Statement is a letter to stockholders from NTN's
President and a copy of NTN's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996. These accompanying materials constitute NTN's Annual
Report to Stockholders.
Management of NTN does not know of any matter to be acted upon at the
Annual Meeting other than the matters described above. If any other matter
properly comes before the Annual Meeting, however, the proxy holders will vote
the proxies thereon in accordance with their best judgment.
PROXY SOLICITATION
The cost of soliciting the proxies will be borne by NTN. This Proxy
Statement and the accompanying materials, in addition to being mailed directly
to stockholders, will be distributed through brokers, custodians, nominees, and
other like parties to beneficial owners of shares of Common Stock. NTN will,
upon request, reimburse such parties for their charges and expenses in
connection therewith.
18
<PAGE>
Officers of NTN may seek to contact beneficial holders of Common Stock to
discuss the proposals to be voted on at the Annual Meeting and to submit
proxies. Any officer who does so will not be compensated for such activities.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 annual
meeting of stockholders of NTN must be received by March 31, 1998. Such
proposals should be addressed to the Secretary of NTN.
By Order of the Board of Directors
Laura J. Kass
Secretary
Carlsbad, California
September 2, 1997
19
<PAGE>
NTN COMMUNICATIONS, INC.
5966 La Place Ct.
Suite 100
Carlsbad, California 92008
-----------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
-----------------------------------------------------------------
The undersigned hereby appoints Gerald Sokol, Jr. and Laura Kass, and each or
either of them, as proxy holders with power to appoint his substitute, and
hereby authorizes the proxy holders to represent and vote, as designated on the
reverse side, all shares of Common Stock of NTN Communications, Inc. (the
"Company") held of record by the undersigned on September 12, 1997, at the
annual meeting of stockholders to be held on November 3, 1997 or any adjournment
thereof.
(Continued and to be signed on the reverse side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
NTN COMMUNICATIONS, INC.
November 3, 1997
A [X] Please mark your
vote as in this
example.
Election FOR all nominees WITHHOLD AUTHORITY Nominees: Gerald Sokol, Jr.
1. of named at right to vote for all Edward C. Frazier
Directors: right (except as nominees named Robert M. Bennett
marked to the at right [_]
contrary below)
[_]
Important: To withhold authority
to vote for any individual
nominee, draw a line through such nominee's name
SIGNATURE(S)_______________ DATE______ SIGNATURE(S)_______________ DATE______
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
