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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 2, 1996
NTN CANADA, INC.
(Exact name of registrant as specified in its charter)
New York 0-18066 11-2805051
--------- --------- ------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
14 Meteor Drive, Etobicoke, Ontario Canada M9W 1A4
(Address of principal executive offices, including zip code)
(416) 675-6666
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On October 2, 1996, NTN Canada, Inc. (the "Registrant"), through its
wholly-owned subsidiary NTN Interactive Network Inc. ("Interactive"), acquired,
effective as of October 1, 1996, all of the outstanding capital stock of Magic
Lantern Communications Ltd., a Canadian corporation ("Magic Lantern"), pursuant
to a Share Purchase Agreement, dated October 1, 1996 (the "Agreement"), among
Interactive, Connolly-Daw Holdings Inc. ("Connolly-Daw"), 1199846 Ontario Ltd.
("1199846") and Douglas Connolly and Wendy Connolly (jointly, the "Connollys"),
a copy of the Agreement being annexed hereto as Exhibit "10.1", and is
incorporated herein by reference thereto. The aggregate purchase price was
$1,450,000 (Canadian), $200,000 (Canadian) of which was paid in cash to
Connolly-Daw. The balance of the aggregate purchase price was satisfied by the
delivery of a Non-Negotiable Promissory Note (the "Connolly-Daw Note") in the
principal amount of $703,133 (Canadian) and payable to Connolly-Daw, and a
Non-Negotiable Promissory Note (the "1199846 Note" and, together with the
Connolly-Daw Note, the "Notes") in the amount of $546,867 and payable to
1199846. Copies of the Connolly-Daw Note and 1199846 Note are annexed hereto as
Exhibits "10.2" and "10.3", respectively, and are incorporated herein by
reference thereto.
Under the terms of the Notes, Interactive has the right (the "Share Payment
Option") to deliver to Connolly-Daw and 1199846 (the "Vendors"), respectively,
in lieu of payment of the principal amounts of the Notes, such shares of the
common stock, par value $.07 per share (the "Common Stock") of the Registrant,
in accordance with a specified schedule therein. Pursuant to the provisions of
the Notes, Interactive, the Registrant and Connolly-Daw have entered into an
option agreement (the "Connolly-Daw Option Agreement"), a copy of which is
annexed hereto as Exhibit "10.4" and is incorporated herein by reference
thereto, and Interactive, the Registrant and 1199846
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have entered into an option agreement (the "1199846 Option Agreement"), a
copy of which is annexed hereto as Exhibit "10.5" and is incorporated herein by
reference thereto, pursuant to which the Registrant, at each of the Vendors'
option, shall be obligated to purchase from the Vendors, (the "Put Option") and
each of the Vendors, at the Registrant's option, shall be obligated to sell to
the Registrant (the "Call Option"), a specified number of shares of Common Stock
at a price (i) equal to 90% of the average closing price of Registrant's Common
Stock during the 20-day period ending on the business day preceding the exercise
of such Put Option, and (ii) equal to 110% of the average closing price of
Registrant's Common Stock for the 20-day period ending on the business day
preceding the exercise of such Call Option. In addition, the Vendors have the
right to require Interactive to deliver shares of Common Stock in lieu of
payment of the amounts due pursuant to the Notes. The Registrant has guaranteed
the delivery of the aforesaid shares to either, or both, of Connolly-Daw and
1199846 if such election is made.
Pursuant to a Registration Rights Agreement, dated October 1, 1996 (the
"Registration Rights Agreement"), a copy of which is annexed hereto as Exhibit
"10.6" and is incorporated herein by reference thereto, the Registrant has
granted certain registration rights under the Securities Act of 1933 with
respect to the shares issuable upon exercise of the Share Payment Option.
In addition, pursuant to a Share Purchase Agreement dated October 1, 1996,
Interactive acquired 1,000 Class A special shares of Magic Lantern owned by
Telesat Canada for $250,000 (Canadian). A copy of this agreement is annexed
hereto as Exhibit "10.7", and is incorporated herein by reference thereto.
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The following schedules to the Agreement are not annexed hereto, but the
Registrant, upon request, shall provide a copy of any omitted schedule:
Schedule "A" - Financial Statements
Schedule "B" - Particulars of Purchased Shares; Information re:
Authorized and Issued Capital
Schedule "C" - List of Subsidiaries and Share Capital Thereof
Schedule "D" - Undisclosed Liabilities
Schedule "E" - Liens, Charges and Encumbrances
Schedule "F" - Equipment and Other Personal Property Leases
Schedule "G" - Real Property Leases
Schedule "H" - Legal Descriptions of Real Property Owned
Schedule "I" - Standard Form Distribution Rights Agreement
Schedule "J" - Employment Contracts, Directors, Officers,
Employees and Independent Contractors
Schedule "K" - Other Material Contracts
Schedule "L" - Litigation
Schedule "M" - Description of Insurance Policies
Schedule "N" - Bank Accounts
Schedule "O" - Intellectual and Industrial Property
Schedule "P" - Vehicular Equipment Owned or Leased
Schedule "Q" - Addresses of Company and Subsidiaries
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Item 7. Financial Statements and Exhibits.
(a) The Registrant intends to provide the following financial statements
and pro forma financial information under cover of a Form 8 Amendment to this
Current Report on Form 8-K, which shall be filed no later than December 16,
1996.
(1) Audited balance sheet of Magic Lantern as of August 31, 1996.
(2) Audited statements of income and cash flows of Magic Lantern for
the twelve month period ended August 31, 1996.
(3) Pro forma information of Magic Lantern and the Registrant as of
and for the period ended August 31, 1996 and
(4) Audited balance sheet and statements of income and cash flows of
the Registrant for the periods required by Sections 3-01 and 3-02
of Regulation S-X.
(b) Set forth below is a list of the Exhibits applicable to this Current
Report on Form 8-K, numbered in accordance with Item 601 of Regulation S-K.
10.1 Share Purchase Agreement, dated the 1st day of October, 1996, by
and between Connolly-Daw Holdings Inc., 1199846 Ontario Ltd.,
Douglas Connolly and Wendy Connolly and NTN Interactive Network
Inc.
10.2 Non-Negotiable Promissory Note, dated October 1, 1996, by and
between NTN Interactive Network Inc., as Debtor, and Connolly-
Daw Holdings Inc., as Creditor.
10.3 Non-Negotiable Promissory Note, dated October 1, 1996 by and
between NTN Interactive Network Inc., as Debtor, and 1199846
Ontario Ltd., as Creditor.
10.4 Registration Rights Agreement, dated October 1, 1996, by and
between NTN Canada, Inc., Connolly-Daw Holdings Inc. and 1199846
Ontario Ltd.
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10.5 Option Agreement, dated the 1st day of October, 1996, by and
between Connolly-Daw Holdings Inc., NTN Interactive Network Inc.
and NTN Canada, Inc.
10.6 Option Agreement, dated the 1st day of October, 1996, by and
between 1199846 Ontario Ltd., NTN Interactive Network Inc. and
NTN Canada, Inc.
10.7 Share Purchase Agreement, dated the 1st day of October, 1996 by
and between NTN Interactive Network Inc. and Telesat Canada.
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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 CANADA, INC.
a New York Corporation
by: Peter Rona
---------------------------
Peter Rona, President
Date: October 2, 1996
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EXHIBIT INDEX
10.1 Share Purchase Agreement, dated the 1st day of October, 1996, by
and between Connolly-Daw Holdings Inc., 1199846 Ontario Ltd.,
Douglas Connolly and Wendy Connolly and NTN Interactive Network
Inc.
10.2 Non-Negotiable Promissory Note, dated October 1, 1996, by and
between NTN Interactive Network Inc., as Debtor, and Connolly-Daw
Holdings Inc., as Creditor.
10.3 Non-Negotiable Promissory Note, dated October 1, 1996 by and
between NTN Interactive Network Inc., as Debtor, and 1199846
Ontario Ltd., as Creditor.
10.4 Registration Rights Agreement, dated October 1, 1996, by and
between NTN Canada, Inc., Connolly-Daw Holdings Inc. and 1199846
Ontario Ltd.
10.5 Option Agreement, dated the 1st day of October, 1996, by and
between Connolly-Daw Holdings Inc., NTN Interactive Network Inc.
and NTN Canada, Inc.
10.6 Option Agreement, dated the 1st day of October, 1996, by and
between 1199846 Ontario Ltd., NTN Interactive Network Inc. and
NTN Canada, Inc.
10.7 Share Purchase Agreement, dated the 1st day of October, 1996 by
and between NTN Interactive Network Inc. and Telesat Canada.
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Exhibit 10.1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 1st day of October, 1996,
B E T W E E N:
CONNOLLY-DAW HOLDINGS INC., a corporation
incorporated pursuant to the laws of the Province of
Ontario (hereinafter referred to as "Connolly-Daw"),
and 1199846 ONTARIO LTD., a corporation incorporated
pursuant to the laws of the Province of Ontario
(hereinafter referred to as "1199846"),
(hereinafter collectively referred to as the
"Vendors"),
OF THE FIRST PART;
- and -
DOUGLAS CONNOLLY and WENDY CONNOLLY, both of the City
of Oakville, in the Province of Ontario,
(hereinafter collectively referred to as the
"Connollys"),
OF THE SECOND PART;
- and -
NTN INTERACTIVE NETWORK INC., a corporation
amalgamated pursuant to the laws of Canada,
(hereinafter referred to as the "Purchaser"),
OF THE THIRD PART.
WHEREAS the Vendors beneficially own and control all of the issued and
outstanding shares in the capital of Magic Lantern Communications Ltd., a
corporation amalgamated pursuant to the laws of Canada (hereinafter
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2
referred to as the "Company"), save and except for 1,000 Class A special shares
in the capital of the Company which are beneficially owned and controlled by
Telesat Canada;
AND WHEREAS 1199846 beneficially owns and controls 20.1% of the issued
and outstanding shares in the capital of 745695 Ontario Ltd., a corporation
incorporated pursuant to the laws of the Province of Ontario (hereinafter
referred to as "745695"), with the remaining 79.9% of the issued and outstanding
shares in the capital of 745695 being beneficially owned and controlled by the
Company;
AND WHEREAS the Vendors desire to sell and the Purchaser desires to
purchase the said issued and outstanding shares in the capital of the Company
owned by the Vendors, all upon and subject to the terms and conditions
hereinafter set forth;
AND WHEREAS 1199846 desires to sell and the Purchaser desires to
purchase the said issued and outstanding shares in the capital of 745695 owned
by 1199846, all upon and subject to the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and the mutual
agreements and covenants herein contained (the adequacy of which consideration
as to each of the parties hereto is hereby mutually admitted), the parties
hereto hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions. Whenever used in this Agreement, unless there is something in
the subject matter or context inconsistent therewith, the following words and
terms shall have the respective meanings ascribed to them as follows:
(a) "Agreement" means this Share Purchase Agreement and all
instruments supplemental hereto or in amendment or
confirmation hereof;
(b) "Business" means the businesses presently carried on by the
Company and its Subsidiaries consisting of the marketing and
distribution of video programming and other media resource
material, the operation of a fulfillment service bureau, the
operation of a video dubbing and production facility, and the
operation of a digital conversion service bureau;
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3
(c) "Business Day" means a day other than a Saturday, Sunday or
any day on which the principal commercial banks located at
Toronto, Ontario are not open for business during normal
banking hours;
(d) "Closing" means the completion of the sale to and purchase by
the Purchaser of the Purchased Shares hereunder by the
transfer and delivery of documents of title thereto and the
payment of the purchase price therefor as contemplated herein;
(e) "Closing Date" means the 1st day of October, 1996, or such
other date as the Parties may agree as the date upon which the
Closing shall take place;
(f) "Closing Time" means 10:00 o'clock a.m. Toronto time, on the
Closing Date or such other time on such date as the Parties
may agree as the time at which the Closing shall take place;
(g) "Financial Statements" means the unaudited consolidated
financial statements of the Company and its Subsidiaries for
the period ended July 31, 1996, consisting of a balance sheet
and a statement of income and retained earnings, as reported
upon by Messrs. Harendorf, Lebane, Moss, Chartered
Accountants, a copy of which is annexed as Schedule "A"
hereto;
(h) "Parties" means the Vendors, the Connollys and the Purchaser,
collectively, and "Party" means any one of them;
(i) "Person" means any individual, corporation, partnership,
trustee or trust or unincorporated association, and pronouns
have a similarly extended meaning;
(j) "Purchaser's Counsel" means Messrs. Walker, Head, Barristers
and Solicitors, of Pickering, Ontario;
(k) "Purchase Price" means the purchase price to be paid by the
Purchaser to the Vendors for the Purchased Shares as provided
in Article 2 hereof;
(l) "Purchased Shares" means the 33,363 issued and outstanding
common shares in the capital of the Company and the 201 issued
and outstanding common shares in the capital of 745695, all as
shown in Schedule "B" hereto;
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4
(m) "Subsidiaries" means the corporations listed in Schedule "C"
hereto and "Subsidiary" means any one of the said corporations
listed in Schedule "C" hereto, all of the issued and
outstanding securities of which are beneficially owned and
controlled as follows, as shown in the said Schedule:
(i) Sonoptic Technologies Inc. - 75% of the issued and
outstanding securities of which are beneficially
owned and controlled by the Company, with the
remaining 25% being beneficially owned and controlled
by Provincial Holdings Ltd.;
(ii) 745695 - 79.9% of the issued and outstanding
securities of which are beneficially owned and
controlled by the Company, with the remaining 20.1%
being beneficially owned and controlled by 1199846;
(iii) B.C. Learning Connection Inc. - all of the issued and
outstanding securities of which are beneficially
owned and controlled by 745695; and
(n) "Vendors' Counsel" means Messrs. Jackson L. Chercover, Q. C.,
Barristers and Solicitors, of Toronto, Ontario.
Terms defined in the preamble to this Agreement shall have the same
meanings herein as are ascribed thereto in the preamble.
1.2 Gender and Number - Words importing the singular include the plural and vice
versa; words importing gender include all genders.
1.3 Entire Agreement - This Agreement, including the Schedules hereto, together
with the agreements and other documents to be delivered pursuant hereto,
constitute the entire agreement between the Parties pertaining to the subject
matter hereof and supercede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties and there are no
warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth
herein and therein.
1.4 Waivers, etc. - No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the Party to be bound
thereby. No waiver of any of the provisions of this Agreement, in whole or in
part, shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
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1.5 Other Words and Phrases - In this Agreement, unless otherwise expressly
provided, (i) the words "hereof", "herein", "hereto" and "hereunder" and words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section, Subsection, paragraph or other subdivision, and (ii) all
references to designated "Articles", "Sections", "Subsections", "paragraphs" or
other subdivisions are to the designated Articles, Sections, Subsections,
paragraphs and other subdivisions of this Agreement.
1.6 Headings - The Article and Section headings contained herein are included
solely for convenience of reference, are not intended to be full or accurate
descriptions of the content thereof and shall not be considered part of this
Agreement.
1.7 Applicable Law - This Agreement and the rights, obligations and relations of
the Parties shall be governed by and construed in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable therein, and
the courts of Ontario shall have exclusive jurisdiction to entertain any action
in connection with this Agreement.
1.8 Currency - Unless otherwise specified, all references to currency herein are
deemed to mean lawful money of Canada, and all amounts to be paid or calculated
pursuant to this Agreement are to be paid or calculated in lawful money of
Canada.
1.9 Accounting Terms - All accounting terms shall have the meanings ascribed to
them in accordance with generally accepted accounting principles, and all
references to "generally accepted accounting principles" shall be deemed to be,
unless otherwise specified, reference to accounting principles which are
generally accepted in Canada.
1.10 Schedules - The following are the schedules attached to and incorporated in
this Agreement by reference and deemed to be an integral part hereof:
Schedule "A" - Financial Statements
Schedule "B" - Particulars of Purchased Shares; Information
re: Authorized and Issued Capital
Schedule "C" - List of Subsidiaries and Share Capital Thereof
Schedule "D" - Undisclosed Liabilities
Schedule "E" - Liens, Charges and Encumbrances
Schedule "F" - Equipment and Other Personal Property Leases
Schedule "G" - Real Property Leases
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6
Schedule "H" - Legal Descriptions of Real Property Owned
Schedule "I" - Standard Form Distribution Rights Agreement
Schedule "J" - Employment Contracts, Directors, Officers,
Employees and Independent Contractors
Schedule "K" - Other Material Contracts
Schedule "L" - Litigation
Schedule "M" - Description of Insurance Policies
Schedule "N" - Bank Accounts, etc.
Schedule "O" - Intellectual and Industrial Property
Schedule "P" - Vehicular Equipment Owned or Leased
Schedule "Q" - Addresses of Company and Subsidiaries
Schedule "R" - Promissory Note (Connolly-Daw)
Schedule "S" - Promissory Note (1199846)
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase Price - At the Closing Time, the Vendors shall sell and the
Purchaser shall purchase the Purchased Shares for an aggregate purchase price of
$1,450,000.00, $903,133.00 of which is payable to Connolly-Daw and $546,867.00
of which is payable to 1199846.
2.2 Action by Vendors and Purchaser at the Closing Time -
(a) Delivery of Certificates, etc. - The Vendors shall transfer and deliver
to the Purchaser at the Closing share certificates representing the
Purchased Shares duly endorsed in blank for transfer. The Vendors shall
take such steps as shall be necessary to cause the Company and 745695
to enter the Purchaser or its nominee upon the books of the Company and
745695 respectively as the holder of the Purchased Shares and to issue
share certificates to the Purchaser or its nominee representing the
Purchased Shares;
(b) Payment to the Vendors - The Purchase Price specified in Section 2.1
shall be paid and satisfied by the delivery by the Purchaser to the
Vendors at the Closing of the following:
(i) a certified cheque or bank draft payable to or to the order of
Connolly-Daw in the amount of $200,000.00;
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7
(ii) a promissory note in favour of Connolly-Daw in the form set
out in Schedule "R" hereto in the amount of $703,133.00; and
(iii) a promissory note in favour of 1199846 in the form set out in
Schedule "S" hereto in the amount of $546,867.00.
2.3 Place of Closing - The Closing shall take place at the Closing Time at the
offices of the Purchaser's Counsel or at such other place as may be agreed upon
by the Vendors and the Purchaser.
2.4 Tender - Any tender of documents or money hereunder may be made upon the
Parties or their respective counsel, and money may be tendered by official bank
draft drawn upon a Canadian chartered bank or by negotiable cheque payable in
Canadian funds and certified by a Canadian chartered bank or trust company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Vendors and the Connollys - The
Vendors and the Connollys hereby jointly and severally represent and warrant to
the Purchaser as follows and acknowledge that the Purchaser is relying on such
representations and warranties in connection with the transactions contemplated
by this Agreement:
(a) Organization and Valid Existence; the Vendors - The Vendors are
corporations duly incorporated and organized and are validly existing
under the laws of the Province of Ontario and the Vendors have all
necessary corporate power, authority and capacity to own and dispose of
the Purchased Shares. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder have been
duly authorized by all necessary corporate action on the part of the
Vendors.
(b) Enforceability of Obligations - This Agreement constitutes a valid and
binding obligation of the Vendors enforceable against them in
accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the court
from which they are sought.
(c) Right to Sell - The Vendors:
(i) are the sole beneficial owners of the Purchased Shares, which
shares constitute all the issued and outstanding shares in the
capital of the Company and 745695 save and except for 1,000
Class A special shares in the capital of the Company which are
beneficially owned and controlled by Telesat Canada and 799
common shares in the capital of 745695 which are beneficially
owned and controlled by the Company;
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8
(ii) have the exclusive right to dispose of the Purchased Shares as
herein provided and such disposition will not violate,
contravene, breach or offend against or result in any default
under any indenture, mortgage, lease, agreement, instrument,
charter or by-law provision, statute, regulation, order,
judgment, decree or law to which the Vendors are a party or
subject or by which the Vendors are bound or affected; and
(iii) are the holders of record of all the Purchased Shares, free
and clear of any liens, charges, encumbrances or rights of
others (other than the rights of the Purchaser hereunder) and
no Person (other than the Purchaser hereunder) has any
agreement, option or any rights capable of becoming an
agreement or option for the acquisition of the Purchased
Shares;
(d) Licences, Registrations and Compliance - The Company and the
Subsidiaries are registered, licensed or otherwise qualified as a
corporation to do business in each jurisdiction in which the nature of
their businesses or the property owned or leased by them makes such
registration, licensing or other qualification necessary, and such
registrations, licences or qualifications (as the case may be) are in
good standing. Neither the Company nor any of the Subsidiaries are in
violation of any applicable laws, regulations, orders, rules, decrees
or ordinances. The Company and the Subsidiaries have offices in the
Provinces of Ontario, New Brunswick and British Columbia and only at
the addresses listed in Schedule "Q" hereto. Neither the Company nor
any Subsidiary have in the past three years had offices at addresses
other than those listed in Schedule "Q" hereto;
(e) Organization and Valid Existence: the Company - The Company is a
corporation duly amalgamated and organized and is validly existing
under the laws of Canada, and has all necessary corporate power,
authority and capacity to own and lease its property and assets
(including, without limitation, the property and assets shown in the
Financial Statements) and to carry on the Business as presently
conducted by it;
(f) Subsidiaries - The Company has no subsidiaries other than the
Subsidiaries listed in Schedule "C" hereto. Each such Subsidiary is
duly incorporated or continued and organized and validly exists under
the laws of its jurisdiction of incorporation or continuance, as the
case may be. The respective jurisdictions of incorporation or
continuance, as the case may be, and the shares in the capital of such
Subsidiaries issued to or in favour of the Company and/or any other
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9
shareholder thereof are as set forth in Schedule "C". All such shares
have been duly and validly issued, are outstanding as fully paid and
non-assessable shares in the capital of the respective Subsidiaries and
are owned beneficially and of record by the respective shareholders,
free and clear of any liens, charges, encumbrances or rights of others.
No options, warrants or other rights to purchase shares or other
securities of any of the Subsidiaries have been authorized or agreed to
be issued or are outstanding;
(g) Capitalization - The authorized and issued share capital of the Company
is as set forth in Schedule "B" hereto. All such issued share capital
has been duly and validly issued and is outstanding as fully paid and
non-assessable shares in the capital of the Company. No options,
warrants or other rights to purchase shares or other securities of the
Company have been authorized or agreed to be issued or are outstanding;
(h) Financial Statements - The Financial Statements are true and correct
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of the preceding
period. The Financial Statements present a true and complete statement
of the consolidated financial condition and assets and liabilities of
the Company and its Subsidiaries as at July 31, 1996 and the other
statement comprising the Financial Statements, being the statement of
income and retained earnings, accurately sets forth the results of the
operations of the Company and its Subsidiaries on a consolidated basis
throughout the period covered thereby;
(i) Absence of Undisclosed Liabilities - Except to the extent reflected or
reserved against in the Financial Statements or incurred subsequent to
the date thereof and disclosed in Schedule "D" and except as incurred
in the ordinary and usual course of the Business of the Company or its
Subsidiaries, neither the Company nor any Subsidiary has any
outstanding indebtedness or any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) of a nature customarily
reflected or reserved against in a balance sheet (including the notes
thereto) prepared in accordance with generally accepted accounting
principles;
(j) Net Worth - The consolidated tangible net worth (paid-up capital plus
earned and contributed surpluses) of the Company and its Subsidiaries,
calculated in accordance with generally accepted accounting principles
(applied on a basis consistent with those applied in connection with
the Financial Statements) is not less than the consolidated tangible
net worth of the Company and its Subsidiaries as at the date of, and as
set forth in the Financial Statements;
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10
(k) Tax Matters - Each of the Company and each Subsidiary has duly and
timely filed all federal, provincial and local income, franchise,
capital, sales or use, excise, fuel, property or other tax returns or
reports required by any law or regulation to be filed by it and has
duly paid all taxes, assessments and reassessments, and all other
taxes, duties, governmental charges, penalties, interest and fines due
and payable by it on or before the date hereof, save and except that,
(i) the tax return for Sonoptic Technologies Inc. for the fiscal
year ended September 30, 1995 was filed in September, 1996;
(ii) the tax liability of the Company for the fiscal year ended
September 30, 1995 has not been paid, given that the said tax
liability will be offset by a loss carry back based on the tax
return filed for the Company for the six month period ended
March 31, 1996, all of which will result in a net refund to
the Company; and
(iii) the tax liability of 745695 for the fiscal year ended
September 30, 1995, being approximately $2,000.00, has not yet
been paid.
Neither the Company nor any Subsidiary has received from any authority
any assessment, reassessment or notice of underpayment of any taxes or
other charges and no such notice is reasonably to be expected.
The most recent year for which the federal income tax liability of the
Company and the Subsidiaries has been reviewed and finally determined
by the applicable authorities is its fiscal year ended September 30,
1995. 745695 has not yet been assessed by the Province of Ontario for
the fiscal year ended September 30, 1995. There is no misrepresentation
that is attributable to neglect, carelessness, wilful default or fraud
in tax returns previously filed.
No consents extending or waiving the time limited for reassessment of
any taxes, duties, governmental charges, penalties, interest or fines,
or any statutes of limitations related thereto have been filed with
respect to the Company or any Subsidiary for any fiscal year.
Each of the Company and the Subsidiaries has withheld from each payment
made to any of its officers, former officers, directors, former
directors, and employees and former employees the amount of all taxes
and other deductions (including without limitation, income taxes,
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11
unemployment, disability and other required taxes and contributions)
required to be withheld and has paid the same together with the
employer's share of same, if any (to the extent required to be paid so
no such amount is past due), to the proper tax or other receiving
officers within the prescribed times and has filed, in complete and
accurate form, all information and other returns required pursuant to
any applicable legislation within the prescribed times.
The provision made for taxes included in the Financial Statements is
sufficient for the payment of all accrued and unpaid federal,
provincial and local income, franchise, capital, sales or use, excise,
fuel, property or other taxes, assessments and reassessments, duties,
governmental charges, penalties, interest and fines of, and payable by,
the Company and the Subsidiaries whether or not disputed, for the
period ended on such date and for all periods prior thereto.
(l) Absence of Changes - Since the date of the Financial Statements there
has not been:
(i) any material change in the condition or operations of the
business, assets or financial condition of the Company or its
Subsidiaries other than changes in the ordinary and normal
course of business, none of which has been materially adverse;
or
(ii) any damage, destruction or loss, labour trouble or other
event, development or condition of any character (whether or
not covered by insurance) materially and adversely affecting
the business, assets, properties or future prospects of the
Company or its Subsidiaries;
(m) Absence of Unusual Transactions - Since the date of the Financial
Statements neither the Company nor any Subsidiary has:
(i) transferred, assigned, sold or otherwise disposed of any of
the assets shown in the Financial Statements or cancelled any
debts or claims except in each case in the ordinary and usual
course of business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except those listed in Schedule "D" hereto and
except unsecured current obligations and liabilities incurred
in the ordinary and normal course of business;
(iii) issued or sold any shares in its capital or any warrants,
bonds, debentures or other securities of the Company or any
Subsidiary or issued, granted or delivered any right, option
or other commitment for the issuance of any such shares,
warrants, bonds, debentures or other securities;
<PAGE>
12
(iv) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than
liabilities included in the Financial Statements and
liabilities incurred since the date thereof in the ordinary
and normal course of business;
(v) declared or made any payment of any dividend or other
distribution in respect of any shares in its capital or
purchased or redeemed any such shares thereof or effected any
subdivision, consolidation or reclassification of any such
shares;
(vi) suffered any operating loss or any extraordinary loss, or
waived any rights of substantial value, or entered into any
commitment or transaction not in the ordinary and usual course
of business where such loss, rights, commitment or transaction
is or would be material in relation to the Company or the
Subsidiary, as the case may be;
(vii) amended or changed or taken any action to amend or change its
articles or by-laws;
(viii) made any general wage or salary increases in respect of
personnel which it employs;
(ix) except as disclosed in Schedule "E" hereto, mortgaged,
pledged, subjected to lien, granted a security interest in or
otherwise encumbered any of its assets or property, whether
tangible or intangible; or;
(x) authorized or agreed or otherwise become committed to do any
of the foregoing;
(n) Title to Properties - Except as disclosed in the Financial Statements
or in Schedule "E" hereto, the Company and its Subsidiaries have good
and marketable title to all their respective properties, interests in
properties and assets, real and personal, including without limitation
those reflected in the Financial Statements or acquired since the date
of the Financial Statements (except as since transferred, sold or
otherwise disposed of in the ordinary and usual course of business),
free and clear of all mortgages, pledges, liens, encumbrances or other
charges of any kind or character;
<PAGE>
13
(o) Leased Equipment - Schedule "F" sets forth a true and complete list of
all equipment, other personal property and fixtures in the possession
or custody of the Company and/or its Subsidiaries which, as of the date
hereof, is leased or held under licence or similar arrangement and of
the leases, licenses, agreements and other documentation relating
thereto.
(p) Collectibility of Accounts Receivable - The accounts receivable shown
in the Financial Statements or acquired subsequent to the date thereof
and prior to the date of this Agreement by the Company or its
Subsidiaries either have been collected or are good and collectible
within 120 days of the date the invoice in respect thereof was issued
at the aggregate recorded amounts thereof (subject to no defence,
counterclaim or set off), except to the extent of any reserves provided
for such accounts in the Financial Statements as adjusted in the
ordinary and usual course of business, and except for an account
rendered to Hascom Television Distributors Limited in May/June of 1996
in the amount of $47,294.00, which amount shall be paid as follows:
(i) $5,777.76 on September 1, 1996;
(ii) $5,777.78 on each of December 1, 1996, March 1, 1997, June 1,
1997, September 1, 1997, December 1, 1997, March 1, 1998, June
1, 1998 and September 1, 1998;
(q) Lease of Real Property - Neither the Company nor any Subsidiary is a
party to or bound by any leases of real property other than those
referred to in Schedule "G" hereto, and all interests held by the
Company and its Subsidiaries as lessees under such leases are free and
clear of any and all liens, charges and encumbrances of any nature and
kind whatsoever.
All rental and other payments required to be paid by the Company or any
Subsidiary, as lessees, pursuant to such leases have been duly paid.
Such leases are in full force and effect without amendment thereto and
neither the Company nor any Subsidiary is otherwise in default in
meeting its obligations contained in any such lease, and none of the
lessors thereto are in default in meeting their obligations contained
in any such lease;
(r) Real Property - Particulars of all real property owned by the Company
and its Subsidiaries are set forth in Schedule "H" hereto, and from the
date hereof to and including the Closing Date the Purchaser or its
agents shall, during normal business hours and upon reasonable notice,
be entitled, at the Purchaser's own cost and expense, to attend upon
and inspect the said real property and the buildings and improvements
located thereon;
<PAGE>
14
(s) Use - The buildings and improvements located on the real property
referred to in paragraph (r) of this Section 3.1, the operation and
maintenance thereof as now operated and maintained and the purposes for
which they are presently being used, are not in breach in any material
respect of any statute, by-law, ordinance, regulation, covenant,
restriction or official plan (collectively the "Laws"), none of such
buildings and improvements encroaches upon any other lands and there
are no restrictive covenants or Laws which in any restrict or prohibit
the use of the said buildings, improvements and real property for the
purposes for which they are presently being used.
All buildings and other structures located on the real property
referred to in paragraph (r) of this Section 3.1 are not now and have
never been insulated with urea formaldehyde foam insulation, nor do
such buildings or structures contain any aluminum wiring or friable
asbestos or any other substance containing a type of asbestos or
asbestos product which is a hazardous product, toxic or priority
substance or any other substance deemed hazardous or regulated by any
laws or regulations of Canada or the Province of Ontario in force at
the date hereof;
(t) Condition of Assets - All material tangible assets of the Company and
its Subsidiaries used in or in connection with the Business are in good
condition, repair and (where applicable) proper working order,
reasonable wear and tear excepted;
(u) Distribution Rights Agreements - Annexed hereto as Schedule "I" is the
standard form of distribution rights agreement entered into by the
Company with its suppliers, wherein the Company obtains from the said
suppliers the right to distribute their video programs, and none of the
distribution rights agreements entered into by the Company with the
said suppliers and in existence at the date hereof varies materially
from the standard form annexed hereto as Schedule "I". Also set forth
in Schedule "I" hereto is a complete list of all suppliers who have
executed a distribution rights agreement with the Company, including
the number of video titles covered thereby and such other particulars
as are therein set forth;
(v) Employment Contracts - Except as set out in Schedule "J" hereto,
neither the Company nor the Subsidiaries have any written contracts of
employment with any employees or any oral contracts of employment with
any employees, and neither the Company nor the Subsidiaries have any
employees who cannot be dismissed on not more than four months' notice
without further liability, save and except David Stock. There is set
<PAGE>
15
forth in Schedule "J" hereto the names and titles of all the directors,
officers and employees of the Company and each Subsidiary, together
with particulars of the material terms and conditions of employment or
engagement of such persons, including rates of remuneration, benefits,
positions held and date of commencement of employment. The employment
records of the Company and each Subsidiary are true, complete and
correct;
Also set forth in Schedule "J" hereto is a complete list of all
independent contractors, sub-contractors, and agents which are
presently engaged by the Company or the Subsidiaries pursuant to
contract, understanding or arrangement, written or oral, together with
particulars of the material terms and conditions of the contract,
understanding or arrangement.
Neither the Company nor the Subsidiaries have any union or collective
labour, pension, deferred profit sharing, stock option or other similar
agreement and no attempts are being made by any trade union or employee
association to organize or represent any employees of the Company or
the Subsidiaries.
There is not now any circumstances or conduct which could result in the
filing of an unfair labour practice complaint; any such complaints
previously raised and currently ongoing and the current status thereof
are particularized in Schedule "L". No contracts, agreements or
arrangements with any employees or unions shall be entered into by the
Company or the Subsidiaries between the date hereof and the Closing
Date except with the prior written consent of the Purchaser. As well,
between the date hereof and the Closing Date there will be no material
increase in the compensation (monetary or otherwise) of the employees
of the Company or the Subsidiaries without the prior written consent of
the Purchaser;
(w) Material Contracts - Except for the liens, charges and encumbrances
listed in Schedule "E", the equipment and other personal property
leases and agreements referred to in Schedule "F", the real property
leases listed in Schedule "G", the employment contracts listed in
Schedule "J" and the contracts and agreements listed in Schedule "K",
neither the Company nor any Subsidiary is a party to or bound by any
material contract or commitment whether oral or written. The contracts
and agreements listed in Schedule "K" are all in full force and effect
unamended and no material default exists in respect thereof on the part
of any of the parties thereto. Such contracts and agreements include
all the presently outstanding material contracts entered into by the
Company and its Subsidiaries in the course of carrying on their
respective businesses and all quotations, orders or tenders for such
contracts which remain open for acceptance. The Company and its
Subsidiaries have the capacity, including the necessary personnel,
equipment and supplies, to perform all their obligations thereunder;
<PAGE>
16
(x) Absence of Guarantees - Neither the Company nor any Subsidiary has
given or agreed to give, or is a party to or bound by, any guarantee of
indebtedness or other obligations of third parties or any other
commitment by which the Company or such Subsidiary is, or is
contingently, responsible for such indebtedness or other obligation;
(y) Absence of Conflicting Agreements - Neither the Company nor any
Subsidiary is a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or by-law
provision, statute, regulation, order, judgment, decree or law which
would be violated, contravened, breached by or under which default
would occur, as a result of the execution and delivery of this
Agreement or the consummation of any of the transactions provided for
herein;
(z) Litigation - Except as disclosed in Schedule "L" hereto, there is no
suit, action, litigation, arbitration proceeding, governmental
proceeding or hearing before an administrative tribunal, including
appeals and applications for review, in progress, pending or threatened
against or relating to the Company or its Subsidiaries or affecting its
or their properties or business which, if determined adversely to the
Company or its Subsidiaries, might materially and adversely affect the
properties, business, future prospects or financial condition of the
Company or its Subsidiaries. Except as shown in the said Schedule,
there is not presently outstanding against the Company or any
Subsidiary any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator.
(aa) Bank Accounts, etc. - There is set forth in Schedule "N" hereto the
name of each bank or other depository in which the Company and each
Subsidiary maintains any bank account, trust account or safety deposit
box and the names of all persons authorized to draw thereon or who have
access thereto;
(bb) Residence of the Vendors - The Vendors are not non-residents of Canada
for the purposes of the Income Tax Act (Canada);
(cc) Insurance - The Company and each Subsidiary maintain such policies of
insurance, issued by responsible insurers, as are appropriate to their
Business, property and assets, in such amounts and against such risks
as are customarily carried and insured against by owners of comparable
businesses, properties and assets; all such policies of insurance are
in full force and effect and neither the Company nor any Subsidiary is
in default, whether as to the payment of premium or otherwise, under
the terms of any such policy.
<PAGE>
17
Schedule "M" hereto sets forth a true and complete list of all such
insurance policies presently maintained by the Company and the
Subsidiaries together with a brief description of each such policy
including the type of policy, name of insurer, coverage limits,
expiration dates and annual premiums;
(dd) Intellectual and Industrial Property - Attached as Schedule "O" is a
true and correct schedule (including the appropriate registration
numbers and expiration dates, if applicable) identifying all patents,
patent rights or licences, patent applications, trade marks, trade mark
registrations and applications, trade mark rights, trade names, trade
secrets, service marks and applications therefore, copyrights and
copyright registrations and copyright applications used in whole or in
part in or required for the proper carrying on of the Business
(collectively, the "Trade Marks"). The Trade Marks, both domestic and
foreign, if any, are validly and beneficially owned by the Company or
the Subsidiaries (as the case may be) with the right to use the same,
and are in good standing and duly registered in all appropriate offices
in Canada, Ontario, New Brunswick and British Columbia in order to
preserve the rights thereof and thereto. The Company or the
Subsidiaries or any of them (as the case may be) own or have the right
to use the Trade Marks, and all intellectual and industrial property
and technology necessary to carry on the Business in the ordinary and
normal course and have taken all reasonable precautions in Canada,
Ontario, New Brunswick and British Columbia to protect the Trade Marks,
and all such intellectual and industrial property and technology. The
operation of the Business does not infringe upon the intellectual or
industrial property or technology of any other Person;
(ee) Vehicular Equipment - Schedule "P" contains a list of all vehicular
equipment owned or leased by the Company and its Subsidiaries. Such
vehicular equipment is in roadworthy condition and is capable of
satisfying the inspection requirements and performance standards
prescribed by the Highway Traffic Act (Ontario) and the Regulations
thereto, as may be amended from time to time, for its particular type
or class;
(ff) Copies of Agreements, etc. - True, correct and complete copies of all
mortgages, leases, agreements, instruments and other documents listed
in Schedules "E", "F", "G", "I", "J", "K" and "M" have been delivered
to the Purchaser;
<PAGE>
18
(gg) Corporate Records - The corporate records and minute books of the
Company and each of the Subsidiaries contain complete and accurate
copies of all by-laws of such corporations and minutes of all meetings
and resolutions of the directors and shareholders of such corporations;
all such meetings were duly called and held, all such by-laws and
resolutions were duly passed and the share certificate books, registers
of shareholders, registers of transfers and registers of directors of
the Company and each of the Subsidiaries are complete and accurate in
all material respects;
(hh) Books of Account - The books and records of account of the Company and
each of the Subsidiaries fairly and correctly set out and disclose in
all material respects and in accordance with generally accepted
accounting principles, consistently applied, the financial position of
the Company and each of the Subsidiaries as of the date hereof and all
material financial transactions of the Company and each of the
Subsidiaries have been accurately recorded in such books and records;
(ii) Third Party Approvals - There are no approvals, consents or waivers
required to be obtained or applications required to be filed from or
with governmental authorities in Canada or from any other Person
whatsoever, including pursuant to any contracts containing prohibitions
to the within transactions, in order to permit the transactions
contemplated herein or to preserve the Business and/or assets of the
Company and/or the Subsidiaries;
(jj) Compliance with Environmental Laws - The Company, the Subsidiaries and
the Business are in compliance with and have always been in compliance
with all, and do not violate, and have not violated any, applicable
federal, provincial, municipal or local laws, regulations, orders,
governmental decrees, ordinances or any and all other legislation or
regulatory instruments with respect to environmental, health or safety
matters (collectively, "Environmental Laws").
The Company and the Subsidiaries have never been charged with or
convicted of any offence under Environmental Laws.
<PAGE>
19
None of the Company or the Subsidiaries is required to hold any
licence, permit or approval under any Environmental Laws for any reason
whatsoever (including in connection with the operation of the
Business). None of the Company or the Subsidiaries have received any
notification pursuant to any Environmental Laws that any work, repairs,
construction or capital expenditures are required to be made in respect
of any of the assets owned or used by them or any of them as a
condition of continued compliance with any Environmental Laws;
None of the Company or the Subsidiaries have received any notification
pursuant to any Environmental Laws that any work, repairs, construction
or capital expenditures are required to be made in respect of any of
the assets owned or used by them or any of them as a condition of
continued compliance with any Environmental Laws;
(kk) Employment Equity - None of the Company or the Subsidiaries have
received notice of any proposed or pending compliance review in respect
of employment equity and no sanctions have been imposed on any of them
for failing to honour their commitment to employment equity;
(ll) 1113659 Ontario Ltd. ("1113659") - 1113659 is a corporation duly
incorporated and validly existing under the laws of Ontario. 1113659
has no assets or liabilities and has never in the past carried on
business. At present, the authorized capital of 1113659 consists of an
unlimited number of Class "A" special shares, an unlimited number of
Class "B" special shares and an unlimited number of common shares, of
which none of the Class "A" special shares, none of the Class "B"
special shares and 1,000 of the common shares (and no more) have been
duly issued and are outstanding as fully paid and non-assessable
shares. In respect of the said 1,000 issued and outstanding common
shares, 660 are beneficially owned and controlled by Connolly-Daw, 300
are beneficially owned and controlled by Cornpepper Productions Ltd.
and 40 are beneficially owned and controlled by Jackson L. Chercover.
No options, warrants or other rights to purchase shares or other
securities of 1113659 have been authorized or agreed to be issued or
are outstanding. The Company has made arrangements to acquire, at a
cost of $1,000.00, 50% of the issued and outstanding common shares of
1113659 on or before October 11, 1996, with the remaining 50% being
acquired by International Tele-Film Enterprises Ltd. ("International")
at the same time, with the net result being that, as soon as the said
share transfers have been completed, 50% of the issued and outstanding
common shares of 1113659 will be beneficially owned and controlled by
the Company, with the remaining 50% being beneficially owned and
controlled by International;
(mm) Full Disclosure - None of the foregoing representations, warranties and
statements of fact contains any untrue statement of material fact or
omits to state any material fact necessary to make any such statement
or representation not misleading to a prospective purchaser of the
Purchased Shares seeking full information as to the Company, the
Subsidiaries and 1113659 and their respective properties, business and
affairs.
<PAGE>
20
3.2 Representations and Warranties of the Purchaser - The Purchaser hereby
represents and warrants to the Vendors as follows and acknowledges that the
Vendors are relying on such representations and warranties in connection with
the transactions contemplated by this Agreement:
(a) Organization and Valid Existence - The Purchaser is a corporation duly
amalgamated and organized and is validly existing under the laws of
Canada and has all necessary corporate power, authority and capacity to
enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereunder have been duly authorized by
all necessary corporate action on the part of the Purchaser;
(b) Enforceability of Obligations - This Agreement constitute a valid and
binding obligation of the Purchaser enforceable against it in
accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the court
from which they are sought;
(c) Residence of the Purchaser - The Purchaser is not a non-Canadian within
the meaning of the Investment Canada Act.
3.3 No Broker - Each of the Parties represents and warrants to the others that
all negotiations relating to this Agreement and the transactions contemplated
hereby have been carried on between them directly and without the intervention
of any other party in such manner as to give rise to any valid claims against
any of the Parties for a brokerage commission, finder's fee or other like
payment.
3.4 Non-Waiver - No investigations made by or on behalf of the Purchaser at any
time shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by the Vendors herein or pursuant
hereto.
3.5 Nature and Survival of Representations, Warranties and Covenants - All
statements contained in any certificate or other instrument delivered by or on
behalf of a Party pursuant to or in connection with the transactions
contemplated by this Agreement shall be deemed to be made by such Party
hereunder. All representations, warranties, covenants and agreements herein
contained on the part of each of the Parties shall survive the Closing, the
execution and delivery hereunder of share or security transfer instruments and
other documents of title to the Purchased Shares and the payment of the
consideration therefor, provided that:
(a) the representations and warranties contained in Section 3.1 (except
with respect to tax matters), Section 3.2 and Section 3.3 shall only
survive for a period of three (3) years from the Closing Time (such
time hereinafter called the "Warranty Expiry Time"); and
(b) the representations and warranties in respect of tax matters relating
to fiscal years:
<PAGE>
21
(i) in respect of which the Canadian Minister of National Revenue
has the right to assess, reassess or make additional
assessments pursuant to the Income Tax Act (Canada) as amended
from time to time; or
(ii) in respect of which any taxation authority of competent
jurisdiction administering any tax legislation pursuant to
which any of the Company or the Subsidiaries is required to
report its income or file an income tax return has the right
to assess, reassess or make additional assessments pursuant to
the taxation legislation of such jurisdiction,
shall survive until the date following the day that the rights of
assessment or reassessment referred to in this sentence cease (such
time hereinafter called the "Tax Warranty Expiry Time").
If no claim has been made against a Party hereto with respect to any
incorrectness or misrepresentation in any such representation or warranty prior
to the Warranty Expiry Time or within thirty (30) days of the expiry of the Tax
Warranty Expiry Time, such Party shall have no further liability hereunder with
respect to such representation and warranty.
ARTICLE 4
CONDITIONS PRECEDENT TO THE PERFORMANCE
BY THE PURCHASER AND THE VENDORS OF
THEIR OBLIGATIONS UNDER THIS AGREEMENT
4.1 Purchaser's Conditions - The obligation of the Purchaser to complete the
purchase of the Purchased Shares hereunder shall be subject to the satisfaction
of, or compliance with, in all materials respects, at or before the Closing
Time, each of the following conditions precedent (each of which is hereby
acknowledged to be inserted for the exclusive benefit of the Purchaser and may
be waived by it in whole or in part):
(a) Truth and Accuracy of Representations of Vendors at the
Closing Time - All of the representations and warranties of
the Vendors made in or pursuant to this Agreement, including,
without limitation, the representations and warranties made by
the Vendors and set forth in Sections 3.1 and 3.3 hereof,
shall be true and correct as at the Closing Time and with the
same effect as if made at and as of the Closing Time (except
as such representations and warranties may be affected by the
occurrence of events or transactions expressly contemplated
and permitted hereby or by transactions in the ordinary and
<PAGE>
22
normal course of business), and the Purchaser shall have
received a certificate from a duly authorized senior officer
of each of the Vendors and from the Connollys confirming the
truth and correctness of the representations and warranties of
the Vendors and the Connollys contained herein;
(b) Performance of Obligations - The Vendors shall have performed
or complied with, in all respects, all of their obligations,
covenants and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating
to the due authorization and completion of the sale and
purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection
with the performance by the Vendors of their obligations under
this Agreement shall be satisfactory to the Purchaser and
Purchaser's Counsel and the Purchaser shall have received
copies of all such documentation or other evidence as it may
reasonably request in order to establish the consummation of
the transactions contemplated hereby and the taking of all
corporate proceedings in connection therewith in compliance
with these conditions, in form (as to certification and
otherwise) and substance satisfactory to the Purchaser and
Purchaser's Counsel;
(d) Opinion of Counsel for the Vendors and the Company - The
Purchaser shall have received from Vendors' Counsel an opinion
dated the Closing Date, in form and substance satisfactory to
Purchaser's Counsel, confirming such matters in regard to the
Vendors, the Company, the Subsidiaries and the Business as are
customary in transactions of this nature;
(e) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of any Persons or
governmental authorities in Canada or elsewhere (or
registrations, declarations, filings or recordings with any
such authorities) required in connection with the completion
of any of the transactions contemplated by this Agreement, the
execution of this Agreement, the Closing or the performance of
any of the terms and conditions hereof, shall have been
obtained on or before the Closing Time;
The Vendors shall have obtained and delivered to the Purchaser
written consents, in form and substance satisfactory to the
Purchaser, to the transactions contemplated herein which are
<PAGE>
23
required pursuant to the personal property leases and
agreements referred to in Schedule "F", the real property
leases referred to in Schedule "G", the employment contracts
referred to in Schedule "J" and the contracts and agreements
listed in Schedule "K", including, without limiting the
generality of the foregoing, such acknowledgements and
confirmations of good standing from the lessors in respect of
the real property leases referred to in Schedule "G" hereto as
may be reasonably requested by the Purchaser;
(f) Directors and Officers of the Company and Subsidiaries - The
board of directors of the Company and each Subsidiary at the
Closing Time shall consist of persons nominated by the
Purchaser and there shall have been delivered to the Purchaser
on or before the Closing Time the resignations of such persons
as the Purchaser shall direct who are presently directors
and/or officers of the Company and each Subsidiary from such
positions and duly executed comprehensive releases from each
such person and from the Vendor of all their claims
respectively, against the Company and each Subsidiary, except
for any claims for current unpaid remuneration;
(g) Management Agreement - Connolly-Daw shall have entered into a
management agreement with the Company upon terms satisfactory
to the Purchaser, under which Connolly-Daw shall provide the
services of the Connollys to the Company for a period of 11
months following Closing;
(h) Indemnity - Connolly-Daw and each of the Connollys shall have
entered into an indemnity agreement in favour of the Company
upon terms and conditions satisfactory to the Purchaser, in
respect of the management agreement referred to in Subsection
4.1(g) hereof;
(i) Employment Agreements - Each of the Connollys shall have
entered into an employment agreement with the Company upon
terms satisfactory to the Purchaser, under which the Connollys
shall be employed by the Company for a period of two years
commencing on September 1, 1997;
(j) Option Agreements - Each of the Vendors shall have entered
into an option agreement with the Purchaser and NTN Canada,
Inc. upon terms satisfactory to the Purchaser and NTN Canada,
Inc., relating to the common shares in the capital of NTN
Canada, Inc. referred to in the promissory notes annexed as
Schedules "R" and "S" hereto respectively;
<PAGE>
24
(k) Non-Competition, etc. - There shall have been delivered to the
Purchaser from the Connollys an executed non-competition,
non-solicitation and confidentiality agreement, which
agreement shall provide that, for a period of 35 months
(subject to an increase to 47 months in the case of Douglas
Connolly in the event of certain specified circumstances) from
the Closing, the Connollys shall not, either alone or in
conjunction with any individual, firm, corporation,
association or other entity (except for the Company, the
Subsidiaries, the Purchaser or their affiliates), whether as
principal, agent, shareholder or in any other capacity
whatsoever;
(i) carry on, be engaged in, concerned with or interested
in, or give financial assistance to, directly or
indirectly, any undertaking which is in whole or in
part competitive with any of the businesses carried
on by the Company and its Subsidiaries, or any of
them, within the respective territories in which such
businesses are then carried on (except for any equity
share investment in a public company whose shares are
listed on a recognized stock exchange where such
share investment does not in the aggregate exceed
five per cent (5%) of the issued equity shares of
such company);
(ii) attempt to solicit any suppliers, employees or
customers away from the Company or any Subsidiary;
(iii) take any act as a result of which the relations
between the Company or its Subsidiaries and its or
their customers, employees or others may be impaired
or which may otherwise be detrimental to the
Business;
(iv) divulge to any Person any name, address or
requirement of any customer of the Company or its
Subsidiaries; or
(v) divulge to any Person any process, method or device
of the Business or any other confidential or
financial information in respect of the Company or
its Subsidiaries.
(l) No Fire Damage - No substantial damage by fire or other hazard
to the assets of the Company shall have occurred from the date
hereof to the Closing Date; and
<PAGE>
25
(m) Litigation - On the Closing Date, there shall be no
litigation, governmental investigation or proceeding pending
or threatened for the purpose of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is
improper.
4.2 Vendors' Conditions - The obligations of the Vendors to complete the sale of
the Purchased Shares hereunder shall be subject to the satisfaction of or
compliance with, at or before the Closing Time, each of the following conditions
precedent (each of which is hereby acknowledged to be inserted for the exclusive
benefit of the Vendors and may be waived by them in whole or in part):
(a) Truth and Accuracy of Representations of Purchaser at Closing
Time - All of the representations and warranties of the
Purchaser made in or pursuant to this Agreement, including,
without limitation, the representations and warranties made by
the Purchaser and set forth in Sections 3.2 and 3.3 hereof,
shall be true and correct as at the Closing Time and with the
same effect as if made at and as of the Closing Time and the
Vendors shall have received a certificate from a duly
authorized senior officer of the Purchaser confirming the
truth and correctness of the representations and warranties of
the Purchaser contained herein;
(b) Performance of Obligations - The Purchaser shall have
performed or complied with, in all respects, all of its
obligations, covenants and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating
to the due authorization and completion of the sale and
purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection
with the performance by the Purchaser of its obligations under
this Agreement shall be satisfactory to the Vendors and
Vendors' Counsel and the Vendors shall have received copies of
all such documentation or other evidence as they may
reasonably request in order to establish the consummation of
the transactions contemplated hereby and the taking of all
corporate proceedings in connection therewith in compliance
with these conditions, in form (as to certification and
otherwise) and substance satisfactory to the Vendors and
Vendors' Counsel;
(d) Management Agreement - The Company shall have entered into a
management agreement with Connolly-Daw upon terms satisfactory
to Connolly-Daw, under which Connolly-Daw shall provide the
services of the Connollys to the Company for a period of 11
months following Closing;
<PAGE>
26
(e) Indemnity - The Purchaser shall have entered into an indemnity
agreement in favour of Connolly-Daw upon terms and conditions
satisfactory to Connolly-Daw, in respect of the management
agreement referred to in Subsection 4.2(d) hereof;
(f) Employment Agreements - The Company shall have entered into an
employment agreement with each of the Connollys upon terms
satisfactory to the Connollys, under which the Connollys shall
be employed by the Company for a period of two years
commencing on September 1, 1997;
(g) Indemnities - The Purchaser shall have entered into a separate
indemnity agreement in favour of each of the Connollys upon
terms and conditions satisfactory to the Connollys, in respect
of the employment agreements referred to in Subsection 4.2(f)
hereof;
(h) Option Agreements - The Purchaser and NTN Canada, Inc. shall
have entered into an option agreement with each of the
Vendors, upon terms satisfactory to the Vendors, relating to
the common shares in the capital of NTN Canada, Inc. referred
to in the promissory notes annexed as Schedules "R" and "S"
hereto respectively;
(i) Undertakings - NTN Canada, Inc. shall have executed and
delivered an undertaking in favour of each of the Vendors upon
terms and conditions satisfactory to the Vendors, in respect
of the common shares in the capital of NTN Canada, Inc.
referred to in the promissory notes annexed as Schedules "R"
and "S" hereto respectively;
(j) Loans - The Purchaser shall have loaned to the Company the sum
of $400,000.00 upon terms and bearing such rate of interest as
shall be satisfactory to the Company, approximately
$200,000.00 of which funds shall be used by the Company to
retire its indebtedness with Cornpepper Productions Ltd., with
the balance being applied by the Company against its
outstanding indebtedness with the Royal Bank of Canada; and
<PAGE>
27
(k) Litigation - On the Closing Date, there shall be no
litigation, governmental investigation or proceeding pending
or threatened for the purpose of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is
improper.
ARTICLE 5
OTHER COVENANTS OF THE PARTIES
5.1 Conduct of Business Prior to Closing - During the period from the date of
this Agreement to the Closing Time, the Vendors will cause the Company and its
Subsidiaries to do the following:
(a) Conduct Business in Ordinary Course - Except as otherwise
contemplated or permitted by this Agreement, to conduct their
respective businesses in the ordinary and normal course
thereof and not, without the prior written consent of the
Purchaser, to enter into any transaction which if effected
before the date of this Agreement would constitute a material
breach of the representations, warranties or agreements
contained herein;
(b) Continue Insurance - To continue in force all existing
policies of insurance presently maintained by the Company and
its Subsidiaries as set forth on Schedule "M" hereto;
(c) Perform Obligations - To comply with all laws affecting the
operation of the Business and to pay all required taxes and
tax installments; and
(d) Prevent Certain Changes - Not, without the prior written
consent of the Purchaser, to take any of the actions, do any
of the things or perform any of the acts described in
paragraphs (i) to (x) inclusive of Subsection 3.1(m).
5.2 Access for Investigation - The Vendors shall cause the Company and its
Subsidiaries to permit the Purchaser and its employees, agents, counsels and
accountants or other representatives, between the date hereof and the Closing
Time, without interference to the ordinary conduct of the Business of the
Company and the Subsidiaries and at the Purchaser's sole cost and expense, to
have free and unrestricted access during normal business hours to the premises
and to all books, accounts, records and other data of the Company and the
Subsidiaries (including, without limitation, all corporate, accounting and tax
records of the Company and the Subsidiaries) and to the properties and assets of
the Company and the Subsidiaries and to furnish with respect to the business,
<PAGE>
28
properties and assets of the Company and the Subsidiaries as the Purchaser shall
from time to time reasonably request to enable confirmation of the matters
warranted in Section 3.1 hereof. Without limiting the generality of the
foregoing, it is agreed that the accounting representatives of the Purchaser
shall be afforded ample opportunity to make a full investigation of all aspects
of the financial affairs of the Company and its Subsidiaries. Until the Closing
Time, and in the event of the termination of this Agreement without consummation
of the transactions contemplated hereby, the Purchaser will use its best efforts
to keep confidential any information (unless readily available from public or
published information or sources) obtained from the Company, any Subsidiary or
the Vendors. If this Agreement is so terminated, promptly after such
termination, all documents, work papers and other written material obtained from
any Person in connection with this Agreement and not theretofore made public
(including all copies thereof), shall be returned to the Person which provided
such material.
5.3 Actions to Satisfy Closing Conditions - Each of the Parties hereby agrees to
take all such actions as are within its power to control, and to use its best
efforts to cause other actions to be taken which are not within its power to
control, so as to ensure compliance with any conditions set forth in Article 4
hereof which are for the benefit of any other Party.
ARTICLE 6
INDEMNIFICATION
6.1 Mutual Indemnifications for Breaches of Warranty, etc. - The Vendors and the
Connollys hereby jointly and severally covenant and agree with the Purchaser,
and the Purchaser hereby covenants and agrees with the Vendors (the Party or
Parties so covenanting and agreeing to indemnify another Party being hereinafter
in this Section 6.1 referred to as the "Indemnifying Party" and the party so to
be indemnified being hereinafter referred to as the "Indemnified Party") to
indemnify and save harmless the Indemnified Party, effective as and from the
Closing Time, from and against any claims, demands, actions, causes of action,
damage, loss, costs, liability or expense (hereinafter in this Article 6 called
"Claims") which may be brought against the Indemnified Party and/or which it may
suffer or incur as a result of, in respect of, or arising out of any material
non-fulfillment of any covenant or agreement on the part of the Indemnifying
Party under this Agreement or any incorrectness in or breach of any
representation or warranty of the Indemnifying Party contained herein or in any
certificate or other document furnished by the Indemnifying Party pursuant
hereto. The foregoing obligation of indemnification in respect of such Claims
shall be
<PAGE>
29
(i) subject to the limitation mentioned in Section 3.5
hereof respecting the survival of the representations
and warranties of the Parties;
(ii) subject to the requirement that the Indemnifying
Party shall, in respect of any Claim made by any
third party, be notified in a timely manner by the
Indemnified Party of all material particulars thereof
and be afforded an opportunity at its sole cost and
expense, to resist, defend and compromise the same;
and
(iii) applicable only to the extent that such Claims, in
the aggregate, exceed $10,000.00.
6.2 Carriage of Action -
(a) In the event that within 10 days after receipt of the notice
referred to in clause (ii) of Section 6.1 hereof, the
Indemnifying Party gives notice to the Indemnified Party that
the Indemnifying Party wishes to dispute the matter in
question, the Indemnifying Party shall have the right to
litigate such matter in the name of the Indemnified Party
using counsel chosen by the Indemnifying Party and the
Indemnifying Party shall also have the right to settle or
compromise such matter in the name of the Indemnified Party;
provided, however, that contemporaneously with such compromise
or settlement the Indemnifying Party shall pay or cause to be
paid to the Indemnified Party, the amount owing under this
indemnity with respect to such matter and provided further
that:
(i) the Indemnifying Party shall furnish security to the
Indemnified Party in respect of any costs or damages
arising in connection with any litigation;
(ii) the Indemnifying Party shall agree to reimburse the
Indemnified Party promptly in respect of all
out-of-pocket expenses of the Indemnified Party in
connection with such litigation or pending
litigation; and
(iii) the Indemnifying Party shall not be entitled to take
any steps which would have the effect of forfeiting
or otherwise terminating any contract, lease or other
agreement, the benefit of which the Indemnified Party
would otherwise be entitled to enjoy.
<PAGE>
30
(b) In the event that the Indemnifying Party does not provide the
notice referred to in Subsection 6.2(a) assuming the defence
of the Claim, the Indemnified Party may defend against such
Claim in such manner as it deems appropriate and may take such
action as may be reasonably prudent in the circumstances to
settle any such Claim.
ARTICLE 7
GENERAL
7.1 Public Notices - Except for disclosures required by law, all public notices
to third parties and all other publicity concerning the transactions
contemplated by this Agreement shall be jointly planned and co-ordinated by the
Vendors and the Purchaser and no Party shall act unilaterally in this regard
without the prior approval of the other of them, such approval not to be
unreasonably withheld.
7.2 Expenses - All costs and expenses (including, without limitation, the fees
and disbursements of legal counsel) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the Party incurring
such expenses.
7.3 Time - Time shall be of the essence hereof.
7.4 Notices - Any notice, direction or other document required or permitted to
be given hereunder or for the purposes hereof (hereinafter in this Section 7.4
called a "notice") to any Party shall be in writing and shall be sufficiently
given if delivered personally, or if sent by prepaid registered mail or if
transmitted by facsimile to such Party:
(a) in the case of a notice to Connolly-Daw at:
Unit 38
775 Pacific Road
Oakville, Ontario
L6L 6M4
Facsimile No.: 905-827-1154
Attention: President
with a copy to Vendors' Counsel at:
Jackson L. Chercover, Q. C.
Barristers & Solicitors
<PAGE>
31
111 Avenue Road
Suite 805
Toronto, Ontario
M5R 3J8
Facsimile No.: 416-925-6811
Attention: Mr. Jackson L. Chercover, Q.C.
(b) in the case of a notice to 1199846 at:
Unit 38
775 Pacific Road
Oakville, Ontario
L6L 6M4
Facsimile No.: 905-827-1154
Attention: President
with a copy to Vendors' Counsel at:
Jackson L. Chercover, Q. C.
Barristers & Solicitors
111 Avenue Road
Suite 805
Toronto, Ontario
M5R 3J8
Facsimile No.: 416-925-6811
Attention: Mr. Jackson L. Chercover, Q.C.
(c) in the case of a notice to the Connollys at:
Unit 38
775 Pacific Road
Oakville, Ontario
L6L 6M4
Facsimile No.: 905-827-1154
with a copy to:
Jackson L. Chercover, Q. C.
Barristers & Solicitors
111 Avenue Road
<PAGE>
32
Suite 805
Toronto, Ontario
M5R 3J8
Facsimile No.: 416-925-6811
Attention: Mr. Jackson L. Chercover, Q.C.
(d) in the case of a notice to the Purchaser at:
14 Meteor Drive
Etobicoke, Ontario
M9W 1A4
Facsimile No.: 416-675-8838
Attention: President
with a copy to Purchaser's Counsel at
Walker, Head
Barristers & Solicitors
Suite 200, 1305 Pickering Parkway
Pickering, Ontario
L1V 3P2
Facsimile No. 905-420-1073
Attention: Mr. Victor A. Sgro
or at such other address as the Party to whom such writing is to be given shall
have last notified the Party giving the same in the manner provided in this
section. Any notice delivered to the Party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on the day
it is so delivered at such address, provided that if such day is not a Business
Day then the notice shall be deemed to have been given and received on the first
Business Day next following such day. Any notice mailed as aforesaid shall be
deemed to have been given and received on the third Business Day following the
date of its mailing. Any notice transmitted by facsimile shall be deemed given
and received on the first Business Day after its transmission. Failure to
transmit timely or adequate notice to Vendor's Counsel or to Purchaser's
Counsel, as the case may be, shall not invalidate, nullify or otherwise
detrimentally affect the provision of same to a Party.
7.5 Assignment - Neither this Agreement nor any rights or obligations hereunder
shall be assignable by any Party without the prior written consent of the other
Parties hereto. Subject thereto, this Agreement shall enure to the benefit of
<PAGE>
33
and be binding upon the Parties and their respective heirs, executors,
administrators and successors (including any successor by reason of amalgamation
of the Purchaser or the Vendors) and permitted assigns.
7.6 Further Assurances - The Parties hereto shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each Party shall provide
such further documents or instruments required by any other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions, whether before or after the Closing.
7.7 Severability - If any covenant or provision of this Agreement is prohibited
in whole or in part in any jurisdiction, such covenant or provision shall, as to
such jurisdiction, be ineffective to the extent of such prohibition without
invalidating the remaining covenants and provisions hereof and shall, as to such
jurisdiction, be deemed to be severed from this Agreement to the extent of such
prohibition.
<PAGE>
7.8 Counterparts - This Agreement may be executed by the Parties in separate
counterparts each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF the Parties have hereunto duly executed this
Agreement.
CONNOLLY-DAW HOLDINGS
INC.
Per: /s/ Wendy Connolly
---------------------------------
President - Wendy Connolly
Per: /s/ Douglas Connolly
---------------------------------
Secretary - Douglas Connolly
1199846 ONTARIO LTD.
Per: /s/ Douglas Connolly
---------------------------------
President - Douglas Connolly
Per: /s/ Wendy Connolly
---------------------------------
Secretary-Treasurer -
Wendy Connolly
SIGNED, SEALED AND DELIVERED )
- in the presence of - )
) /s/ Douglas Connolly
- - ------------------------------ ) ----------------------------
WITNESS ) DOUGLAS CONNOLLY
)
) /s/ Wendy Connolly
- - ------------------------------ ) ----------------------------
WITNESS ) WENDY CONNOLLY
NTN INTERACTIVE NETWORK INC.
Per: /s/ Peter Rona
---------------------------------
President - Peter Rona
<PAGE>
Exhibit 10.2
NON-NEGOTIABLE PROMISSORY NOTE
Amount: $703,133.00 Date: October 1, 1996
FOR VALUE RECEIVED, the undersigned, NTN INTERACTIVE NETWORK INC. (the
"Debtor") acknowledges itself indebted and promises to pay, in accordance with
the payment schedule referred to below, to or to the order of CONNOLLY-DAW
HOLDINGS INC. (the "Creditor") at 49 Ennisclare Drive East, Oakville, Ontario
L6J 4N3 or at such other place as the Creditor shall in writing direct, the
principal amount of Seven Hundred and Three Thousand, One Hundred and
Thirty-Three ($703,133.00) Dollars (the "Principal Sum") in lawful money of
Canada, without interest before default and with interest after default on the
amount of the Principal Sum in default at the annual rate of Royal Bank Prime
(as hereinafter defined) plus four percent (4%) per annum, calculated from the
date of default to the date of payment and compounded annually.
For the purposes of this promissory note, "Royal Bank Prime" means the
annual rate of interest announced from time to time by the Royal Bank of Canada
as a reference rate then in effect for determining interest rates on Canadian
dollar commercial loans in Canada.
This promissory note is made and delivered pursuant to the provisions
of a share purchase agreement made the first day of October, 1996 between the
Creditor, 1199846 Ontario Ltd., Douglas Connolly, Wendy Connolly and the Debtor
(the "Share Purchase Agreement"). Pursuant to the provisions of the Share
Purchase Agreement, the Creditor entered into a management agreement with Magic
Lantern Communications Ltd. ("Magic Lantern") dated the first day of October,
1996 (the "Management Agreement"), wherein the Creditor covenants and agrees to
provide the managerial services of Douglas Connolly to Magic Lantern. Further
pursuant to the provisions of the Share Purchase Agreement, Douglas Connolly
entered into an employment agreement with Magic Lantern dated the first day of
October, 1996 (the "Employment Agreement"). Further pursuant to the provisions
of the Share Purchase Agreement, the Debtor, the Creditor and NTN Canada, Inc.
entered into an option agreement dated the first day of October, 1996 (the
"Option Agreement"), which provides in part for acceleration of this promissory
note upon the occurrence of certain events therein specified, and accordingly,
this promissory note is subject to the provisions of the Option Agreement.
Payment shall be made in accordance with the following schedule:
<PAGE>
2
(a) $78,133.00 on August 31, 1998;
(b) $312,500.00 on August 31, 1999; and
(c) $312,500.00 on August 31, 2000.
Notwithstanding the foregoing, the Debtor shall have the right,
exercisable between the date hereof and June 30, 1998 to elect to deliver to the
Creditor, in lieu of the aforesaid payments, common shares in the capital of NTN
Canada, Inc. (the "Common Shares"), in accordance with the following schedule:
(a) 12,276 Common Shares on August 31, 1998;
(b) 49,097 Common Shares on August 31, 1999; and
(c) 49,096 Common Shares on August 31, 2000.
Common Shares delivered to the Creditor in accordance with the
foregoing schedule shall be accepted by the Creditor in full satisfaction of the
payments otherwise required pursuant to the provisions of this promissory note.
In the event the Debtor does not so elect to deliver Common Shares to
the Creditor as aforesaid, the Creditor shall then have the right, exercisable
between July 1, 1998 and July 31, 1998, to elect to require the Debtor to
deliver to the Creditor, Common Shares in accordance with the foregoing
schedule, in which event the Common Shares so delivered shall be accepted by the
Creditor in full satisfaction of the payments otherwise required pursuant to the
provisions of this promissory note.
If and whenever at any time the outstanding Common Shares shall be
subdivided, redivided or changed into a greater or consolidated into a lesser
number of shares or reclassified into different shares, the aforesaid schedule
shall be appropriately adjusted so that the Creditor shall, in the event the
Debtor shall elect to deliver or the Creditor shall elect to receive, as the
case may be, Common Shares in lieu of payment as above provided, be entitled to
receive and shall accept, at the appropriate time, in lieu of the number of
Common Shares to which it was theretofore entitled in accordance with the
aforesaid schedule, the aggregate number of Common Shares that the Creditor
would have been entitled to receive as a result of such subdivision, redivision,
change, consolidation or reclassification if, on the effective date thereof, the
Creditor had been the registered holder of the number of Common Shares to which
it was theretofore entitled in accordance with the aforesaid schedule.
<PAGE>
3
In the event Magic Lantern decides that it does not wish to extend the
term of the Employment Agreement as provided in Article 10 of the Employment
Agreement and Douglas Connolly decides that he does wish to extend the term of
the Employment Agreement as so provided, and regardless of whether or not Magic
Lantern and Douglas Connolly would otherwise have been able to agree upon the
terms and conditions of the said extension assuming both parties had decided
that they wished to extend the said term, the Creditor shall have the right,
exercisable between September 1, 1998 and September 30, 1998, to elect to
accelerate the payment (or delivery of the Common Shares, as the case may be),
otherwise due on August 31, 2000, to August 31, 1999.
At the option of the Debtor, the Principal Sum then remaining
outstanding shall be automatically cancelled and forgiven by the Creditor and
the Debtor shall automatically be forever released from any and all further
liability hereunder without any payment (or delivery of Common Shares, as the
case may be), upon the occurrence of any of the following events:
(a) the wilful and continued malfeasance or gross negligence of
Douglas Connolly in the performance of his duties under the
Management Agreement and the failure by Douglas Connolly to
remedy such conduct within 30 days of receipt of written
notice from Magic Lantern specifying particulars of the said
conduct;
(b) the wilful and continued malfeasance or gross negligence of
Douglas Connolly in the performance of his duties under the
Employment Agreement and the failure by Douglas Connolly to
remedy such conduct within 30 days of receipt of written
notice from Magic Lantern specifying particulars of the said
conduct;
(c) Douglas Connolly's actual fraud, intentional misappropriation
of a corporate opportunity or of Magic Lantern's funds, or
embezzlement of Magic Lantern's funds;
(d) the wilful disregard by Douglas Connolly of a directive of the
board of directors of Magic Lantern and the failure by Douglas
Connolly to remedy such conduct within 30 days of receipt of
written notice from Magic Lantern specifying particulars of
the said conduct;
(e) the election by Douglas Connolly, during the term of the
Management Agreement, not to provide his services to Magic
Lantern, notwithstanding the terms and provisions of the
Management Agreement; or
<PAGE>
4
(f) the resignation by Douglas Connolly, during the term of the
Employment Agreement, from Magic Lantern.
Partial or full payment in advance may be made at any time or times
without notice or bonus, subject to the prior written consent of the Creditor.
All payments shall be applied firstly in payment of unpaid interest and
the balance, if any, in reduction of the Principal Sum.
The failure of the Creditor to exercise any right hereunder, in any
particular instance, shall not constitute a waiver of such right in that or any
other subsequent instance.
Save and except as may be otherwise herein provided, the undersigned
hereby waives demand and presentment for payment, notice of non-payment, protest
and notice of protest of this promissory note.
This promissory note shall enure to the benefit of the successors of
the Creditor and shall be binding upon the undersigned and its successors.
This promissory note may not be assigned in whole or in part.
NTN INTERACTIVE NETWORK INC.
Per: /s/ Peter Rona
______________________________
President - Peter Rona
<PAGE>
TO: CONNOLLY-DAW HOLDINGS INC. ("Connolly-Daw")
UNDERTAKING
-----------
Subject to the provisions of the promissory note (the "Promissory
Note") in the principal sum of $703,133.00 (Canadian), dated October 1, 1996 and
given by NTN Interactive Network Inc., a wholly-owned subsidiary of the
undersigned, to Connolly-Daw, the undersigned hereby undertakes to deliver to
Connolly-Daw the Common Shares (as defined in the Promissory Note) set forth in
the Promissory Note if and when such shares are required to be delivered as set
forth in the Promissory Note.
DATED at Toronto, Ontario this 1st day of October, 1996.
NTN CANADA, INC.
Per: /s/ Peter Rona
______________________________
President - Peter Rona
Per: /s/ David Auger
______________________________
Secretary - David Auger
<PAGE>
Exhibit 10.3
NON-NEGOTIABLE PROMISSORY NOTE
------------------------------
Amount: $546,867.00 Date: October 1, 1996
FOR VALUE RECEIVED, the undersigned, NTN INTERACTIVE NETWORK INC. (the
"Debtor") acknowledges itself indebted and promises to pay, in accordance with
the payment schedule referred to below, to or to the order of 1199846 ONTARIO
LTD. (the "Creditor") at 49 Ennisclare Drive East, Oakville, Ontario L6J 4N3 or
at such other place as the Creditor shall in writing direct, the principal
amount of Five Hundred and Forty-Six Thousand Eight Hundred and Sixty-Seven
($546,867.00) Dollars (the "Principal Sum") in lawful money of Canada, without
interest before default and with interest after default on the amount of the
Principal Sum in default at the annual rate of Royal Bank Prime (as hereinafter
defined) plus four percent (4%) per annum, calculated from the date of default
to the date of payment and compounded annually.
For the purposes of this promissory note, "Royal Bank Prime" means the
annual rate of interest announced from time to time by the Royal Bank of Canada
as a reference rate then in effect for determining interest rates on Canadian
dollar commercial loans in Canada.
This promissory note is made and delivered pursuant to the provisions
of a share purchase agreement made the first day of October, 1996 between
Connolly-Daw Holdings Inc. ("Connolly-Daw"), the Creditor, Douglas Connolly,
Wendy Connolly and the Debtor (the "Share Purchase Agreement"). Pursuant to the
provisions of the Share Purchase Agreement, Connolly-Daw entered into a
management agreement with Magic Lantern Communications Ltd. ("Magic Lantern")
dated the first day of October, 1996 (the "Management Agreement"), wherein
Connolly-Daw covenants and agrees to provide the managerial services of Douglas
Connolly to Magic Lantern. Further pursuant to the provisions of the Share
Purchase Agreement, Douglas Connolly entered into an employment agreement with
Magic Lantern dated the first day of October, 1996 (the "Employment Agreement").
Payment shall be made in accordance with the following schedule:
(a) $312,500.00 on August 31, 1997; and
(b) $234,367.00 on August 31, 1998.
10.3
<PAGE>
2
Notwithstanding the foregoing, the Debtor shall have the right,
exercisable between the date hereof and June 30, 1997 to elect to deliver to the
Creditor, in lieu of the aforesaid payments, common shares in the capital of NTN
Canada, Inc. (the "Common Shares"), in accordance with the following schedule:
(a) 49,097 Common Shares on August 31, 1997; and
(b) 36,821 Common Shares on August 31, 1998.
Common Shares delivered to the Creditor in accordance with the
foregoing schedule shall be accepted by the Creditor in full satisfaction of the
payments otherwise required pursuant to the provisions of this promissory note.
In the event the Debtor does not so elect to deliver Common Shares to
the Creditor as aforesaid, the Creditor shall then have the right, exercisable
between July 1, 1997 and July 31, 1997, to elect to require the Debtor to
deliver to the Creditor, Common Shares in accordance with the foregoing
schedule, in which event the Common Shares so delivered shall be accepted by the
Creditor in full satisfaction of the payments otherwise required pursuant to the
provisions of this promissory note.
If and whenever at any time the outstanding Common Shares shall be
subdivided, redivided or changed into a greater or consolidated into a lesser
number of shares or reclassified into different shares, the aforesaid schedule
shall be appropriately adjusted so that the Creditor shall, in the event the
Debtor shall elect to deliver or the Creditor shall elect to receive, as the
case may be, Common Shares in lieu of payment as above provided, be entitled to
receive and shall accept, at the appropriate time, in lieu of the number of
Common Shares to which it was theretofore entitled in accordance with the
aforesaid schedule, the aggregate number of Common Shares that the Creditor
would have been entitled to receive as a result of such subdivision, redivision,
change, consolidation or reclassification if, on the effective date thereof, the
Creditor had been the registered holder of the number of Common Shares to which
it was theretofore entitled in accordance with the aforesaid schedule.
At the option of the Debtor, the Principal Sum then remaining
outstanding shall be automatically cancelled and forgiven by the Creditor and
the Debtor shall automatically be forever released from any and all further
liability hereunder without any payment (or delivery of Common Shares, as the
case may be), upon the occurrence of any of the following events:
(a) the wilful and continued malfeasance or gross negligence of
Douglas Connolly in the performance of his duties under the
Management Agreement and the failure by Douglas Connolly to
<PAGE>
3
remedy such conduct within 30 days of receipt of written
notice from Magic Lantern specifying particulars of the said
conduct;
(b) the wilful and continued malfeasance or gross negligence of
Douglas Connolly in the performance of his duties under the
Employment Agreement and the failure by Douglas Connolly to
remedy such conduct within 30 days of receipt of written
notice from Magic Lantern specifying particulars of the said
conduct;
(c) Douglas Connolly's actual fraud, intentional misappropriation
of a corporate opportunity or of Magic Lantern's funds, or
embezzlement of Magic Lantern's funds;
(d) the wilful disregard by Douglas Connolly of a directive of the
board of directors of Magic Lantern and the failure by Douglas
Connolly to remedy such conduct within 30 days of receipt of
written notice from Magic Lantern specifying particulars of
the said conduct;
(e) the election by Douglas Connolly, during the term of the
Management Agreement, not to provide his services to Magic
Lantern, notwithstanding the terms and provisions of the
Management Agreement; or
(f) the resignation by Douglas Connolly, during the term of the
Employment Agreement, from Magic Lantern.
Partial or full payment in advance may be made at any time or times
without notice or bonus, subject to the prior written consent of the Creditor.
All payments shall be applied firstly in payment of unpaid interest and
the balance, if any, in reduction of the Principal Sum.
The failure of the Creditor to exercise any right hereunder, in any
particular instance, shall not constitute a waiver of such right in that or any
other subsequent instance.
Save and except as may be otherwise herein provided, the undersigned
hereby waives demand and presentment for payment, notice of non-payment, protest
and notice of protest of this promissory note.
This promissory note shall enure to the benefit of the successors of
the Creditor and shall be binding upon the undersigned and its successors.
<PAGE>
4
This promissory note may not be assigned in whole or in part.
NTN INTERACTIVE NETWORK INC.
Per: /s/ Peter Rona
______________________________
President - Peter Rona
<PAGE>
TO: 1199846 ONTARIO LTD. ("1199846")
UNDERTAKING
-----------
Subject to the provisions of the promissory note (the "Promissory
Note") in the principal sum of $546,867.00 (Canadian), dated October 1, 1996
and given by NTN Interactive Network Inc., a wholly-owned subsidiary of the
undersigned, to 1199846, the undersigned undertakes to deliver to 1199846 the
Common Shares (as defined in the Promissory Note) set forth in the Promissory
Note if and when such shares are required to be delivered as set forth in the
Promissory Note.
DATED at Toronto, Ontario this 1st day of October, 1996.
NTN CANADA, Inc.
Per: /s/ Peter Rona
______________________________
President - Peter Rona
Per: /s/ David Auger
______________________________
Secretary - David Auger
<PAGE>
Exhibit 10.4
OPTION AGREEMENT
----------------
THIS AGREEMENT made the 1st day of October, 1996,
B E T W E E N:
CONNOLLY-DAW HOLDINGS INC., a
-----------------------------
corporation incorporated pursuant to the laws
of the Province of Ontario,
(hereinafter referred to as the "Vendor"),
OF THE FIRST PART;
- and -
NTN INTERACTIVE NETWORK INC., a
-------------------------------
corporation amalgamated pursuant to the laws
of Canada,
(hereinafter referred to as the "Corporation"),
OF THE SECOND PART;
- and -
NTN CANADA, INC., a corporation
-----------------
incorporated pursuant to the laws of the State
of New York,
(hereinafter referred to as "NTN Canada"),
OF THE THIRD PART.
WHEREAS:
1. Pursuant to a share purchase agreement dated October 1, 1996 (the "Share
Purchase Agreement"), entered into between the Vendor, 1199846 Ontario Ltd.
("1199846"), Douglas Connolly, Wendy Connolly and the Corporation, the Vendor
and 1199846 sold all of the issued and outstanding common shares in the capital
of Magic Lantern Communications Ltd. ("Magic Lantern") to the Corporation and
10.4
<PAGE>
2
1199846 sold 20.1% of the issued and outstanding shares in the capital of 745695
Ontario Ltd. to the Corporation;
2. As part of the consideration received by the Vendor in connection with
the aforesaid transaction, the Vendor received a promissory note from the
Corporation in the principal sum of $703,133.00 dated October 1, 1996 (the
"Promissory Note");
3. Pursuant to the provisions of the Promissory Note, the Corporation may
elect to deliver to the Vendor or the Vendor may elect to receive from the
Corporation, common shares in the capital of NTN Canada (the "Common Shares") in
lieu of payment as therein provided;
4. Pursuant to the provisions of the Share Purchase Agreement, Douglas
Connolly entered into an employment agreement with Magic Lantern dated
October 1, 1996 (the "Employment Agreement").
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
completion of the transactions contemplated by the Share Purchase Agreement, the
respective covenants and agreements of the parties contained herein, the sum of
One Dollar ($1.00) now paid by each party hereto to each of the other parties
hereto and other good and valuable consideration (the receipt and sufficiency of
which is hereby acknowledged by each of the parties hereto), the parties hereto
hereby agree as follows:
1. Put Option -
(1) In the event Magic Lantern decides that it does not wish to extend the
term of the Employment Agreement as provided in Article 10 of the
Employment Agreement and Douglas Connolly decides that he does wish to
extend the term of the Employment Agreement as so provided, and
regardless of whether or not Magic Lantern and Douglas Connolly would
otherwise have been able to agree upon the terms and conditions of the
said extension assuming both parties had decided that they wished to
extend the said term, the Vendor shall, on or after September 1, 1999,
have the right (hereinafter in this Article 1 referred to as the "Put
Option") to require NTN Canada to purchase from the Vendor all, but not
less than all, of the Common Shares acquired by the Vendor pursuant to
the provisions of the Promissory Note, if any, which are then still
beneficially owned by the Vendor (hereinafter in this Article 1
collectively referred to as the "Vendor's Shares"). In the event that
the Vendor has not, as of such time, accelerated delivery of the Common
Shares otherwise due on August 31, 2000 to August 31, 1999 pursuant to
the provisions of the Promissory Note, the Vendor shall, prior to
<PAGE>
3
giving to NTN Canada the Notice of Exercise (as hereinafter defined),
accelerate delivery of the Common Shares otherwise due on August 31,
2000 to the date on which the Notice of Exercise is delivered to NTN
Canada, which acceleration is hereby consented and agreed to by the
Corporation and NTN Canada.
(2) The Put Option shall be exercised by the Vendor giving to NTN Canada
notice in writing (in this Article 1 referred to as the "Notice of
Exercise") of its intention to exercise the Put Option.
(3) Upon exercise of the Put Option, NTN Canada shall be obligated to
purchase from the Vendor, and the Vendor shall be obligated to sell to
NTN Canada, the Vendor's Shares in accordance with the provisions of
Section 1(4) hereof.
(4) The sale and purchase of the Vendor's Shares under this Article shall
be completed on the following terms and conditions:
(a) the purchase price payable for each of the Vendor's Shares
shall be equal to 90% of the average closing price of the
Common Shares during the twenty-trading day period ending on
the business day which immediately precedes the day on which
the Notice of Exercise is delivered by the Vendor to NTN
Canada as reported by the NASDAQ "Small-Cap" market (or, if
the Common Shares are not, at such time, included in the
NASDAQ "Small-Cap" market, then such other market or exchange
in which the Common Shares are then included;
(b) the purchase price shall be payable by certified cheque or
bank draft at the time of completion of the transaction;
(c) the Vendor's Shares shall be free and clear of any liens,
mortgages, charges and encumbrances whatsoever and the Vendor
shall have good and marketable title thereto;
(d) the completion of the sale shall take place at 10:00 a.m.
(Toronto time) on the date being 60 days after the date on
which the Vendor delivered the Notice of Exercise to NTN
Canada, provided such day is not a Saturday, Sunday or
statutory holiday, in which event the completion of the sale
shall take place on the next business day thereafter.
(5) The Put Option shall expire on September 30, 1999.
<PAGE>
4
2. Call Option
(1) In the event Magic Lantern decides that it does wish to extend the term
of the Employment Agreement as provided in Article 10 of the Employment
Agreement and Douglas Connolly decides that he does not wish to extend
the term of the Employment Agreement as so provided, and regardless of
whether or not Magic Lantern and Douglas Connolly would otherwise have
been able to agree upon the terms and conditions of the said extension
assuming both parties had decided that they wished to extend the said
term, NTN Canada shall, on or after September 1, 1999, have the right
(hereinafter in this Article 2 referred to as the "Call Option") to
require the Vendor to sell to NTN Canada all, but not less than all, of
the Common Shares acquired by the Vendor pursuant to the provisions of
the Promissory Note, if any, which are then still beneficially owned by
the Vendor (hereinafter in this Article 2 collectively referred to as
the Vendor's Shares). The Vendor shall, forthwith upon NTN Canada
giving to the Vendor the Notice of Exercise (as hereinafter defined),
accelerate delivery of the Common Shares otherwise due on August 31,
2000 pursuant to the provisions of the Promissory Note to the date
which is five business days after the date on which the Notice of
Exercise is delivered to the Vendor, which acceleration is hereby
consented and agreed to by the Vendor.
(2) The Call Option shall be exercised by NTN Canada giving to the Vendor
notice in writing (in this Article 2 referred to as the "Notice of
Exercise") of its intention to exercise the Call Option.
(3) Upon exercise of the Call Option, the Vendor shall be obligated to sell
to NTN Canada, and NTN Canada shall be obligated to purchase from the
Vendor, the Vendor's Shares in accordance with the provisions of
Section 2(4) hereof.
(4) The sale and purchase of the Vendor's Shares under this Article shall
be completed on the following terms and conditions:
(a) the purchase price payable for each of the Vendor's Shares
shall be equal to 110% of the average closing price of the
Common Shares during the twenty-trading day period ending on
the business day which immediately precedes the day on which
the Notice of Exercise is delivered by NTN Canada to the
Vendor as reported by the NASDAQ "Small-Cap" market (or, if
the Common Shares are not, at such time, included in the
NASDAQ "Small-Cap" market, then such other market or exchange
in which the Common Shares are then included;
<PAGE>
5
(b) the purchase price shall be payable by certified cheque or
bank draft at the time of completion of the transaction;
(c) the Vendor's Shares shall be free and clear of any liens,
mortgages, charges and encumbrances whatsoever and the Vendor
shall have good and marketable title thereto;
(d) the completion of the sale shall take place at 10:00 a.m.
(Toronto time) on the date being 60 days after the date on
which NTN Canada delivered the Notice of Exercise to the
Vendor, provided such day is not a Saturday, Sunday or
statutory holiday, in which event the completion of the sale
shall take place on the next business day thereafter.
(5) The Call Option shall expire on September 30, 1999.
3. General Provisions
(1) Notices - Any notice, direction or other document required or permitted
to be given hereunder or for the purposes hereof (hereinafter in this
Section 3(1) called a "notice") to any party shall be in writing and shall be
sufficiently given if delivered personally or if sent by prepaid registered mail
to such party:
(a) in the case of a notice to the Vendor, at:
49 Ennisclare Drive East
Oakville, Ontario
L6J 4N3
(b) in the case of a notice to the Corporation, at:
14 Meteor Drive
Etobicoke, Ontario
M9W 1A4
(c) in the case of a notice to NTN Canada, at:
14 Meteor Drive
Etobicoke, Ontario
M9W 1A4
<PAGE>
6
or at such other address as may be given by such party to the other parties
hereto in writing from time to time.
All such notices shall be deemed to have been received when delivered
or, if mailed, 48 hours after 12:01 a.m. on the day following the day of the
mailing thereof.
(2) Additional Considerations - The parties shall sign such further and other
documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence, do and perform and cause to be done
and performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part thereof.
(3) Time of the Essence - Time shall be of the essence of this Agreement and
of every part hereof and no extension or variation of this Agreement shall
operate as a waiver of this provision.
(4) Entire Agreement - This Agreement constitutes the entire agreement
between the parties with respect to all of the matters herein and its execution
has not been induced by, nor do any of the parties rely upon or regard as
material, any representations or writings whatsoever not incorporated herein
and made a part hereof and may not be amended or modified in any respect except
by written instrument signed by the parties hereto.
(5) Modification of Agreement - Any modification to this Agreement must be in
writing and signed by the parties hereto or it shall have no effect and shall
be void.
(6) Assignment and Enurement - Neither this Agreement nor any rights or
obligations of the Vendor under this Agreement shall be assignable by the Vendor
without the prior written consent of the Corporation and NTN Canada. Subject to
such consent, this Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
(7) Headings for Convenience Only - The division of this Agreement into
Articles and Sections is for convenience of reference only and shall not affect
the interpretation or construction of this Agreement.
(8) Governing Law - This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein and each of the parties hereto hereby irrevocably
attorns to the jurisdiction of the courts of such Province.
<PAGE>
7
(9) Waiver - No term or condition of this Agreement shall be deemed waived
unless such waiver is expressed in writing and signed by the parties hereto.
Failure or delay on the part of any party to enforce any right hereunder shall
not operate as a waiver hereof.
(10) Gender - In this Agreement, words importing the singular number shall
include the plural and vice versa, and words importing the use of any gender
shall include the masculine, feminine and neuter genders and the word "person"
shall include an individual, a trust, a partnership, a body corporate, an
association or other incorporated or unincorporated organization or entity.
(11) Severability - If any Article, Section or any portion of any Section of
this Agreement is determined to be unenforceable or invalid for any reason
whatsoever, that unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and such
unenforceable or invalid Article, Section or portion thereof shall be severed
from the remainder of this Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement.
CONNOLLY-DAW HOLDINGS INC.
Per: /s/ Wendy Connolly
______________________________
President - Wendy Connolly
Per: /s/ Douglas Connolly
______________________________
Secretary - Douglas Connolly
NTN INTERACTIVE NETWORK INC.
Per: /s/ Peter Rona
______________________________
President - Peter Rona
NTN CANADA, INC.
Per: /s/ Peter Rona
______________________________
President - Peter Rona
Per: /s/ David Auger
______________________________
Secretary - David Auger
<PAGE>
Exhibit 10.5
OPTION AGREEMENT
THIS AGREEMENT made the 1st day of October, 1996,
B E T W E E N:
1199846 ONTARIO LTD., a corporation incorporated
pursuant to the laws of the Province of Ontario,
(hereinafter referred to as the "Vendor"),
OF THE FIRST PART;
- and -
NTN INTERACTIVE NETWORK INC., a corporation
amalgamated pursuant to the laws of Canada,
(hereinafter referred to as the "Corporation"),
OF THE SECOND PART;
- and -
NTN CANADA, INC., a corporation incorporated pursuant
to the laws of the State of New York,
(hereinafter referred to as "NTN Canada"),
OF THE THIRD PART.
WHEREAS:
1. Pursuant to a share purchase agreement dated October 1, 1996 (the "Share
Purchase Agreement"), entered into between Connolly-Daw Holdings Inc.
("Connolly-Daw"), the Vendor, Douglas Connolly, Wendy Connolly and the
Corporation, the Vendor and Connolly-Daw sold all of the issued and outstanding
common shares in the capital of Magic Lantern Communications Ltd. ("Magic
<PAGE>
2
Lantern") to the Corporation and the Vendor sold 20.1% of the issued and
outstanding shares in the capital of 745695 Ontario Ltd. to the Corporation;
2. As part of the consideration received by the Vendor in connection with the
aforesaid transaction, the Vendor received a promissory note from the
Corporation in the principal sum of $546,867.00 dated October 1, 1996 (the
"Promissory Note");
3. Pursuant to the provisions of the Promissory Note, the Corporation may elect
to deliver to the Vendor or the Vendor may elect to receive from the
Corporation, common shares in the capital of NTN Canada (the "Common Shares") in
lieu of payment as therein provided;
4. Pursuant to the provisions of the Share Purchase Agreement, Douglas Connolly
entered into an employment agreement with Magic Lantern dated October 1, 1996
(the "Employment Agreement").
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
completion of the transactions contemplated by the Share Purchase Agreement, the
respective covenants and agreements of the parties contained herein, the sum of
One Dollar ($1.00) now paid by each party hereto to each of the other parties
hereto and other good and valuable consideration (the receipt and sufficiency of
which is hereby acknowledged by each of the parties hereto), the parties hereto
hereby agree as follows:
1. Put Option -
(1) In the event Magic Lantern decides that it does not wish to extend the
term of the Employment Agreement as provided in Article 10 of the
Employment Agreement and Douglas Connolly decides that he does wish to
extend the term of the Employment Agreement as so provided, and
regardless of whether or not Magic Lantern and Douglas Connolly would
otherwise have been able to agree upon the terms and conditions of the
said extension assuming both parties had decided that they wished to
extend the said term, the Vendor shall, on or after September 1, 1999,
have the right (hereinafter in this Article 1 referred to as the "Put
Option") to require NTN Canada to purchase from the Vendor all, but not
less than all, of the Common Shares acquired by the Vendor pursuant to
the provisions of the Promissory Note, if any, which are then still
beneficially owned by the Vendor (hereinafter in this Article 1
collectively referred to as the "Vendor's Shares").
<PAGE>
3
(2) The Put Option shall be exercised by the Vendor giving to NTN Canada
notice in writing (in this Article 1 referred to as the "Notice of
Exercise") of its intention to exercise the Put Option.
(3) Upon exercise of the Put Option, NTN Canada shall be obligated to
purchase from the Vendor, and the Vendor shall be obligated to sell to
NTN Canada, the Vendor's Shares in accordance with the provisions of
Section 1(4) hereof.
(4) The sale and purchase of the Vendor's Shares under this Article shall
be completed on the following terms and conditions:
(a) the purchase price payable for each of the Vendor's Shares
shall be equal to 90% of the average closing price of the
Common Shares during the twenty-trading day period ending on
the business day which immediately precedes the day on which
the Notice of Exercise is delivered by the Vendor to NTN
Canada as reported by the NASDAQ "Small-Cap" market (or, if
the Common Shares are not, at such time, included in the
NASDAQ "Small-Cap" market, then such other market or exchange
in which the Common Shares are then included;
(b) the purchase price shall be payable by certified cheque or
bank draft at the time of completion of the transaction;
(c) the Vendor's Shares shall be free and clear of any liens,
mortgages, charges and encumbrances whatsoever and the Vendor
shall have good and marketable title thereto;
(d) the completion of the sale shall take place at 10:00 a.m.
(Toronto time) on the date being 60 days after the date on
which the Vendor delivered the Notice of Exercise to NTN
Canada, provided such day is not a Saturday, Sunday or
statutory holiday, in which event the completion of the sale
shall take place on the next business day thereafter.
(5) The Put Option shall expire on September 30, 1999.
2. Call Option
(1) In the event Magic Lantern decides that it does wish to extend the term
of the Employment Agreement as provided in Article 10 of the Employment
Agreement and Douglas Connolly decides that he does not wish to extend
<PAGE>
4
the term of the Employment Agreement as so provided, and regardless of
whether or not Magic Lantern and Douglas Connolly would otherwise have
been able to agree upon the terms and conditions of the said extension
assuming both parties had decided that they wished to extend the said
term, NTN Canada shall, on or after September 1, 1999, have the right
(hereinafter in this Article 2 referred to as the "Call Option") to
require the Vendor to sell to NTN Canada all, but not less than all, of
the Common Shares acquired by the Vendor pursuant to the provisions of
the Promissory Note, if any, which are then still beneficially owned by
the Vendor (hereinafter in this Article 2 collectively referred to as
the Vendor's Shares).
(2) The Call Option shall be exercised by NTN Canada giving to the Vendor
notice in writing (in this Article 2 referred to as the "Notice of
Exercise") of its intention to exercise the Call Option.
(3) Upon exercise of the Call Option, the Vendor shall be obligated to sell
to NTN Canada, and NTN Canada shall be obligated to purchase from the
Vendor, the Vendor's Shares in accordance with the provisions of
Section 2(4) hereof.
(4) The sale and purchase of the Vendor's Shares under this Article shall
be completed on the following terms and conditions:
(a) the purchase price payable for each of the Vendor's Shares
shall be equal to 110% of the average closing price of the
Common Shares during the twenty-trading day period ending on
the business day which immediately precedes the day on which
the Notice of Exercise is delivered by NTN Canada to the
Vendor as reported by the NASDAQ "Small-Cap" market (or, if
the Common Shares are not, at such time, included in the
NASDAQ "Small-Cap" market, then such other market or exchange
in which the Common Shares are then included;
(b) the purchase price shall be payable by certified cheque or
bank draft at the time of completion of the transaction;
(c) the Vendor's Shares shall be free and clear of any liens,
mortgages, charges and encumbrances whatsoever and the Vendor
shall have good and marketable title thereto;
(d) the completion of the sale shall take place at 10:00 a.m.
(Toronto time) on the date being 60 days after the date on
which NTN Canada delivered the Notice of Exercise to the
Vendor, provided such day is not a Saturday, Sunday or
<PAGE>
5
statutory holiday, in which event the completion of the sale
shall take place on the next business day thereafter.
(5) The Call Option shall expire on September 30, 1999.
3. General Provisions
(1) Notices - Any notice, direction or other document required or permitted to
be given hereunder or for the purposes hereof (hereinafter in this Section 3(1)
called a "notice") to any party shall be in writing and shall be sufficiently
given if delivered personally or if sent by prepaid registered mail to such
party:
(a) in the case of a notice to the Vendor, at:
49 Ennisclare Drive East
Oakville, Ontario
L6J 4N3
(b) in the case of a notice to the Corporation, at:
14 Meteor Drive
Etobicoke, Ontario
M9W 1A4
(c) in the case of a notice to NTN Canada, at:
14 Meteor Drive
Etobicoke, Ontario
M9W 1A4
or at such other address as may be given by such party to the other parties
hereto in writing from time to time.
All such notices shall be deemed to have been received when delivered
or, if mailed, 48 hours after 12:01 a.m. on the day following the day of the
mailing thereof.
(2) Additional Considerations - The parties shall sign such further and other
documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence, do and perform and cause to be done
and performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part thereof.
<PAGE>
6
(3) Time of the Essence - Time shall be of the essence of this Agreement and of
every part hereof and no extension or variation of this Agreement shall operate
as a waiver of this provision.
(4) Entire Agreement - This Agreement constitutes the entire agreement between
the parties with respect to all of the matters herein and its execution has not
been induced by, nor do any of the parties rely upon or regard as material, any
representations or writings whatsoever not incorporated herein and made a part
hereof and may not be amended or modified in any respect except by written
instrument signed by the parties hereto.
(5) Modification of Agreement - Any modification to this Agreement must be in
writing and signed by the parties hereto or it shall have no effect and shall be
void.
(6) Assignment and Enurement - Neither this Agreement nor any rights or
obligations of the Vendor under this Agreement shall be assignable by the Vendor
without the prior written consent of the Corporation and NTN Canada. Subject to
such consent, this Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
(7) Headings for Convenience Only - The division of this Agreement into Articles
and Sections is for convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
(8) Governing Law - This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein and each of the parties hereto hereby irrevocably
attorns to the jurisdiction of the courts of such Province.
(9) Waiver - No term or condition of this Agreement shall be deemed waived
unless such waiver is expressed in writing and signed by the parties hereto.
Failure or delay on the part of any party to enforce any right hereunder shall
not operate as a waiver hereof.
(10) Gender - In this Agreement, words importing the singular number shall
include the plural and vice versa, and words importing the use of any gender
shall include the masculine, feminine and neuter genders and the word "person"
shall include an individual, a trust, a partnership, a body corporate, an
association or other incorporated or unincorporated organization or entity.
(11) Severability - If any Article, Section or any portion of any Section of
this Agreement is determined to be unenforceable or invalid for any reason
whatsoever, that unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and such
unenforceable or invalid Article, Section or portion thereof shall be severed
from the remainder of this Agreement.
<PAGE>
7
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement.
1199846 ONTARIO LTD.
Per: /s/ Douglas Connolly
---------------------------------
President - Douglas Connolly
Per: /s/ Wendy Connolly
---------------------------------
Secretary - Treasurer
Wendy Connolly
NTN INTERACTIVE NETWORK INC.
Per: /s/ Peter Rona
---------------------------------
President - Peter Rona
NTN CANADA, INC.
Per: /s/ Peter Rona
---------------------------------
President - Peter Rona
Per: /s/ David Auger
---------------------------------
Secretary - David Auger
<PAGE>
SCHEDULE "A"
RELEASE
TO: Magic Lantern Communications Ltd.
(herein called the "Release")
KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good
and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of
Canada now paid by the Releasee to the undersigned (herein called the
"Releasor"), the receipt and sufficiency of which is hereby acknowledged, the
Releasor hereby remises, releases and forever discharges the Releasee, of and
from all manner of actions, causes of action, suits, debts, dues, duties,
accounts, bonds, covenants, contracts, claims and demands whatsoever which
against the Releasee, the Releasor, as a shareholder of the Releasee, ever had,
now has or hereafter can, shall or may have for or by reason of or in any way
arising out of any cause, matter or thing whatsoever existing up to the present
time relating to, or arising directly or indirectly by reason of or as a
consequence of, the Releasor; having been a shareholder of the Releasee.
AND in consideration of the foregoing, the Releasor covenants and
agrees not to make any claims or take any proceedings against any corporation,
firm or person which could claim contribution and/or indemnity against the
Releasee, pursuant to the provisions of any statute or otherwise with respect to
any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors and assigns of the Releasee and shall be binding
upon and enforceable against the successors of the Releasor.
IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st
day of October, 1996.
TELESAT CANADA
Per: ______________________________
Per: ______________________________
<PAGE>
SCHEDULE "B"
MUTUAL RELEASE
The undersigned hereby acknowledge and agree that the agreement between
the undersigned and Canadian Satellite Learning Services Inc. dated October 13,
1995 (the "Agreement") is hereby terminated and cancelled and of no further
force and effect, and the undersigned further hereby remise, release and forever
discharge each other of and from all manner of actions, causes of action,
suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and
demands which against each other, each of them ever had, now has or hereafter
can, shall or may have for or by reason of or in any way arising out of the
Agreement.
AND in consideration of the foregoing, each of the undersigned
covenants and agrees not to make any claims or take any proceedings against any
corporation, firm or person which could claim contribution and/or indemnity
against the other of them, pursuant to the provisions of any statute or
otherwise with respect to any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors of the undersigned and shall be binding upon and
enforceable against the successors of the undersigned.
IN WITNESS WHEREOF the undersigned has duly executed this Release the
1st day of October, 1996.
TELESAT CANADA
Per: ______________________________
Per: ______________________________
MAGIC LANTERN COMMUNICATIONS
LTD.
Per: ______________________________
Per: ______________________________
<PAGE>
RELEASE
TO: Magic Lantern Communications Ltd.
(herein called the "Releasee")
KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good
and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of
Canada now paid by the Releasee to the undersigned (herein called the
"Releasor"), the receipt and sufficiency of which is hereby acknowledged, the
Releasor hereby remises, releases and forever discharges the Releasee, of and
from all manner of actions, causes of action, suits, debts, dues, duties,
accounts, bonds, covenants, contracts, claims and demands whatsoever which
against the Releasee, the Releasor, as a shareholder of the Releasee, ever had,
now has or hereafter can, shall or may have for or by reason of or in any way
arising out of any cause, matter or thing whatsoever existing up to the present
time relating to, or arising directly or indirectly by reason of or as a
consequence of, the Releasor having been a shareholder of the Releasee.
AND in consideration of the foregoing, the Releasor covenants and
agrees not to make any claims or take any proceedings against any corporation,
firm or person which could claim contribution and/or indemnity against the
Releasee, pursuant to the provisions of any statute or otherwise with respect to
any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors and assigns of the Releasee and shall be binding
upon and enforceable against the successors of the Releasor.
IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st
day of October, 1996.
TELESAT CANADA
Per: /s/ L. J. Boisvert
-----------------------------------
L. J. Boisvert, President & C.E.O.
Per: /s/ J. E. Perkins,
-----------------------------------
J. E. Perkins, Secretary
<PAGE>
MUTUAL RELEASE
The undersigned hereby acknowledge and agree that the agreement between
the undersigned and Canadian Satellite Learning Services Inc. dated October 13,
1995 (the "Agreement") is hereby terminated and cancelled and of no further
force and effect, and the undersigned further hereby remise, release and forever
discharge each other of and from all manner of actions, causes of action,
suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and
demands which against each other, each of them ever had, now has or hereafter
can, shall or may have for or by reason of or in any way arising out of the
Agreement.
AND in consideration of the foregoing, each of the undersigned
covenants and agrees not to make any claims or take any proceedings against any
corporation, firm or person which could claim contribution and/or indemnity
against the other of them, pursuant to the provisions of any statute or
otherwise with respect to any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors of the undersigned and shall be binding upon and
enforceable against the successors of the undersigned.
IN WITNESS WHEREOF the undersigned has duly executed this Release the
1st day of October, 1996.
TELESAT CANADA
Per: /s/ L. J. Boisvert
-----------------------------------
L. J. Boisvert, President & C.E.O.
Per: /s/ J. E. Perkins,
-----------------------------------
J. E. Perkins, Secretary
MAGIC LANTERN COMMUNICATIONS
LTD.
Per: /s/ Douglas Connolly
-----------------------------------
President, Douglas Connolly
Per: /s/ Jackson L. Chercover
-----------------------------------
Secretary, Jackson L. Chercover
<PAGE>
Exhibit 10.6
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated October 1, 1996 (the
"Agreement"), is by and between NTN CANADA, INC., a New York corporation (the
"Corporation"), and CONNOLLY-DAW HOLDINGS INC., an Ontario corporation
("Holdings"), and 1199846 ONTARIO LTD., an Ontario corporation ("1199846")
(Holdings and 1199846 each being hereinafter individually referred to as a
"Rightsholder," and, jointly, as the "Rightsholders").
W I T N E S E T H:
WHEREAS, pursuant to a certain Share Purchase Agreement, of even date
herewith (the "Purchase Agreement"), by and among the Rightsholders, NTN
Interactive Network Inc., a corporation amalgamated pursuant to the laws of
Canada and which is a wholly-owned subsidiary of the Corporation
("Interactive"), and certain others, amongst other things, the Rightsholders
were issued promissory notes from Interactive (the "Promissory Notes") wherein
Interactive may elect to deliver to the Rightsholders, and the Rightsholders
shall have the right to require delivery of, common stock par value $0.0467 per
share (the "Common Stock") of the Corporation in lieu of payment therein (the
"Shares"); and
WHEREAS, it is the desire of the parties hereto that the Corporation
grant to the Rightsholders certain registration rights under the Securities Act
of 1933, as amended (the "Act") with respect to the Shares, upon the terms and
conditions hereinafter set forth; and
WHEREAS, the number of Shares to which each of the Rightsholders are
being hereby granted registration rights under the Act is set forth on Schedule
I to this Agreement.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
2
1. Registration or Qualification "Piggy-Back" Rights.
(a) If at any time on or after September 1, 1997 and on or prior to August 31,
2002, the Corporation proposes to register or qualify any of its securities
under the Act, or any other applicable federal or state law (other than a
registration relating to: (i) a registration of a stock option, stock purchase
or compensation or incentive plan or of stock issued or issuable pursuant to any
such plan, or a dividend investment plan, (ii) a registration of securities
proposed to be issued in exchange for securities or assets of, or in connection
with a merger or consolidation with, another corporation, or (iii) a
registration of securities proposed to be issued in exchange for other
securities of the Corporation), it shall on each such occasion give written
notice to each of the Rightsholders of its intention to do so and, upon the
written request of any Rightsholder given within 20 days after receipt of any
such notice (a "Request") (which Request shall (i) specify the number of Shares
intended to be sold or disposed of, and (ii) describe the method of any proposed
sale or other disposition thereof), the Corporation will use its best efforts to
cause such Shares so specified in the Request to be registered or qualified
under such Act or laws, to the extent requisite to permit the sale or other
disposition thereof (in accordance with the method described by such
Rightsholder in the Request, provided such method is in accordance with law);
provided that, if, at any time after giving written notice of its intention to
register or qualify any securities and prior to the effective date of the
registration statement or qualification document filed in connection with such
registration or qualification, the Corporation shall determine for any reason
not to register or qualify or to delay registration or qualification of such
securities, the Corporation may, at its election, give written notice of such
determination to the Rightsholder who shall have given a Request and, thereupon:
(i) in the case of a determination not to register or qualify, the Corporation
shall be relieved of its obligation to register or qualify any Shares in
connection with such registration or qualification, and (ii) in the case of a
determination to delay registration or qualification, the Corporation shall be
permitted to delay registering or qualifying any Shares for the same period as
the delay in registering or qualifying such other securities. No registration
effected under this Section 1 shall relieve the Corporation of its obligation to
effect any registration or qualification upon demand otherwise granted to a
Rightsholder under this Agreement or any other agreement with the Corporation.
The Corporation shall keep effective and maintain any registration or
qualification specified in this Paragraph 1(a) for a period of not less than the
greater of: (i) three (3) months or (ii) the period within which such other
securities shall remain subject to such registration or qualification.
(b) If (i) a registration or qualification pursuant to this Section 1 involves
an underwritten offering of the securities so being registered or qualified,
whether or not for sale for the account of the Corporation, to be distributed on
a firm commitment basis by or through one or more underwriters under
<PAGE>
3
underwriting terms appropriate for such a transaction, and (ii) the managing
underwriter of such offering shall advise the Corporation and the holders of the
Shares who have made a Request to include their Shares in such registration, in
a letter, that the number of securities requested to be included in such
offering (whether by a Request or by means of a request of another party to whom
the Corporation may have otherwise granted registration rights under the Act)
exceeds the number which can be sold in such offering, then the Corporation may
include in such offering all securities originally proposed by the Corporation
to be sold, whether or not for its own account, and may decrease, pro rata, the
number of Shares and other securities so proposed to be sold and so requested to
be included in such offering (whether by a Request or by means of a request of
another party to whom the Corporation may have otherwise granted registration
rights under the Act) to the extent necessary to reduce the number of securities
to be included in such offering to the level recommended by the managing
underwriter. The holders of Shares to be distributed by such underwriters shall
be parties to the underwriting agreement between the Corporation and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Corporation to and for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Shares and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Shares. Any such holder of Shares shall not be required to make any
representations or warranties to or agreements with the Corporation or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Shares and such holder's intended method of distribution
and any other representation(s) required by law.
(c) Notwithstanding the provisions of this Section 1, a holder of Shares may
participate and cause the registration or qualification of the holder's Shares
(or portions thereof), pursuant to the provisions of this Section 1, only to the
extent of two registrations or qualifications and only with respect to the
holder's Shares as set forth in Schedule I to this Agreement.
2. Registration on Demand.
(a) At any time during the period commencing on September 1, 1997 and
terminating on August 31, 2002, and on a one time only basis, upon the written
request (a "Demand Request") of the holder or holders of at least fifty (50%)
percent of the Shares that the Corporation effect a registration under the Act
of all or part of the Shares of such holder(s), specifying the intended method
of disposition thereof and whether or not such requested registration is to
relate to an underwritten offering, the Corporation will promptly give written
notice (a "Demand Notice") of such Demand Request to all other holders of
<PAGE>
4
outstanding Shares and, thereupon, the Corporation will, on one occasion, use
its best efforts to effect the registration under the Act, within three (3)
months of the date the Demand Notice is given, of: (i) the Shares which the
Corporation shall have been so requested to register in the Demand Request, and
(ii) all other Shares which the Corporation has been requested to register by
the holders thereof by written request (the "Secondary Demand Request") given to
the Corporation within 30 days after the giving of the Demand Notice (which
Secondary Demand Request shall specify the intended method of disposition of
such Shares and whether or not such disposition will be an underwritten
offering), on an appropriate form and to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as set forth in
Demand Request and all Secondary Demand Requests) of the Shares so to be
registered.
(b) Whenever the Corporation shall effect a registration pursuant to Paragraph
2(a) above in connection with an underwritten offering by one or more holders of
Shares, no securities other than Shares shall be included among the securities
covered by such registration, unless: (i) the managing underwriter of such
offering shall have advised each holder of Shares to be subject to such
registration that the inclusion of such other securities would not adversely
affect such offering or (ii) the holders of all Shares subject to such
registration shall have consented in writing to the inclusion of such other
securities.
(c) Registrations made pursuant to Paragraph 2(a) above shall be on an
appropriate registration form selected by the Corporation and reasonably
acceptable to the holders of at least fifty (50%) percent of the Shares so to be
registered, and as shall permit the disposition of all of the Shares in
accordance with the method(s) of disposition specified in the Demand Request and
all Secondary Demand Requests.
(d) The Corporation will pay all registration expenses in connection with any
registration requested pursuant to Paragraph 2(a) above, provided, that the
Corporation's obligation to pay all such registration expenses shall be limited
to one registration to be made pursuant to Paragraph 2(a) above, whether or not
the securities so registered are successfully sold pursuant to such
registration.
(e) If the requested demand registration pursuant to this Section 2 is to
involve an underwritten offering, the underwriter or managing underwriter or
selling agent shall be subject to the approval of the Corporation, which
approval may not be unreasonably withheld.
(f) If the requested demand registration pursuant to this Section 2 involves an
underwritten offering, and the managing underwriter shall advise the Corporation
in writing that, in its opinion, the number of Shares requested to be included
<PAGE>
5
in such registration exceeds the number which can be sold in such offering
within a price range acceptable to the holders of at least fifty (50%) percent
of the Shares requested to be included in such registration, the Corporation
will include in such registration, to the extent of the number which the
Corporation is so advised can be sold in such offering, such Shares requested to
be included in such registration pro rata among the holders thereof requesting
such registration on the basis of the percentage of Shares held by the holders
of Shares which have requested that such Shares be included. In connection with
any registration as to which the provisions of this Paragraph 2(f) apply, no
securities other than Shares shall be covered by such registration.
3. Registration Procedures.
(a) If and whenever the Corporation is required to use its best efforts to
effect the registration or qualification of any Shares under the Act as provided
in this Agreement, the Corporation shall expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission
("SEC") the requisite registration or qualification statement to effect
such registration or qualification and thereafter use its best efforts
to cause such registration or qualification statement to become
effective; provided that, the obligation of the Corporation to effect
such registration or qualification and/or cause such registration or
qualification statement to become effective, may be postponed for (A)
such period of time when the financial statements of the Corporation
required to be included in such registration statement are not
available (due solely to the fact that such financial statements have
not been prepared in the regular course of business of the
Corporation), or (B) any other bona fide corporate purpose, but then
only for a period not to exceed 90 days; provided further that the
Corporation may refuse to make a registration or qualification of
Shares when and during the period that the subject Shares may be
disposed of by reasons of the availability of an exemption from
registration under the Act, or the rules and regulations promulgated
thereunder, including, without limitation, Rule 144; and provided
further, that the Corporation may discontinue or delay any registration
or qualification of Shares being registered or qualified pursuant to
Section 1 above at any time prior to the effective date of the
registration or qualification statement relating thereto, but only in
accordance with Paragraph 1(a) above;
(ii) prepare and file with the SEC such amendments and supplements to
such registration or qualification statement and the prospectus used in
connection therewith as may be necessary to keep such registration or
qualification statement effective and to comply with the provisions of
the Act with respect to the disposition of all securities covered by
<PAGE>
6
such registration or qualification statement, until the earlier of: (A)
such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the Rightsholders whose
Shares are subject to such registration or qualification statement as
set forth in such statement, or (B) nine months from the original
effective date of such registration or qualification statement;
(iii) furnish to such Rightsholder whose Shares are subject to such
registration such number of conformed copies of such registration or
qualification statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration or qualification
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Act, in conformity with the requirements of the Act, and such other
documents, as such Rightsholder may reasonably request;
(iv) use its best efforts to register or qualify all Shares and other
securities covered by such registration statement under such other
securities or Blue Sky laws of the State of New York and such other
jurisdictions as such Rightsholder shall reasonably request (but only
if such Rightsholder shall advance to the Corporation funds necessary
to enable the Corporation to pay all applicable fees and application
costs as are required by such other jurisdictions), to maintain such
registration or qualification in effect for so long as such
registration or qualification statement remains in effect, and to take
any other action which may be reasonably necessary or advisable to
enable such Rightsholder to consummate the disposition of such
Rightsholder's Shares in such jurisdictions, except that the
Corporation shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not (but for the requirements of this Subparagraph
3(a)(iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Shares covered by such
registration or qualification statement to be registered with or
approved by such other governmental authorities, agencies or
instrumentalities as may be necessary to enable such Rightsholder to
consummate the disposition of such Rightsholder's Shares in accordance
with applicable law;
(vi) furnish to such Rightsholder a signed counterpart, addressed to
the Rightsholder (and the underwriters, if any) of: (A) an opinion of
counsel for the Corporation, dated the effective date of such
registration or qualification statement (or, if such registration or
qualification relates to an underwritten offering, dated the date of
<PAGE>
7
the closing under the underwriting agreement), reasonably satisfactory
in form and substance to such Rightsholder, and (B) a "comfort letter,"
dated the effective date of such registration statement (and, if such
registration or qualification relates to an underwritten offering,
dated the date of the closing under the underwriting agreement), signed
by the independent public accountants who have certified the
Corporation's financial statement included in such registration
statement, such opinion and "comfort letter" to cover substantially the
same matters with respect to such registration or qualification
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and, in the
case of the legal opinion, such other legal matters, and, in the case
of the accountants' letter, such other financial matters, as such
Rightsholder (or the underwriters, if any) may reasonably request;
(vii) notify all Rightsholders at any time when a prospectus relating
to the Rightsholder's Shares is required to be delivered under the Act,
upon discovery that, or upon the occurrence of any event as a result of
which, the prospectus included in such registration or qualification
statement, as then in effect, included an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, and at the
request of such Rightsholder promptly prepare and furnish to such
Rightsholder a reasonable number of copies of an amendment of or a
supplement to such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and furnish to such Rightsholder at
least one business day prior to the filing thereof a copy of any
amendment or supplement to such registration or qualification statement
or prospectus and shall not file any thereof to which such Rightsholder
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Act or the rules or regulations thereunder; and
<PAGE>
8
(ix) provide and cause to be maintained a transfer agent and registrar
for all Shares covered by such registration statement from and after a
date not later than the effective date of such registration or
qualification statement.
(b) The Corporation may require each holder of Shares as to which any
registration or qualification is being effected to furnish to the Corporation
such information regarding such holder and the distribution of such securities
as the Corporation may from time to time reasonably request in writing.
(c) Each Rightsholder hereby agrees and covenants that upon receipt of any
notice from the Corporation of the occurrence of an event of the kind specified
in Subparagraph 3(a)(viii) above, such Rightsholder will forthwith discontinue
such Rightsholder's disposition of the Shares pursuant to the registration or
qualification statement relating to such Shares until receipt of the copies of
the supplemented or amended prospectus contemplated by such Subparagraph
3(a)(vii), and, if so directed by the Corporation, will deliver to the
Corporation (at the Corporation's expense) all copies, other than permanent file
copies, then in such Rightsholder's possession, of the prospectus relating to
such notice.
4. Prospectus and Expenses.
Whenever the Corporation is required by the provisions of Sections 1 or
2 above to use its best efforts to effect a registration or qualification of any
Shares, all expenses incurred by the Corporation in connection therewith,
including registration or filing fees, Blue Sky fees and expenses (except as
provided in Subparagraph 3(a)(iv)), printing expenses and fees, compensation of
regular employees and counsel and independent accountants for the Corporation
and disbursements of counsel and of independent accountants of the Corporation,
shall be borne by the Corporation.
5. Preparation; Reasonable Investigation.
In connection with the preparation and filing of each registration or
qualification statement under the Act pursuant to this Agreement, the
Corporation shall allow a Rightsholder, its or his underwriters, if any, and
their respective counsel and accountants, at such Rightsholder's sole cost, the
opportunity to participate in the preparation of such registration or
qualification statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and shall give each of them
such access to its books and records and such opportunities to discuss the
business and affairs of the Corporation with its officers and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of such Rightsholder's and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Act.
<PAGE>
9
6. Indemnification.
In the event that the Corporation shall be obligated to use its best
efforts to effect any registration or qualification pursuant to this Agreement,
the following shall apply:
(a) Indemnification by the Corporation.
The Corporation shall indemnify and hold harmless each
Rightsholder, its directors and officers, if any, each other person who
participates as an underwriter in the offering or sale of such Shares
and each other person, if any, who controls such Rightsholder or any
such underwriter within the meaning of the Act, against any losses,
liabilities, obligations, claims or damages, joint or several, which
such Rightsholder or any such director, officer, underwriter or
controlling person may suffer or incur, or to which any of them may
become subject, under the Act or otherwise, incidental to any suit,
action, investigation or other proceeding, insofar as such losses,
liabilities, obligations, claims or damages arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in a registration statement under which Shares are
registered under the Act, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Corporation shall pay such
Rightsholder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably
incurred by them in connection with defending any such loss, liability,
obligation, claim or damage; provided that the Corporation shall not be
liable in any such case to the extent that any such loss, liability,
obligation, claim, damage or expense arises out of or is based upon an
untrue statement or alleged untrue statement in, or omission or alleged
omission from, such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement made in
reliance upon and in conformity with written information furnished to
the Corporation by such Rightsholder for use in the preparation of such
registration or qualification statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; and provided
further that the Corporation shall not be liable to any person who
participates as an underwriter in the offering or sale of Shares or any
other person, if any, who controls such underwriter within the meaning
<PAGE>
10
of the Act, in any such case to the extent that any such loss,
liability, obligation, claim, damage or expense arises out of or is
based upon such person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the
person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of
the sale of Shares to such person if such statement or omission was
corrected in such final prospectus. Such indemnification shall remain
in full force and effect regardless of any investigation made by or on
behalf of such Rightsholder or any such director, officer, underwriter
or controlling person and shall survive the transfer of shares by such
Rightsholder.
(b) Indemnification by Shareholders.
The Corporation may require, as a condition to including any
Shares in any registration statement or qualification document filed
pursuant to this Agreement, that it shall have received an undertaking
satisfactory to it from each and every Rightsholder whose Shares are to
be included in such registration statement or qualification document to
indemnify and hold harmless (in the same manner and to the same extent
as set forth in paragraph (a) of this Section 6) the Corporation, its
directors and officers, and each other person, if any, who controls the
Corporation within the meaning of the Act, with respect to any
statement or alleged statement in, or omission or alleged omission
from, such registration or qualification statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein,
or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Corporation by
such Rightsholder for use in the preparation of such registration or
qualification statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnification shall
remain in full force and effect, regardless of any investigation made
by or on behalf of the Corporation or any such director, officer or
controlling person and shall survive the transfer of Warrant Shares by
such Rightsholder.
(c) Procedures.
Promptly after notice to an indemnified party of the
commencement of any suit, action, investigation or other proceeding
involving any loss, liability, obligation, claim or damages referred to
in Paragraphs 6(a) or (b), such indemnified party shall, if a claim for
indemnification in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the
<PAGE>
11
commencement of such proceeding, setting forth in reasonable detail the
nature of such suit, action, investigation or other proceeding and the
basis upon which such party seeks indemnification hereunder; provided
that the failure of any indemnified party to give such notice shall not
relieve the indemnifying party of its obligations under such
Paragraphs, except to the extent that the indemnifying party is
actually prejudiced by the failure to give such notice. In case any
such proceeding is brought against an indemnified party, and provided
that proper notice is duly given, the indemnifying party shall assume
the defense thereof insofar as such proceeding involves any loss,
liability, obligation, claim or damages in respect of which
indemnification may be sought hereunder, with counsel reasonably
satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its assumption of the
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof (but the
indemnified party shall have the right, but not the obligation, to
participate, at its own cost and expense, in such defense by counsel of
its own choice) or for any amounts paid or foregone by the latter as a
result of the settlement or compromise thereof (without the written
consent of the indemnifying party), except that, if both the
indemnifying party and the indemnified party are named as parties or
subject to such proceeding and either such party determines with the
advise of counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the other party or that a material conflict of interest
between such parties may exist in respect of such proceeding, the
indemnifying party may decline to assume the defense on behalf of the
indemnified party or the indemnified party may retain the defense on
its own behalf, and, in such case, after notice to such effect is duly
given hereunder to the other party, the indemnifying party shall be
relieved of its obligation to assume the defense on behalf of the
indemnified party, but shall be required to pay any legal or other
expenses, including, without limitation, reasonable attorneys' fees and
disbursements incurred by the indemnified party in such defense;
provided, however, that the indemnifying party shall not be liable for
such expenses on account of more than one separate firm of attorneys
(and, if necessary, local counsel) at any time representing such
indemnified party or parties in connection with any proceeding or
separate proceedings in the same jurisdiction arising out of or based
upon substantially the same allegations or circumstances. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or proceeding.
<PAGE>
12
Provided that proper notice is duly given, if the indemnifying party
shall fail promptly and diligently to respond to, contest or defend
against such suit, action, investigation or other proceeding, the
indemnified party may assume the defense thereof and may make any
compromise or settlement with respect thereto, and may recover the
entire cost and expense thereof, including, without limitation,
reasonable attorneys' fees, disbursements and all amounts paid or
foregone as a result of such suit, action, investigation or other
proceeding, or the settlement or compromise thereof, from the
indemnifying party.
(d) Other Indemnification.
Indemnification similar to that specified in this Section 6
shall be given by the Corporation and the Rightsholders with respect to
any registration or other qualification of securities required under
any federal or state statute or rule or regulation of any governmental
authority, agency or instrumentality, other than the Act.
(e) Indemnification Payments.
The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills or invoices are received or
loss, liability, obligation, damage or expense is actually suffered or
incurred.
7. Transfer.
This Agreement and the rights granted hereunder may not be
transferred or assigned by either or both of the Rightsholders without the prior
written consent of the Corporation.
8. Notices.
Any notice or demand required or permitted to be given or made
to or upon any party hereto pursuant to any of the provisions of this Agreement
shall be deemed to have been duly given or made for all purposes if: (a) in
writing and delivered by hand against receipt, or sent by certified or
registered mail, postage prepaid, return receipt requested, or (b) sent by
telegram, telex, facsimile or other electronic means and followed by a copy
delivered or sent in the manner provided in (a) above, to such party at the
following address:
<PAGE>
13
To the Corporation: 14 Meteor Drive
Etobicoke, Ontario M9W 1A4
Attn.: President
Facsimile: (416) 675-8838
with a copy to: Mintz & Fraade, P.C.
488 Madison Avenue - 11 Floor
New York, New York 10022
Facsimile: (212) 496-0701
To each of the Rightsholders: 49 Ennisclare Drive East
Oakville, Ontario L6J 4N3
Attn.: President
Facsimile: (905) 827-1154
with a copy to: Jackson L. Chercover, Q.C.
111 Avenue Road - Suite 805
Toronto, Ontario M5R 3J8
Facsimile: (416) 925-6811
or such other address as any such party may at any time, or from time to time,
direct by notice given to the other parties in accordance with this Section 8.
The date of giving or making of any such notice or demand shall be, if sent in
accordance with (a) above, the earlier of the date of actual receipt or five
business days after such notice or demand is sent, or, if sent in accordance
with (b) above, the business day next following the day such notice or demand is
actually transmitted.
9. Amendments.
Except as otherwise provided herein, no amendment or termination of
this Agreement shall be valid or effective, unless in writing and signed by or
on behalf of the parties hereto.
10. Waiver.
No course of dealing or omission or delay on the part of any party
hereto in asserting or exercising any right hereunder shall constitute or
operate as a waiver of any such right. No waiver of any provision hereof shall
be effective, unless in writing and signed by or on behalf of the party to be
charged therewith. No waiver shall be deemed a continuing waiver or waiver in
respect of any other or subsequent breach or default, unless expressly so stated
in writing.
<PAGE>
14
11. Applicable Law.
This Agreement shall be governed by, and interpreted and enforced in
accordance with, the laws of the State of New York applicable to agreements made
and to be performed entirely within that State.
12. Jurisdiction.
Each of the parties hereto hereby irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located therein in connection with any suit, action or other proceeding arising
out of or relating to this Agreement or the transactions contemplated thereby.
13. Remedies.
The parties hereto acknowledge and agree that, in the event of an
actual or prospective breach or default by any party hereto, the other party may
not have an adequate remedy at law. Accordingly, in the event of any such actual
or prospective breach or default by any party, the other parties shall be
entitled to such equitable relief, including remedies in the nature of
injunction and specific performance, as may be available to restrain any person
from causing or participating in any such actual or prospective breach or
default. All remedies hereunder are cumulative and not exclusive, and nothing
herein shall be deemed to prohibit or limit any party from pursuing any other
remedy or relief available at law or in equity for such actual or prospective
breach or default, including the recovery of damages.
14. Binding Effect.
This Agreement and the various rights and obligations arising hereunder
shall inure to the benefit of, and be binding upon, the parties hereto and their
respective legal representatives, successors and (subject to the provisions of
Section 7 hereof) assigns.
15. Severability.
In the event that any provision of this Agreement shall be deemed
invalid or unenforceable in any respect by a court of competent jurisdiction,
the remaining provisions shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any invalid or
unenforceable provision shall be deemed, without further action on the part of
the parties hereto, amended and limited to the extent necessary to render the
same valid and enforceable.
<PAGE>
15
16. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
17. Further Assurances.
Each party hereto covenants and agrees promptly to execute, deliver,
file and/or record such agreements, instruments, certificates and other
documents and to do and perform such other and further acts and things as any
other party hereto may reasonably request or as may otherwise be necessary or
proper to consummate and perfect the transactions contemplated hereby.
18. Captions.
The headings or captions of the Sections and Paragraphs of this
Agreement are for convenience and reference only and do not in any way define or
interpret the intent of the parties or modify or otherwise affect any of the
provisions hereof.
19. Entire Agreement.
This Agreement embodies the entire agreement of the parties hereto with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
NTN CANADA, INC.
By: /s/ Peter Rona
------------------------
Peter Rona, President
ATTEST:
/s/ David Auger
- - ------------------------
David Auger, Secretary
<PAGE>
16
CONNOLLY-DAW HOLDINGS INC.
By: /s/ Wendy Connolly
----------------------------
Wendy Connolly, President
ATTEST:
/s/ Douglas Connolly
- - ---------------------------
Douglas Connolly, Secretary
1199846 ONTARIO LTD.
By: /s/ Douglas Connolly
----------------------------
Douglas Connolly, President
ATTEST:
/s/ Wendy Connolly
- - -----------------------
Wendy Connolly,
Secretary- Treasurer
<PAGE>
Schedule I to Registration
Rights Agreement
Rightsholder Number of Shares Subject to this
Agreement
Connolly-Daw Holdings Inc. 110,469
1199846 Ontario Ltd. 85,918
-------
TOTAL: 196,387
=======
<PAGE>
Exhibit 10.7
SHARE PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made the 1st day of October, 1996,
B E T W E E N:
TELESAT CANADA, a corporation
---------------
incorporated pursuant to the laws of Canada,
(hereinafter referred to as the "Vendor"),
OF THE FIRST PART;
-and-
NTN INTERACTIVE NETWORK INC., a
-----------------------------
corporation amalgamated pursuant to the laws
of Canada,
(hereinafter referred to as the "Purchaser"),
OF THE SECOND PART.
WHEREAS the Vendor beneficially owns and controls all of the issued
and outstanding Class A special shares in the capital of Magic Lantern
Communications Ltd., a corporation amalgamated pursuant to the laws of Canada
(hereinafter referred to as the "Company");
AND WHEREAS the Vendor desires to sell and the Purchaser desires to
purchase the said issued and outstanding shares in the capital of the Company
owned by the Vendor, all upon and subject to the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
agreements and covenants herein contained (the adequacy of which consideration
as to each of the parties hereto is hereby mutually admitted), the parties
hereto hereby covenant and agree as follows:
<PAGE>
2
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions. Whenever used in this Agreement, unless there is
something in the subject matter or context inconsistent therewith, the following
words and terms shall have the respective meanings ascribed to them as follows:
(a) "Agreement" means this Share Purchase Agreement and all
instruments supplemental hereto or in amendment or confirmation
hereof;
(b) "Business Day" means a day other than a Saturday, Sunday or any
day on which the principal commercial banks located at Toronto,
Ontario are not open for business during normal banking hours;
(c) "Closing" means the completion of the sale to and purchase by the
Purchaser of the Purchased Shares hereunder by the transfer and
delivery of documents of title thereto and the payment of the
purchase price therefor as contemplated herein;
(d) "Closing Date" means the 1st day of October, 1996, or such other
date as the Parties may agree as the date upon which the Closing
shall take place;
(e) "Closing Time" means 10:00 o'clock a.m. Toronto time, on the
Closing Date or such other time on such date as the Parties may
agree as the time at which the Closing shall take place;
(f) "Parties" means the Vendor and the Purchaser, collectively, and
"Party" means any one of them;
(g) "Person" means any individual, corporation, partnership, trustee
or trust or unincorporated association, and pronouns have a
similarly extended meaning;
(h) "Purchaser's Counsel" means Messrs. Walker, Head, Barristers and
Solicitors, of Pickering, Ontario;
(i) "Purchase Price" means the purchase price to be paid by the
Purchaser to the Vendor for the Purchased Shares as provided in
Article 2 hereof;
<PAGE>
3
(j) "Purchased Shares" means the 1,000 issued and outstanding Class A
special shares in the capital of the Company; and
(k) "Vendor's Counsel" means Jennifer E. Perkins, Secretary and
General Counsel of the Vendor.
Terms defined in the preamble to this Agreement shall have the same
meanings herein as are ascribed thereto in the preamble.
1.2 Gender and Number - Words importing the singular include the plural
and vice versa; words importing gender include all genders.
1.3 Entire Agreement - This Agreement, including the Schedules hereto,
together with the agreements and other documents to be delivered pursuant
hereto, constitute the entire agreement between the Parties pertaining to the
subject matter hereof and supercede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties and there
are no warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth
herein and therein.
1.4 Waivers, etc. - No supplement, modification, waiver or termination
of this Agreement shall be binding unless executed in writing by the Party to
be bound thereby. No waiver of any of the provisions of this Agreement, in whole
or in part, shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
1.5 Other Words and Phrases - In this Agreement, unless otherwise
expressly provided, (i) the words "hereof", "herein", "hereto" and "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, Subsection, paragraph or other subdivision, and
(ii) all references to designated "Articles", "Sections", "Subsections",
"paragraphs" or other subdivisions are to the designated Articles, Sections,
Subsections, paragraphs and other subdivisions of this Agreement.
1.6 Headings - The Article and Section headings contained herein are
included solely for convenience of reference, are not intended to be full or
accurate descriptions of the content thereof and shall not be considered part of
this Agreement.
1.7 Applicable Law - This Agreement and the rights, obligations and
relations of the Parties shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein, and the courts of Ontario shall have exclusive jurisdiction to
entertain any action in connection with this Agreement.
<PAGE>
4
1.8 Currency - Unless otherwise specified, all references to currency
herein are deemed to mean lawful money of Canada, and all amounts to be paid or
calculated pursuant to this Agreement are to be paid or calculated in lawful
money of Canada.
1.9 Schedules - the following are the schedules attached to and
incorporated in this Agreement by reference and deemed to be an integral part
hereof:
Schedule "A" -- Release
Schedule "B" -- Mutual Release
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase Price - At the Closing Time, the Vendor shall sell and
the Purchaser shall purchase the Purchased Shares for an aggregate purchase
price of $250,000.00
2.2 Action by Vendor and Purchaser at the Closing Time -
(a) Delivery of Certificates, etc. - The Vendor shall transfer and deliver
to the Purchaser at the Closing share certificates representing the
Purchased Shares duly endorsed in blank for transfer. The Vendor shall
take such steps as shall be necessary to cause the Company to enter
the Purchaser or its nominee upon the books of the Company as the
holder of the Purchased Shares and to issue share certificates to the
Purchaser or its nominee representing the Purchased Shares;
(b) Payment to the Vendor - The Purchase Price specified in Section 2.1
shall be paid and satisfied by the delivery by the Purchaser to the
Vendor at the Closing of a certified cheque or bank draft payable to
or to the order of the Vendor in the amount of $250,000.00.
2.3 Place of Closing - The Closing shall take place at the Closing
Time at the offices of the Purchaser's Counsel or at such other place as may be
agreed upon by the Vendor and the Purchaser.
2.4 Tender - Any tender of documents or money hereunder may be made
upon the Parties or their respective counsel, and money may be tendered by
official bank draft drawn upon a Canadian chartered bank or by negotiable cheque
payable in Canadian funds and certified by a Canadian chartered bank or trust
company.
<PAGE>
5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Vendor - The Vendor hereby
represents and warrants to the Purchaser as follows and acknowledges that the
Purchaser is relying on such representations and warranties in connection with
the transactions contemplated by this Agreement:
(a) Organization and Valid Existence - The Vendor is a corporation duly
incorporated and organized and is validly existing under the laws of
Canada and the Vendor has all necessary corporate power, authority
and capacity to own and dispose of the Purchased Shares. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereunder have been duly authorized by all
necessary corporate action on the part of the Vendor.
(b) Enforceability of Obligations - This Agreement constitutes a valid and
binding obligation of the Vendor enforceable against it in accordance
with its terms, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the court from
which they are sought.
(c) Right to sell - The Vendor:
(i) is the sole beneficial owner of the Purchased Shares, which
shares constitute all the issued and outstanding Class A
special shares in the capital of the Company;
(ii) has the exclusive right to dispose of the Purchased Shares as
herein provided and such disposition will not violate,
contravene, breach or offend against or result in any default
under any indenture, mortgage, lease, agreement, instrument,
charter or by-law provision, statute, regulation, order,
judgment, decree or law to which the Vendor is a party or
subject or by which the Vendor is bound or affected; and
(iii) is the holder of record of all the Purchased Shares, free and
clear of any liens, charges, encumbrances or rights of others
(other than the rights of the Purchaser hereunder) and no
Person (other than the Purchaser hereunder) has any agreement,
option or any rights capable of becoming an agreement or option
for the acquisition of the Purchased Shares;
<PAGE>
6
(d) Residence of the Vendor - The Vendor is not a non-resident of Canada
for the purposes of the Income Tax Act (Canada);
(e) Third Party Approvals - There are no approvals, consents or waivers
required to be obtained or applications required to be filed from or
with governmental authorities in Canada or from any other Person
whatsoever, including pursuant to any contracts containing
prohibitions to the within transactions, in order to permit the
transactions contemplated herein;
(f) Full Disclosure - None of the foregoing representations, warranties
and statements of fact contains any untrue statement of material fact
or omits to state any material fact necessary to make any such
statement or representation not misleading to a prospective purchaser
of the Purchased Shares.
3.2 Representations and Warranties of the Purchaser - The Purchaser hereby
represents and warrants to the Vendor as follows and acknowledges that the
Vendor is relying on such representations and warranties in connection with
the transactions contemplated by this Agreement.
(a) Organization and Valid Existence - The Purchaser is a corporation duly
amalgamated and organized and is validly existing under the laws of
Canada and has all necessary corporate power, authority and capacity
to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action on the part of the
Purchaser;
(b) Enforceability of Obligations - This Agreement constitutes a valid and
binding obligation of the Purchaser enforceable against it in
accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the court
from which they are sought;
(c) Residence of the Purchaser - The Purchaser is not a non-Canadian
within the meaning of the Investment Canada Act.
3.3 No Broker - Each of the Parties represents and warrants to the others
that all negotiations relating to this Agreement and the transactions
contemplated hereby have been carried on between them directly and without the
intervention of any other party in such manner as to give rise to any valid
claims against any of the Parties for a brokerage commission, finder's fee or
other like payment.
<PAGE>
7
3.4 Non-Waiver - No investigations made by or on behalf of the Purchaser
at any time shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty made by the Vendor herein or
pursuant hereto.
3.5 Nature and Survival of Representations, Warranties and Covenants -
All statements contained in any certificate or other instrument delivered by or
on behalf of a Party pursuant to or in connection with the transactions
contemplated by this Agreement shall be deemed to be made by such Party
hereunder. All representations, warranties, covenants and agreements herein
contained on the part of each of the Parties shall survive the Closing, the
execution and delivery hereunder of share or security transfer instruments and
other documents of title to the Purchased Shares and the payment of the
consideration therefor, provided that the representations and warranties
contained in Section 3.1, Section 3.2 and Section 3.3 shall only survive for a
period of three (3) years from the Closing Time (such time hereinafter called
the "Warranty Expiry Time").
If no claim has been made against a Party hereto with respect to any
incorrectness or misrepresentation in any such representation or warranty prior
to the Warranty Expiry Time, such Party shall have no further liability
hereunder with respect to such representation and warranty.
ARTICLE 4
CONDITIONS PRECEDENT TO THE PERFORMANCE
BY THE PURCHASER AND THE VENDOR OF
THEIR OBLIGATIONS UNDER THIS AGREEMENT
4.1 Purchaser's Conditions - The obligation of the Purchaser to
complete the purchase of the Purchased Shares hereunder shall be subject to the
satisfaction of, or compliance with, in all materials respects, at or before the
Closing Time, each of the following conditions precedent (each of which is
hereby acknowledged to be inserted for the exclusive benefit of the Purchaser
and may be waived by it in whole or in part):
(a) Truth and Accuracy of Representations of Vendor at the Closing
Time - All of the representations and warranties of the Vendor
made in or pursuant to this Agreement, including, without
limitation, the representations and warranties made by the Vendor
and set forth in Sections 3.1 and 3.3 hereof, shall be true and
correct as at the Closing Time, and the Purchaser shall have
received a certificate from a duly authorized senior officer of
<PAGE>
8
the Vendor confirming the truth and correctness of the
representations and warranties of the Vendor contained herein;
(b) Performance of Obligations - The Vendor shall have performed or
complied with, in all respects, all of its obligations, covenants
and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating to
the due authorization and completion of the sale and purchase
hereunder of the Purchased Shares and all actions and proceedings
taken on or prior to the Closing in connection with the
performance by the Vendor of its obligations under this Agreement
shall be satisfactory to the Purchaser and Purchaser's Counsel
and the Purchaser shall have received copies of all such
documentation or other evidence as it may reasonably request in
order to establish the consummation of the transactions
contemplated hereby and the taking of all corporate proceedings
in connection therewith in compliance with these conditions, in
form (as to certification and otherwise) and substance
satisfactory to the Purchaser and Purchaser's Counsel;
(d) Release - The Vendor shall have executed and delivered to the
Purchaser a release in the form of the unexecuted release annexed
hereto as Schedule "A";
(e) Mutual Release - The Vendor shall have executed and delivered to
the Purchaser a mutual release in regard to an agreement between
the Vendor, the Company and Canadian Satellite Learning Services
Inc. dated October 13, 1995, in the form of the unexecuted mutual
release annexed hereto as Schedule "B".
4.2 Vendor's Conditions - The obligations of the Vendor to complete
the sale of the Purchased Shares hereunder shall be subject to the satisfaction
of or compliance with, at or before the Closing Time, each of the following
conditions precedent (each of which is hereby acknowledged to be inserted for
the exclusive benefit of the Vendor and may be waived by it in whole or in
part):
(a) Truth and Accuracy of Representations of Purchaser at Closing
Time - All of the representations and warranties of the Purchaser
made in or pursuant to this Agreement, including, without
limitation, the representations and warranties made by the
Purchaser and set forth in Sections 3.2 and 3.3 hereof, shall be
true and correct as at the Closing Time and with the same effect
<PAGE>
9
as if made at and as of the Closing Time and the Vendor shall
have received a certificate from a duly authorized senior officer
of the Purchaser confirming the truth and correctness of the
representations and warranties of the Purchaser contained herein;
(b) Performance of Obligations - The Purchaser shall have performed
or complied with, in all respects, all of its obligations,
covenants and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating to
the due authorization and completion of the sale and purchase
hereunder of the Purchased Shares and all actions and proceedings
taken on or prior to the Closing in connection with the
performance by the Purchaser of its obligations under this
Agreement shall be satisfactory to the Vendor and Vendor's
Counsel and the Vendor shall have received copies of all such
documentation or other evidence as it may reasonably request in
order to establish the consummation of the transactions
contemplated hereby and the taking of all corporate proceedings
in connection therewith in compliance with these conditions, in
form (as to certification and otherwise) and substance
satisfactory to the Vendor and Vendor's Counsel;
(d) The Purchaser shall have arranged for the execution and delivery
to the Vendor of a mutual release in regard to an agreement
between the Vendor, the Company and Canadian Satellite Learning
Services Inc. dated October 13, 1995, in the form of the
unexecuted mutual release annexed hereto as Schedule "B".
ARTICLE 5
INDEMNIFICATION
5.1 Mutual Indemnifications for Breaches of Warranty, etc. - The
Vendor hereby covenants and agrees with the Purchaser, and the Purchaser hereby
covenants and agrees with the Vendor (the Party so covenanting and agreeing to
indemnify another Party being hereinafter in this Section 5.1 referred to as the
"Indemnifying Party" and the party so to be indemnified being hereinafter
referred to as the "Indemnified Party") to indemnify and save harmless the
Indemnified Party, effective as and from the Closing Time, from and against any
claims, demands, actions, causes of action, damage, loss, costs, liability or
expense (hereinafter in this Article 5 called "Claims") which may be brought
against the Indemnified Party and/or which it may suffer or incur as a result
of, in respect of, or arising out of any material non-fulfillment of any
<PAGE>
10
covenant or agreement on the part of the Indemnifying Party under this Agreement
or any incorrectness in or breach of any representation or warranty of the
Indemnifying Party contained herein or in any certificate or other document
furnished by the Indemnifying Party pursuant hereto. The foregoing obligation of
indemnification in respect of such Claims shall be subject to the limitation
mentioned in Section 3.5 hereof respecting the survival of the representations
and warranties of the Parties.
ARTICLE 6
GENERAL
6.1 Public Notices - Except for disclosures required by law, all public
notices to third parties and all other publicity concerning the transactions
contemplated by this Agreement shall be jointly planned and co-ordinated by the
Vendor and the Purchaser and no Party shall act unilaterally in this regard
without the prior approval of the other of them, such approval not to be
unreasonably withheld.
6.2 Expenses - All costs and expenses (including without limitation, the
fees and disbursements of legal counsel) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Party
incurring such expenses.
6.3 Time - Time shall be of the essence hereof.
6.4 Notices - Any notice, direction or other document required or
permitted to be given hereunder or for the purposes hereof (hereinafter in this
Section 6.4 called a "notice") to any Party shall be in writing and shall be
sufficiently given if delivered personally, or if sent by prepaid registered
mail or if transmitted by facsimile to such Party:
(a) in the case of a notice to Vendor at:
1601 Telesat Court
Gloucester, Ontario
K1B 5P4
Facsimile No.: 613-748-8712
Attention: Jennifer E. Perkins
Secretary and General Counsel
(b) in the case of a notice to the Purchaser at:
<PAGE>
11
14 Meteor Drive
Etobicoke, Ontario
M9W 1A4
Facsimile No.: 416-675-8838
Attention: President
with a copy to Purchaser's Counsel at
Walker, Head
Barristers & Solicitors
Suite 200, 1305 Pickering Parkway
Pickering, Ontario
L1V 3P2
Facsimile No. 905-420-1073
Attention: Mr. Victor A. Sgro
or at such other address as the Party to whom such writing is to be given shall
have last notified the Party giving the same in the manner provided in this
section. any notice delivered to the Party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on the day
it is so delivered at such address, provided that if such day is not a Business
Day then the notice shall be deemed to have been given and received on the first
Business Day next following such day. Any notice mailed as aforesaid shall be
deemed to have been given and received on the third Business Day following the
date of its mailing. Any notice transmitted by facsimile shall be deemed given
and received on the first Business Day after its transmission. Failure to
transmit timely or adequate notice to Vendor's Counsel or to Purchaser's
Counsel, as the case may be, shall not invalidate, nullify or otherwise
detrimentally affect the provision of same to a Party.
6.5 Assignment - Neither this Agreement nor any rights or obligations
hereunder shall be assignable by any Party without the prior written consent
of the other Party hereto. Subject thereto, this Agreement shall enure to the
benefit of and be binding upon the Parties and other respective successors
(including any successor by reason of amalgamation of the Purchaser or the
Vendor) and permitted assigns.
6.6 Further Assurances - The Parties hereto shall with reasonable
diligence do all such things and provide all such reasonable assurances as may
be required to consummate the transactions contemplated hereby, and each Party
shall provide such further documents or instruments required by any other Party
as may be reasonably necessary or desirable to effect the purpose of this
Agreement and carry out its provisions, whether before or after the Closing.
<PAGE>
12
6.7 Severability - If any covenant or provision of this Agreement is
prohibited in whole or in part in any jurisdiction, such covenant or provision
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition without invalidating the remaining covenants and provisions hereof
and shall, as to such jurisdiction, be deemed to be severed from this Agreement
to the extent of such prohibition.
6.8 Counterparts - This Agreement may be executed by the Parties in
separate counterparts each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF the Parties have hereunto duly executed this
Agreement.
TELESAT CANADA
Per: /s/ L. J. Boisvert
-----------------------------------------
L. J. Boisvert, President & C.E.O.
Per: /s/ J. E. Perkins
-----------------------------------------
J. E. Perkins, Secretary
NTN INTERACTIVE NETWORK INC.
Per: /s/ Peter Rona
-----------------------------------------
President - Peter Rona
<PAGE>
SCHEDULE "A"
RELEASE
TO: Magic Lantern Communications Ltd.
(herein called the "Release")
KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good
and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of
Canada now paid by the Releasee to the undersigned (herein called the
"Releasor"), the receipt and sufficiency of which is hereby acknowledged, the
Releasor hereby remises, releases and forever discharges the Releasee, of and
from all manner of actions, causes of action, suits, debts, dues, duties,
accounts, bonds, covenants, contracts, claims and demands whatsoever which
against the Releasee, the Releasor, as a shareholder of the Releasee, ever had,
now has or hereafter can, shall or may have for or by reason of or in any way
arising out of any cause, matter or thing whatsoever existing up to the present
time relating to, or arising directly or indirectly by reason of or as a
consequence of, the Releasor; having been a shareholder of the Releasee.
AND in consideration of the foregoing, the Releasor covenants and
agrees not to make any claims or take any proceedings against any corporation,
firm or person which could claim contribution and/or indemnity against the
Releasee, pursuant to the provisions of any statute or otherwise with respect to
any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors and assigns of the Releasee and shall be binding
upon and enforceable against the successors of the Releasor.
IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st
day of October, 1996.
TELESAT CANADA
Per: ______________________________
Per: ______________________________
<PAGE>
SCHEDULE "B"
MUTUAL RELEASE
The undersigned hereby acknowledge and agree that the agreement between
the undersigned and Canadian Satellite Learning Services Inc. dated October 13,
1995 (the "Agreement") is hereby terminated and cancelled and of no further
force and effect, and the undersigned further hereby remise, release and forever
discharge each other of and from all manner of actions, causes of action,
suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and
demands which against each other, each of them ever had, now has or hereafter
can, shall or may have for or by reason of or in any way arising out of the
Agreement.
AND in consideration of the foregoing, each of the undersigned
covenants and agrees not to make any claims or take any proceedings against any
corporation, firm or person which could claim contribution and/or indemnity
against the other of them, pursuant to the provisions of any statute or
otherwise with respect to any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors of the undersigned and shall be binding upon and
enforceable against the successors of the undersigned.
IN WITNESS WHEREOF the undersigned has duly executed this Release the
1st day of October, 1996.
TELESAT CANADA
Per: ______________________________
Per: ______________________________
MAGIC LANTERN COMMUNICATIONS
LTD.
Per: ______________________________
Per: ______________________________
<PAGE>
RELEASE
TO: Magic Lantern Communications Ltd.
(herein called the "Releasee")
KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good
and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of
Canada now paid by the Releasee to the undersigned (herein called the
"Releasor"), the receipt and sufficiency of which is hereby acknowledged, the
Releasor hereby remises, releases and forever discharges the Releasee, of and
from all manner of actions, causes of action, suits, debts, dues, duties,
accounts, bonds, covenants, contracts, claims and demands whatsoever which
against the Releasee, the Releasor, as a shareholder of the Releasee, ever had,
now has or hereafter can, shall or may have for or by reason of or in any way
arising out of any cause, matter or thing whatsoever existing up to the present
time relating to, or arising directly or indirectly by reason of or as a
consequence of, the Releasor having been a shareholder of the Releasee.
AND in consideration of the foregoing, the Releasor covenants and
agrees not to make any claims or take any proceedings against any corporation,
firm or person which could claim contribution and/or indemnity against the
Releasee, pursuant to the provisions of any statute or otherwise with respect to
any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors and assigns of the Releasee and shall be binding
upon and enforceable against the successors of the Releasor.
IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st
day of October, 1996.
TELESAT CANADA
Per: /s/ L. J. Boisvert
-----------------------------------
L. J. Boisvert, President & C.E.O.
Per: /s/ J. E. Perkins,
-----------------------------------
J. E. Perkins, Secretary
<PAGE>
MUTUAL RELEASE
The undersigned hereby acknowledge and agree that the agreement between
the undersigned and Canadian Satellite Learning Services Inc. dated October 13,
1995 (the "Agreement") is hereby terminated and cancelled and of no further
force and effect, and the undersigned further hereby remise, release and forever
discharge each other of and from all manner of actions, causes of action,
suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and
demands which against each other, each of them ever had, now has or hereafter
can, shall or may have for or by reason of or in any way arising out of the
Agreement.
AND in consideration of the foregoing, each of the undersigned
covenants and agrees not to make any claims or take any proceedings against any
corporation, firm or person which could claim contribution and/or indemnity
against the other of them, pursuant to the provisions of any statute or
otherwise with respect to any of the aforesaid matters.
AND the provisions hereof shall enure to the benefit of and be
enforceable by the successors of the undersigned and shall be binding upon and
enforceable against the successors of the undersigned.
IN WITNESS WHEREOF the undersigned has duly executed this Release the
1st day of October, 1996.
TELESAT CANADA
Per: /s/ L. J. Boisvert
-----------------------------------
L. J. Boisvert, President & C.E.O.
Per: /s/ J. E. Perkins,
-----------------------------------
J. E. Perkins, Secretary
MAGIC LANTERN COMMUNICATIONS
LTD.
Per: /s/ Douglas Connolly
-----------------------------------
President, Douglas Connolly
Per: /s/ Jackson L. Chercover
-----------------------------------
Secretary, Jackson L. Chercover
