SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of the
fifth day of May, 2003, by and among NTN Communications, Inc., a Delaware
corporation (the "Company"), Buzztime Entertainment, Inc., a Delaware
corporation ("Buzztime"), and Media General, Inc., a Virginia corporation (the
"Investor," and collectively with the Company and Buzztime, the "Parties").
The Parties hereby agree as follows:
1. AUTHORIZATION OF SALE OF THE SECURITIES
The Company and Buzztime have authorized the sale and issuance of certain
units (the "Units"; each Unit consisting of one share of the Company's common
stock, par value $.005 per share, and one-fourth of a warrant to purchase one
share of Buzztime's common stock, par value $.001 per share). The shares of the
Company's common stock sold hereunder shall be referred to herein as the
"Shares," the Buzztime warrants sold hereunder shall be referred to herein as
the "Warrants," and the shares of Buzztime common stock underlying the Warrants
shall be referred to herein as the "Warrant Shares." A form of the Warrant is
attached as Appendix I.
At the Closing, the Company and the Investor will enter into the NTN
Investor Rights Agreement and the Company, Buzztime and the Investor will enter
into the Buzztime Investor Rights Agreement. The warrants exercisable for shares
of the Company's common stock that are issuable upon the exchange of the
Warrants pursuant to the Buzztime Investor Rights Agreement (subject to
adjustment to reflect stock splits, combinations, stock dividends, mergers or
reclassifications) shall be referred to herein as the "Exchange Warrants." The
shares of the Company's common stock that are issuable upon the exchange of the
Warrant Shares pursuant to the Buzztime Investor Rights Agreement at a fixed
ratio of two shares of the Company's common stock for each Warrant Share
(subject to adjustment to reflect stock splits, combinations, stock dividends,
mergers or reclassifications), together with the shares of the Company's common
stock that are issuable upon the exercise of the Exchange Warrants, shall be
referred to herein as "Exchange Shares."
In addition, the Company has authorized the issuance of 666,667 shares of
the Company's common stock to the Investor as payment of the license fee for the
initial term under Section 3.1 of the Licensing Agreement to be entered into by
the Company, Buzztime and the Investor at the Closing (the "Licensing
Agreement," and such shares to be issued to the Investor at the Closing pursuant
thereto, the "License Fee Shares"). The Licensing Agreement further permits the
issuance of additional shares of the Company's common stock or Buzztime's common
stock as payment for subsequent periods after the initial term (the "Renewal
License Fee Shares") at the election of the Investor.
The Licensing Agreement, the Warrants, the NTN Investor Rights Agreement,
and the Buzztime Investor Rights Agreement shall be collectively referred to
herein as the "Related Agreements." The Units, Shares, Warrants, Warrant Shares,
Exchange Shares, Exchange Warrants, License Fee Shares and Renewal License Fee
Shares shall be collectively referred to herein as the "Securities."
The Investor has previously received the Company's annual report on Form
10-K for the year ended December 31, 2002 (the "Form 10-K"), and all other
filings made with the Securities and Exchange Commission (the "SEC") under
Sections 13, 14(a) and 15(d) of the Exchange Act (as defined below) since the
filing of the Form 10-K through the date of this Agreement (such filings, along
with the Form 10-K, the "2003 SEC Filings"). The 2003 SEC Filings shall be
deemed to include any filings pursuant to Items 9 or 12 of Form 8-K made during
2003 through the date of this Agreement.
2. AGREEMENT TO SELL AND PURCHASE THE UNITS
Subject to the terms and conditions of this Agreement, at the Closing (as
defined below), the Company and Buzztime agree to sell to the Investor, and the
Investor agrees to purchase from the Company and Buzztime, 2,000,000 Units at a
purchase price of $1.50 per Unit for an aggregate amount of $3,000,000.
3. CLOSING AND DELIVERY
3.1 Closing. The closing of the purchase and sale of the Units pursuant to
this Agreement and the License Fee Shares (the "Closing") shall be held as soon
as practicable after the satisfaction or waiver of all of the conditions to
Closing set forth in Sections 6 and 7 hereof, at the offices of O'Melveny &
Xxxxx LLP, located at 000 Xxxxx Xxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, or on such
other date and at such other place as may be agreed by the Company and the
Investor. Prior to the Closing, the Parties shall execute any Related Agreements
and other documents required to be executed hereunder.
3.2 Delivery of the Certificates and Warrants at the Closing. At the
Closing, the Company and Buzztime shall deliver to the Investor a stock
certificate for 2,000,000 shares of the Company's common stock, a stock
certificate for 666,667 shares of the Company's common stock and Warrants for
500,000 shares of Buzztime's common stock registered in the name of such
Investor, or in such nominee name as designated by such Investor, representing
the Units to be purchased by such Investor at the Closing against payment of the
purchase price for such Units and representing the License Fee Shares.
3.3 Payment of Purchase Price. At the Closing, the Investor shall make
payment of the aggregate purchase price of $3,000,000 for the Units by wire
transfer to an account specified by the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BUZZTIME
The Company and Buzztime each hereby jointly and severally represents and
warrants to the Investor as follows:
4.1 Organization; Standing; Permits. The Company and each of its
subsidiaries is duly incorporated and validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation with full
corporate power and corporate authority to own, lease and operate its properties
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and conduct its current business as described in the Form 10-K. The Company and
each of its subsidiaries is duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing is not reasonably likely to have a material adverse effect on the
condition (financial or otherwise), operations, business or business prospects
of the Company and each of its subsidiaries (hereinafter, a "Material Adverse
Effect"). No proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification. The Company and each of its subsidiaries is in
possession of and operating in compliance with all authorizations, licenses,
certificates, franchises, consents, orders and permits from federal, state and
other governmental and regulatory authorities necessary for its business and
operations as presently conducted and as proposed to be conducted, except where
the failure to possess or be in compliance with any of the foregoing is not
reasonably likely to have a Material Adverse Effect, all of which are valid and
in full force and effect.
4.2 Subsidiaries. Schedule 4.2 sets forth the names and jurisdictions of
organization of each of the Company's direct and indirect significant
subsidiaries. Except as set forth on Schedule 4.2, the Company holds of record
and owns beneficially 100% of the issued and outstanding shares of capital stock
and other securities of each such subsidiary.
4.3 Corporate Power; Authorization; Compliance with Other Instruments. The
Company and Buzztime each has full legal right, power and authority to enter
into this Agreement and the Related Agreements and to perform the transactions
contemplated hereby and thereby. This Agreement and the Related Agreements have
been duly authorized, executed and delivered by the Company and Buzztime and,
assuming due authorization, execution and delivery by the Investor, are valid
and binding agreements on the part of the Company and Buzztime, enforceable in
accordance with their terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles. The
making, execution and performance of this Agreement and the Related Agreements
by the Company and Buzztime and the consummation of the transactions herein and
therein contemplated will not (with or without the passage of time and/or the
giving of notice) conflict with or result in a breach or violation of any of the
terms and provisions of, or constitute a default under, (i) any bond, debenture,
note or other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or Buzztime is a party or by which it or its
assets or properties may be bound, (ii) the certificates of incorporation or
bylaws of the Company and Buzztime or (iii) any law, order, rule, regulation,
writ, injunction, judgment or decree of any court, administrative agency,
regulatory body, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or Buzztime or their assets or properties,
except, with respect to (i) and (iii), for any conflict, breach, violation or
default which is not reasonably likely to have a Material Adverse Effect.
4.4 SEC Filings; Financial Statements. The Company has filed in a timely
manner all documents that the Company was required to file with the SEC under
Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934 (as amended,
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and including any successor thereto and any rules and regulations promulgated
thereunder, the "Exchange Act") since January 1, 2001. As of their respective
filing dates (or, if amended, when amended), the documents filed by the Company
with the SEC since January 1, 2001 (the "SEC Filings") complied with the
requirements of the Exchange Act and the Securities Act of 1933 (as amended, and
including any successor thereto and any rules and regulations promulgated
thereunder, the "Securities Act"). The Company satisfies the registrant
requirements for the use of Form S-3 for secondary offerings under the
Securities Act. None of the SEC Filings contain any untrue statement of a
material fact or omit to state material facts required to be stated therein or
necessary to make the statements made therein not misleading. Since January 1,
2001, the Company has timely filed all documents that it was required to file
under the Securities Act or the Exchange Act, and all such documents were
complete and accurate in all material respects. The consolidated financial
statements of the Company included in the SEC Filings (the "Financial
Statements") comply in all respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") and fairly present the
consolidated financial position of the Company and its subsidiaries at the dates
thereof and the results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal, recurring
adjustments and the absence of complete footnotes). Except as and to the extent
reflected in the Financial Statements, the Company and its subsidiaries did not
have, as of the respective dates of the Financial Statements, any liabilities or
obligations (other than obligations of continued performance under contracts and
other commitments and arrangements entered into in the ordinary course of
business that are not in the nature of contingent liabilities) which GAAP would
require the Company to reflect in the Financial Statements. Except as disclosed
in the 2003 SEC Filings, there have not been any changes in the assets,
liabilities (contingent or otherwise), financial condition or operations of the
Company or any of its subsidiaries from that reflected in the Financial
Statements for the period ended December 31, 2002, except changes in the
ordinary course of business that are consistent with past practices that,
individually or in the aggregate, are not material to the financial condition or
results of operations of the Company.
4.5 Properties. Except as set forth in the 2003 SEC Filings, (a) each of the
Company and its subsidiaries owns or leases all properties and assets, and has
all other rights and privileges, necessary to its business and operations as now
conducted and proposed to be conducted, and each of the Company and its
subsidiaries has good and marketable title to all such properties and assets
owned by it, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest except those that do not materially impair the
Company's or any of its subsidiaries' ownership or use of such properties or
assets; (b) the agreements, contracts and other instruments to which each of the
Company and its subsidiaries is a party are valid and enforceable by the Company
or the subsidiary that is a party thereto, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default under any of such agreements, contracts or instruments; and (c) each of
the Company and its subsidiaries has valid and enforceable leases for all
material properties and assets leased by it, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
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4.6 Capitalization.
(a) All outstanding shares of capital stock of the Company and Buzztime
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all applicable federal and
state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. The
tables included in Schedule 4.6(a) specify (i) the total number of authorized
shares of each class of capital stock of the Company and each of its
subsidiaries and (ii) the total number of issued and outstanding shares of each
class of capital stock of the Company and each of its subsidiaries and the total
number of shares held in treasury, in each case before and after giving effect
to the transactions contemplated by this Agreement. Schedule 4.6(a) also
specifies (1) the total number of shares of common stock of each of the Company
and Buzztime that are issuable upon the exercise, conversion or exchange of all
Convertible Securities of each of the Company and Buzztime that are outstanding
after giving effect to the transactions contemplated by this Agreement, on a
fully-diluted basis and after giving effect to any anti-dilution adjustments
resulting from the transactions contemplated by this Agreement and (2) the total
additional number of shares of common stock or Convertible Securities of each of
the Company and Buzztime that are authorized or reserved for issuance pursuant
to employee stock option plans or otherwise or that either the Company or
Buzztime may become obligated to issue under an outstanding contract or
commitment after giving effect to the transactions contemplated by this
Agreement. "Convertible Securities" means all securities or obligations that are
exercisable for, convertible into or exchangeable for shares of common stock of
the Company and Buzztime, as applicable, including options, warrants and other
rights to subscribe for or purchase other securities that are exercisable for,
convertible into or exchangeable for shares of common stock of the Company or
Buzztime, as applicable. The rights, privileges and preferences of the Company's
Series A Preferred Stock are as stated in the restated certificate of
incorporation of the Company in the form delivered to the Investor, and the
rights, privileges and preferences of Buzztime's Series A Preferred Stock are as
stated in the restated certificate of incorporation of Buzztime and the Investor
Rights Agreement dated June 8, 2001 between Buzztime and Scientific-Atlanta
Strategic Investments, LLC in the forms delivered to the Investor. Except as
disclosed in the 2003 SEC Filings, there are no accrued and unpaid dividends
with respect to any shares of capital stock or other securities of the Company
or its subsidiaries.
(b) The Shares and License Fee Shares to be issued and sold at the Closing
hereunder and the Licensing Agreement have been duly authorized for issuance and
sale to the Investor pursuant to this Agreement and the Licensing Agreement,
and, when issued and delivered by the Company and Buzztime against payment
therefor in accordance with the terms of this Agreement and the Licensing
Agreement, will be duly and validly issued and fully paid and nonassessable,
issued in compliance with all applicable securities laws and regulations, and
sold free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest. The Units and Warrants to be issued and sold at the
Closing hereunder have been duly authorized for issuance and sale to the
Investor pursuant to this Agreement, and, when issued and delivered by the
Company and Buzztime against payment therefor in accordance with the terms of
this Agreement, will be duly and validly issued, issued in compliance with all
applicable securities laws and regulations, and sold free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest. The
Renewal License Fee Shares issuable under the Licensing Agreement have been duly
authorized and reserved for issuance to the Investor pursuant to the Licensing
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Agreement and, upon issuance pursuant to Section 3.2 of the Licensing Agreement,
the Renewal License Fee Shares will be duly and validly issued and fully paid
and nonassessable, issued in compliance with all applicable securities laws and
regulations, and sold free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. The Warrant Shares issuable upon
exercise of the Warrants have been duly and validly authorized and reserved for
issuance and, when issued and delivered by Buzztime against payment therefor in
accordance with the terms of the this Agreement and the Warrant, will be duly
and validly issued and fully paid and nonassessable, issued in compliance with
all applicable securities laws and regulations, and sold free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest. The
Exchange Shares issuable upon exercise of the Investor's exchange rights under
the Buzztime Investor Rights Agreement and the Exchange Shares issuable upon the
exercise of the Exchange Warrants have been duly and validly authorized and
reserved for issuance and, upon issuance, will be duly and validly issued and
fully paid and nonassessable, issued in compliance with all applicable
securities laws and regulations, and sold free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest. The Exchange
Warrants to be issued and sold upon the exercise of the Investor's exchange
rights under the Buzztime Investor Rights Agreement have been duly authorized
for issuance and sale to the Investor pursuant to the Buzztime Investor Rights
Agreement, and, when issued and delivered by the Company against payment
therefor in accordance with the terms of the Buzztime Investor Rights Agreement,
will be duly and validly issued, issued in compliance with all applicable
securities laws and regulations, and sold free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest. Except as set forth
on Schedule 4.6(b), no preemptive right, co-sale right, registration right,
right of first refusal or other similar right of stockholders exists with
respect to any of the Securities or the issuance and sale thereof other than
those that have been expressly waived prior to the date hereof and those that
will automatically expire upon and will not apply to the consummation of the
transactions contemplated on or before the Closing. No further approval or
authorization of any stockholder or the Board of Directors of the Company or
Buzztime is required for the issuance and sale of the Securities to the Investor
in accordance with this Agreement and the Related Agreements.
4.7 Litigation. Except as disclosed in the 2003 SEC Filings, there is not
pending or, to the Company's knowledge, threatened, any action, suit, claim,
proceeding or investigation against the Company or any of its subsidiaries or
any of their respective directors, officers, employees, properties, assets or
rights before any court, administrative agency, regulatory body, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company, or its subsidiaries (or any of their respective directors, officers,
employees, properties, or otherwise) which (i) is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect or is
reasonably likely to materially and adversely affect the Company's or its
subsidiaries' properties, assets or rights or (ii) is reasonably likely to
prevent consummation of, or rescind or unwind, the transactions contemplated
hereby. Neither the Company nor any of its subsidiaries is a party or subject to
the provisions of any injunction, judgment, decree or order of any court,
regulatory body, administrative agency, government or governmental agency or
body domestic or foreign, that could reasonably be expected to have a Material
Adverse Effect. The Company and each of its subsidiaries has conducted and is
conducting its business in compliance with all applicable federal, state, local
and foreign statutes, laws, rules, regulations, ordinances, codes, decisions,
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decrees, directives and orders, except where the failure to do so would not
reasonably be likely, singly or in the aggregate, to have a Material Adverse
Effect.
4.8 Listed Shares. Upon issuance, the Shares, License Fee Shares, Renewal
License Fee Shares and the Exchange Shares will be registered pursuant to
Section 12(b) of the Exchange Act, and approved for listing and quotation on the
American Stock Exchange ("AMEX"). Except as disclosed in the 2003 SEC Filings,
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of its common stock under the Exchange Act or
delisting its common stock from the AMEX. The Company is, and after giving
effect to the issuance of the Shares and the License Fee Shares to the Investor
at the Closing hereunder, the Company will be in compliance with all standards
for continued listing on the AMEX. Based on the Company's financial projections,
which have been prepared by the Company in good faith and on a reasonable basis,
its stockholders' equity will exceed the minimum required by the AMEX during and
at the end of the twelve-month period following the Closing.
4.9 Intellectual Property. The Company and its subsidiaries each owns or
possesses sufficient rights in all patents, patent rights, inventions,
trademarks, service marks, trade names, copyrightable materials, domain names,
trade secrets, know-how and all other intellectual property which are necessary
to conduct its business as now conducted and as proposed to be conducted
(collectively, the "Intellectual Property"). Except as disclosed in the 2003 SEC
Filings or on Schedule 4.9 attached hereto, neither the Company nor any of its
subsidiaries has received any written notice of, nor has it any knowledge of,
any violation of or allegation that the Company or any of its subsidiaries has
violated or, by conducting its business as now conducted or as proposed to be
conducted, would violate, any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, copyrights or any other
proprietary right of any third party. To the Company's knowledge, there is no
violation or infringement by any third party of any of the Company's or any
subsidiary's rights in the Intellectual Property.
4.10 No Change. Since December 31, 2002 and except as otherwise disclosed
in the 2003 SEC Filings, there has not been (i) any change or development that,
either individually or in the aggregate, has had a material and adverse effect
on, or could be reasonably expected to have a material and adverse effect on,
the condition (financial or otherwise), earnings, operational results,
operations, assets, liabilities (actual or contingent), business or business
prospects of the Company or any of its subsidiaries, (ii) any transaction that
is material to the Company or any of its subsidiaries, (iii) any obligation,
direct or contingent, incurred by the Company or any of its subsidiaries, except
obligations incurred in the ordinary course of business consistent with past
practices, (iv) any change in the capital stock or outstanding indebtedness of
the Company or any of its subsidiaries, except the incurrence of trade debt and
obligations incurred in the ordinary course consistent with past practices, (v)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its subsidiaries, (vi) any default in the payment
of principal of or interest on any outstanding debt obligations, or (vii) any
material loss or damage (whether or not insured) to the property of the Company
or any of its subsidiaries which has been sustained or will have been sustained.
4.11 No Defaults. Neither the Company nor any of its subsidiaries is (a) in
violation of its certificate of incorporation, bylaws or other organizational
documents or (b) in violation of or default (with or without notice or lapse of
time or both) in the performance or observance of any obligation, agreement,
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covenant or condition contained in any bond, debenture, note or other evidence
of indebtedness, or in any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which it is a
party or by which it or its assets or properties may be bound, or (c) in
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or
their assets or properties, except in the case of (b) or (c) for any default or
violation not reasonably likely to have a Material Adverse Effect.
4.12 Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental or regulatory authority or other third
party on the part of the Company or any of its subsidiaries is required in
connection with the consummation of the transactions contemplated by this
Agreement or the Related Agreements (each a "Consent"), except for (a) Consents
required to comply with the securities and Blue Sky laws in the states and other
jurisdictions in which any of the Securities are offered and/or sold, which
compliance will be effected in accordance with such laws, (b) Consents required
by the AMEX and the SEC, and (c) Consents described on Schedule 4.12. The
Company and all of its subsidiaries are conducting business in compliance with
all applicable laws, rules and regulations of the jurisdictions in which they
are conducting business, including but not limited to, all applicable federal,
state and local environmental laws and regulations, except for any failure to
comply which is not reasonably likely to have a Material Adverse Effect
4.13 Labor; Employees; ERISA.
(a) The Company and its subsidiaries are in compliance in all material
respects with all laws, orders, rules and regulations relating to the employment
of labor. No strike by or other labor dispute involving the employees of the
Company or its subsidiaries exists or, to the Company's knowledge, has been
threatened. The Company is not aware of any existing or threatened labor dispute
involving the employees of any of its principal suppliers, subcontractors,
authorized dealers or international distributors that is reasonably likely to
result in a Material Adverse Effect. No collective bargaining agreement or other
agreement with any labor union covering any employees of the Company or any of
its subsidiaries exists, no such agreement is being negotiated or prepared, and,
to the knowledge of the Company, no labor union has sought to represent any of
the employees, representatives, or agents of the Company or any of its
subsidiaries
(b) If any employee of the Company or any of its subsidiaries has entered
into any non-competition, non-disclosure, confidentiality or other similar
agreement with any party other than the Company or its subsidiaries of which the
Company is aware, (i) to the Company's knowledge, such employee is neither in
violation thereof nor is expected to be in violation thereof as a result of the
business conducted or expected to be conducted by the Company or any of its
subsidiaries or such person's performance of his or her obligations to the
Company or any of its subsidiaries and (ii) the Company will use reasonable
efforts to prevent its employees and the employees of its subsidiaries from
violating any such agreement.
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(c) The Company and any ERISA Affiliate have complied in all material
respects with all applicable laws, orders, rules and regulations relating to any
Employee Plan or Compensation Arrangement. There are no material undisclosed
liabilities relating to, associated with or arising under any Employee Plan or
Compensation Arrangement. No governmental inspection, investigation, audit or
examination of any Employee Plan or Compensation Arrangement is pending or
threatened. There are no Employee Plans subject to Title IV of the Employee
Retirement Income Security Act of 1974 (as amended, and including any successor
thereto and any regulations promulgated thereunder, "ERISA"). As used herein,
the term "Code" means the Internal Revenue Code of 1986, as amended, any
successor thereto and any regulations promulgated thereunder; "Compensation
Arrangement" means any plan or compensation arrangement other than an Employee
Plan, whether written or unwritten, which provides to employees, former
employees, officers, directors and shareholders of the Company or any ERISA
Affiliate any compensation or other benefits, whether deferred or not,
including, but not limited to, any bonus or incentive plan, stock rights plan,
deferred compensation arrangement, life insurance, stock purchase plan,
severance pay plan and any other employee fringe benefit plan; "Employee Plan"
means any retirement or welfare plan or arrangement or any other employee
benefit plan as defined in Section 3(3) of ERISA to which the Company or any
ERISA Affiliate contribute or to which the Company or any ERISA Affiliate
sponsor, maintain or otherwise are bound; and "ERISA Affiliate" means any trade
or business related to the Company under the terms of Sections 414(b), (c), (m)
or (o) of the Code.
4.14 Taxes. The Company and its subsidiaries have timely filed all federal,
state, local and foreign income tax returns and all franchise, sales and use and
other material tax returns required by law and have paid all taxes shown thereon
as due, and there is no tax deficiency that has been or, to the Company's
knowledge, that might be asserted against the Company or its subsidiaries that
is reasonably likely to have a Material Adverse Effect. All tax liabilities of
the Company or any of its subsidiaries (whether or not shown to be due on or
with respect to the applicable tax return or claimed to be due from it by any
governmental authority) have either been paid or are adequately provided for on
the books and balance sheet of the Company or the applicable subsidiary in
accordance with GAAP. There are no tax sharing agreements or similar
arrangements with respect to or involving the Company or any of its
subsidiaries.
4.15 Insurance. Each of the Company and its subsidiaries maintains
insurance with insurers of recognized financial responsibility of the types and
in the amounts generally deemed prudent for its business and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company or its subsidiaries against theft, damage,
destruction, acts of vandalism, products liability, errors and omissions, and
all other risks customarily insured against, and directors and officers
liability insurance, all of which insurance is in full force and effect. Neither
the Company nor any of its subsidiaries is in default with respect to its
obligations under any insurance policy maintained by it. The Company has
delivered to the Investor a true and complete copy of the Company's directors
and officers liability insurance policy as currently in effect.
4.16 Offering. Subject in part to the truth and accuracy of the
representations and warranties of the Investor set forth in Section 5 of this
Agreement, the offer, sale and issuance of the Securities as contemplated by
this Agreement and the Related Agreements are exempt from the registration
9
requirements of any applicable state and federal securities laws, and neither
the Company, Buzztime nor any authorized agent acting on their behalf shall take
any action hereafter that would cause the loss of such exemption.
4.17 Environmental Matters. (i) The Company and its subsidiaries are in
compliance with all rules, laws, orders and regulations relating to the use,
treatment, storage, cleanup and disposal of toxic or hazardous substances and
protection of health and the environment ("Environmental Laws") which are
applicable to them or their businesses, except where the failure to comply would
not reasonably be likely to have a Material Adverse Effect, (ii) neither the
Company nor any of its subsidiaries has received any written notice or other
communication from any governmental authority or third party of an asserted or
threatened claim under any Environmental Laws, which claim would be required to
be disclosed in its filings with SEC under the Exchange Act, (iii) to the
Company's knowledge, neither the Company nor any subsidiary will be required to
make future material capital expenditures to comply with Environmental Laws and
(iv) no property which is, or has been, owned, leased or occupied by the Company
or any subsidiary has, to the Company's knowledge, been designated as a
Superfund site pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or otherwise designated as
a contaminated site under applicable state or local law. The Company and its
subsidiaries do not currently own any real property in fee simple.
4.18 Reservation of Shares. Buzztime shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, the number
of shares of Buzztime common stock necessary to provide for the issuance of the
Warrant Shares. The Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, the number of shares of
the Company's common stock necessary to provide for the issuance of the Exchange
Shares and Renewal License Fee Shares. Buzztime shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, the
number of shares of Buzztime common stock necessary to provide for the issuance
of the Renewal License Fee Shares.
4.19 Corporate Documents. True and complete copies of the certificates of
incorporation and bylaws of the Company and Buzztime as currently in effect have
been delivered to the Investor. Except as disclosed in the 2003 SEC Filings,
neither the Company nor any of its subsidiaries has taken any action to amend or
plans to amend its certificate of incorporation or bylaws.
4.20 Disclosure. No representation or warranty of the Company or Buzztime
contained in this Agreement or the Related Agreements, or the schedules attached
hereto and thereto contains any untrue statement of a material fact or omits to
state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which they were made.
10
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
5.1 Investment Representations. The Investor represents and warrants to the
Company and Buzztime that:
(a) The Investor is knowledgeable, sophisticated and experienced in making,
and is qualified to make, decisions with respect to investments in securities
presenting an investment decision like that involved in the purchase of the
Units and License Fee Shares, including investments in securities issued by the
Company, and has requested, received, reviewed and considered all information
the Investor deems relevant (including the Confidential Private Placement
Memorandum dated May 31, 2002 and annexes thereto (the "Memorandum") and the
2003 SEC Filings) in making an informed decision to purchase the Units and
License Fee Shares. The Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company and Buzztime
regarding the terms and conditions of the offering of the Units and License Fee
Shares and the business, properties, prospects and financial condition of the
Company and its subsidiaries.
(b) The Investor is purchasing the Units and the License Fee Shares for its
own account for investment only and with no present intention of distributing
the Units or the License Fee Shares or any arrangement or understanding with any
other persons regarding the distribution of the Units or the License Fee Shares
in violation of any applicable federal or state securities laws.
(c) The Investor shall not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the securities purchased hereunder
except in compliance with the Securities Act, applicable Blue Sky laws, and the
rules and regulations promulgated thereunder. The Investor also understands that
there is no assurance that any exemption from registration under the Securities
Act and applicable Blue Sky laws will ever be available and that, even if
available, such exemption may not allow the Investor to transfer all or any
portion of the securities under the circumstances, in the amounts or at the
times the Investor might propose.
(d) The Investor has, in connection with its decision to purchase the Units
and the License Fee Shares, relied with respect to the Company and its affairs
solely upon the Memorandum, the 2003 SEC Filings and the representations and
warranties of the Company and Buzztime contained herein.
(e) The Investor is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act.
(f) The Investor has full right, power, authority and capacity to enter
into this Agreement and the Related Agreements and to perform the transactions
contemplated hereby and thereby. This Agreement and the Related Agreements have
been duly authorized, executed and delivered by the Investor. Assuming due
authorization, execution and delivery by each of the other Parties hereto and
thereto, this Agreement and the Related Agreements are valid and binding
obligations of the Investor, enforceable in accordance with their terms.
11
5.2 Ability to Bear Risk. The Investor is able to bear the economic risk of
holding the Units and License Fee Shares for an indefinite period, including the
loss of the Investor's entire investment. The Units and License Fee Shares were
not offered or sold to the Investor by any form of general solicitation or
advertising. The Investor also represents that it has not been organized for the
purpose of acquiring the Units and License Fee Shares.
5.3 Independent Advice. The Investor understands that nothing in the
Memorandum, this Agreement or any other materials presented to the Investor in
connection with the purchase and sale of the Units and License Fee Shares
constitutes legal, tax or investment advice and that no independent legal
counsel retained by the Company has reviewed these documents and materials on
the Investor's behalf. The Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Units.
5.4 No Transferability. The Investor understands that (a) none of the
Securities shall be transferable in the absence of registration under the
Securities Act and applicable Blue Sky laws or an exemption therefrom or in the
absence of compliance with any term of this Agreement; (b) the Company and
Buzztime shall provide stop transfer instructions to its transfer agent with
respect to each of the Securities in order to enforce the restrictions contained
in this Section 5.4; and (c) each certificate or instrument representing any of
the Securities shall be in the name of Investor and shall bear substantially the
following legend (in addition to any legends required under applicable
securities laws):
"THIS SECURITY [AND ANY SHARES ISSUED UPON EXERCISE OF THIS SECURITY] HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THE APPLICABLE SECURITY HAS BEEN REGISTERED
UNDER THE ACT AND SUCH LAWS OR (1) REGISTRATION UNDER SUCH LAWS IS NOT
REQUIRED AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
FURNISHED UPON REQUEST BY THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
THE ACT AND THE APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED."
The legend contained in this Section 5.4 may be removed from a certificate or
instrument representing any of the Securities immediately upon receipt by the
Company's transfer agent of a certificate substantially in the form of Appendix
II and such other documentation as the transfer agent may routinely require,
including, but not limited to, an opinion of counsel. Notwithstanding the
foregoing, such Securities must be held in certificated form until such shares
have been sold in accordance with the provisions of Appendix II.
5.5 Residence. The office or offices of the Investor in which its
investment decision was made is located at the address or addresses of the
Investor set forth on the signature page.
5.6 Effect on the Company's and Buzztime's Representations and Warranties.
The representations and warranties of the Investor in this Section 5 do not
12
limit or modify in any respect the Company's and Buzztime's representations and
warranties in Section 4 herein or the right of the Investor to rely on the
Company's and Buzztime's representations and warranties in Section 4.
6. CONDITIONS TO COMPANY'S AND BUZZTIME'S OBLIGATIONS AT THE CLOSING
The Company's and Buzztime's obligations to complete the sale and issuance
of the Units and to deliver Units to the Investor shall be subject to the
following conditions (to the extent not waived by the Company and Buzztime):
6.1 Representations and Warranties; Performance. The representations and
warranties made by the Investor in Section 5 hereof shall be true and correct
when made, and shall be true and correct as of the Closing as if made on the
Closing. The Investor shall have performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complied with on or prior to the Closing.
6.2 Delivery of Purchase Price. The purchase price for the Units being
purchased shall have been delivered by the Investor.
7. CONDITIONS TO INVESTOR'S OBLIGATIONS AT THE CLOSING
The Investor's obligation to accept delivery of the Units and to pay for
the Units shall be subject to the following conditions (to the extent not waived
by the Investor):
7.1 Representations and Warranties; Performance. The representations and
warranties made by the Company and Buzztime in Section 4 shall be true and
correct when made, and shall be true and correct as of the Closing as if made on
the Closing. The representations and warranties made by the Company and Buzztime
in Section 4.6(a) with respect to capitalization shall be true and correct as of
the Closing as if made on the Closing, and the Company will provide an updated
Schedule 4.6(a) dated as of the date of the Closing (provided that the updated
Schedule 4.6(a) may reflect changes in the capitalization since the date of this
Agreement through the Closing so long as the total number of shares of
fully-diluted common stock of each of the Company and Buzztime, respectively,
disclosed on such updated Schedule 4.6(a) is equal to the number of shares of
fully-diluted common stock of each of the Company and Buzztime, respectively, as
disclosed in the original Schedule 4.6(a)). The Company and Buzztime shall have
performed and complied in all material respects with all of their obligations
under this Agreement which are to be performed or complied with on or prior to
the Closing.
7.2 Delivery of the Shares, Warrants and License Fee Shares. The stock
certificates representing the Shares and License Fee Shares, and the instruments
representing the Warrants, shall have been delivered by the Company and Buzztime
in accordance with Section 3.2 herein.
7.3 Consents. The Company and Buzztime shall have obtained any and all
consents, permits and waivers necessary or appropriate for the consummation of
the transactions contemplated by this Agreement (except for such as may be
properly obtained subsequent to the Closing).
13
7.4 Execution of Investor Rights Agreements and Licensing Agreement. The
Company and the Investor shall have executed the NTN Investor Rights Agreement
substantially in the form attached as Appendix III. Buzztime, the Company and
the Investor shall have executed the Buzztime Investor Rights Agreement
substantially in the form attached as Appendix IV and the Licensing Agreement
substantially in the form attached as Appendix V.
7.5 AMEX Listing. The Shares and License Fee Shares shall have been
approved for listing and authorized for trading on AMEX, and trading in the
Shares and License Fee Shares shall not have been suspended by the SEC or AMEX.
7.6 Board Seat. The Board of Directors of the Company shall have appointed
Xxxx X. Xxxxxxx as the Investor's designee to the Board of Directors to serve as
a director of the Company in the class whose current term expires in 2005. The
Company and Xx. Xxxxxxx shall have entered into an indemnity agreement
substantially similar to the indemnity agreements executed between the Company
and the other directors of the Company.
7.7 Officer's Certificate. The Investor shall have received a certificate
signed by a duly authorized officer of the Company attesting to the satisfaction
of all of the conditions contained in this Section 7. Such certificate shall
attest that from the date of this Agreement through the date of Closing, no
event or development has occurred that has resulted or could reasonably be
expected to result in a material adverse change (from the information previously
furnished to the Investor) in the condition (financial or otherwise),
operations, assets or liabilities of the Company or Buzztime taken as a whole.
7.8 Opinion of Counsel. The Company and Buzztime shall have delivered to
the Investor an opinion of O'Melveny & Xxxxx LLP, counsel to the Company and
Buzztime, dated as of the Closing, in a form attached as Appendix VI.
8. MISCELLANEOUS
8.1 Waivers and Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged, terminated, modified or amended except upon
the written consent of the Company, Buzztime and the Investor.
8.2 Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
8.3 Broker's Fee. Except as otherwise disclosed in writing, the Company,
Buzztime and the Investor hereby represent (as to such party only) that there
are no brokers or finders entitled to compensation in connection with the sale
of the Units, and shall indemnify each other for any such fees for which they
are responsible.
8.4 Severability. The provisions of this Agreement are severable. The
invalidity, in whole or in part, of any provision of this Agreement will not
affect the validity or enforceability of any other of its provisions. If one or
more provisions hereof will be declared invalid or unenforceable, the remaining
provisions will remain in full force and effect and will be construed in the
broadest possible manner to effectuate the purposes hereof. If it is determined
by a court of competent jurisdiction in any state that any restriction in this
Agreement is excessive in duration or scope or is unreasonable or unenforceable
14
under the laws of that state, it is the intention of the parties that such
restriction may be modified or amended by the court to render it enforceable to
the maximum extent permitted by the law of that state. The parties further agree
to replace such void or unenforceable provisions of this Agreement with valid
and enforceable provisions that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provisions.
8.5 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (c) upon receipt when sent by first-class registered or
certified mail, return receipt requested, postage prepaid, or (d) upon receipt
after deposit with a nationally recognized overnight express courier, postage
prepaid, specifying next day delivery with written verification of receipt. All
communications shall be sent to the party to be notified at the address as set
forth below or at such other address as such party may designate by ten (10)
days advance written notice to the Company. All communications shall be
addressed as follows:
(a) if to the Company and/or Buzztime, to:
NTN COMMUNICATIONS, INC.
0000 Xx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy so mailed to:
O'MELVENY & XXXXX LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: C. Xxxxx Xxxxx
(b) if to the Investor, at the address as set forth on the
signature page of this Agreement, with a copy so mailed to the same address and
to the attention of the general counsel of the Investor.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of law principles thereof.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each Party hereto and
delivered to the other Parties.
15
8.8 Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company, Buzztime and the
Investor herein and in the certificates for the securities delivered pursuant
hereto shall survive the execution of this Agreement, the delivery to the
Investor of the Units and the payment therefor. The Company and Buzztime shall
indemnify, defend, reimburse and hold harmless the Investor from and against all
costs, losses, liabilities, damages and expenses (including reasonable
attorneys' fees) arising out of or related to the breach of or a failure by the
Company and/or Buzztime to perform any of their representations, warranties,
covenants or agreements under this Agreement. The Investor shall indemnify,
defend, reimburse and hold harmless the Company and Buzztime from and against
all costs, losses, liabilities, damages and expenses (including reasonable
attorneys' fees) arising out of or related to the breach of or a failure by the
Investor to perform any of its representations, warranties, covenants or
agreements under this Agreement.
8.9 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the Parties hereto.
Neither the terms "successors" nor "assigns" as used herein shall include any
entity or person who purchases any of the Securities from the Investor after the
Closing and is not an affiliate of the Investor. Neither the Company nor
Buzztime may assign this Agreement or delegate any of its obligations hereunder.
8.10 Entire Agreement. This Agreement, the Related Agreements and other
documents delivered pursuant hereto and thereto, including the exhibits,
constitute the full and entire understanding and agreement between the Parties
with regard to the subjects hereof and thereof.
8.11 Payment of Fees and Expenses. Each of the Company, Buzztime and the
Investor shall bear its own expenses and legal fees incurred on its behalf with
respect to this Agreement and the transactions contemplated hereby; provided,
however, that the Company shall bear the Registration Expenses as described in
the NTN Investor Rights Agreement and the Buzztime Investor Rights Agreement. If
any action at law or in equity is necessary to enforce or interpret the terms of
this Agreement (including, without limitation, any action arising out of or
related to a breach of a representation or warranty herein), the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
8.12 Confidentiality. The Investor acknowledges and agrees that any
information or data it has acquired from the Company and its subsidiaries, not
otherwise properly in the public domain, was received in confidence. Except to
the extent authorized by the Company or Buzztime or required by any federal or
state law, rule or regulation or any decision or order of any court or
regulatory authority, the Investor agrees that it will refrain from disclosing
any such information to any person other than to any agents, attorneys,
accountants, employees, officers and directors of the Investor who need to know
such information in connection with the Investor's purchase of the Units, and
who agree to be bound by the confidentiality provisions of this Agreement. In
the event that the Investor or its agents are required by federal or state or
other law, rule or regulation or any decision or order of any court or
regulatory authority to release such information, it shall give the Company and
Buzztime sufficient prior notice so that the Company and Buzztime may seek a
16
stay or other release or waiver from disclosing such information. The Investor
agrees not to use to the detriment of the Company or its subsidiaries or for the
benefit of any other person or persons, or misuse in any way, any confidential
information of the Company or its subsidiaries. Nothing in this Section 8.12
will prohibit or restrict the Investor from complying with its disclosure
obligations under applicable federal and state securities laws.
8.13 Knowledge. The phrases "knowledge," "to the Company's knowledge," "to
our knowledge," "of which the Company is aware" and similar language as used
herein shall mean the actual knowledge or awareness, or knowledge or awareness
which a prudent business person would have acquired following a reasonable
investigation, of Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxx XxXxxxxx and Xxxxxx
X. Xxx.
8.14 Rights Cumulative. Each and all of the various rights, powers and
remedies of the Parties hereto will be considered to be cumulative with and in
addition to any other rights, powers and remedies that such Parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement.
8.15 Limitation on Issuance of Common Stock. Notwithstanding any provision
to the contrary contained herein or in the Related Agreements, in no event shall
the Investor be entitled to receive any Renewal License Fee Shares or Exchange
Shares under this Agreement and the Related Agreements to the extent that, after
giving effect to such issuances, the aggregate number of Shares, License Fee
Shares, Renewal License Fee Shares and Exchange Shares issued under this
Agreement and the Related Agreements would exceed 19.9% of the total shares of
the Common Stock outstanding as of the date hereof as disclosed on Schedule
4.6(a).
[remainder of the page left blank; signature page follows]
17
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
NTN COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
BUZZTIME ENTERTAINMENT, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
MEDIA GENERAL, INC.,
a Virginia corporation
By: /s/ Xxxxxxxx X. Xxxxxx
Name: Xxxxxxxx X. Xxxxxx
Title: Vice Chairman
Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Signature Page
Schedules to Securities Purchase Agreement of dated May 5, 2003
SCHEDULE 4.2
Subsidiaries
NTN Communications, Inc., a Delaware corporation
Buzztime Entertainment, Inc., a Delaware corporation
NTN Wireless Communications, Inc., a Delaware corporation
IWN, Inc., a Delaware corporation
IWN, L.P., a Delaware limited partnership
TAPCO, Inc. (successor to New World Computing, Inc.), a California corporation
National Telecommunicator Network, Inc., a California corporation
NTN Communications, Ltd., a United Kingdom corporation
NTN Internacional S.A. de CV, a Mexico corporation (required paperwork must be
filed in Mexico to return corporation to active status).
The Company owns a 17.5% equity interest in LearnStar Corporation after selling
82.5% of the subsidiary's equity to NewStar Learning Systems, L.L.C. on June 16,
1998.
Schedules to Securities Purchase Agreement of dated May 5, 2003
SCHEDULE 4.6(a)
Capitalization and Indebtedness
NTN Communications, Inc.
The following table sets forth our capitalization as of May 5, 2003:
o On an actual basis; and
o On an adjusted basis to reflect the Company's receipt of the estimated
net proceeds of $3,965,000 ($3 million in cash for the sale of Units and $1
million in the form of the Boxerjam license less $35,000 in estimated
transaction costs) from the sale of the shares of the Company's common
stock in the offering, assuming an offering price of $1.50 per share and an
aggregate offering of $4 million.
Actual As Adjusted
Long-term Debt:
Obligations under capital leases......................... $ 173,000 $ 173,000
Revolving line of credit................................. 2,043,000 2,043,000
Minority Interest in Subsidiary:.............................. 0 0
Stockholders' Equity:
Series A 10% cumulative convertible
preferred stock, $.005 par value,
5,000,000 shares authorized;
161,000 shares issued and outstanding.................. 1,000 1,000
Common Stock, $.005 par value,
70,000,000 shares authorized actual and as adjusted;1
43,040,000 shares issued and outstanding actual;
45,706,667 shares issued and outstanding as adjusted... 214,000 227,333
Additional paid-in capital............................... 84,817,000 88,768,667
Accumulated deficit...................................... (79,342,000) (79,342,000)
Accumulated other comprehensive loss..................... (635,000) (635,000)
Treasury stock, at cost, 111,000 shares.................. (76,000) (76,000)
Total stockholders' equity............................... 4,979,000 8,944,000
Total capitalization........................ $7,195,000 $11,160,000
1The Company's stockholders approved an amendment to the Company's
certificate of incorporation on May 2, 2003 authorizing an increase in
authorized number of common stock to 84,000,000 shares. As of the date hereof,
such amendment has not been filed with the Delaware Secretary of State.
The Company may issue 12,352,000 shares of its common stock issuable upon
the exercise of options and warrants outstanding as of April 30, 2003 at a
weighted average exercise price of $1.37 per share, of which 8,814,000 of these
options and warrants were exercisable at April 30, 2003. The Company may issue
up to an additional 1,066,000 shares of its common stock pursuant to its
employee stock option plan. The Company is also required to issue 1,792 shares
of its common stock issuable pursuant to the anti-dilution provisions of the
BayStar warrants as a result of the Agreement and the Licensing Agreement.
In addition, the Company may issue 60,691 shares of its common stock
issuable upon the conversion of its outstanding Series A Preferred Stock.
Buzztime Entertainment, Inc.
The following table sets forth Buzztime's capitalization as of May 5, 2003:
o On an actual basis; and
o On an adjusted basis to reflect Buzztime's receipt of the estimated net
proceeds of $1,730,000 from the exercise of all Warrants issued in the
offering (assumes a cash exercise).
Actual As Adjusted
Long-term Debt:
None $ 0 $ 0
Stockholders' Equity:
Series A Preferred Stock, $.001 par value,
796,179 shares authorized; none issued and outstanding
0 0
Common Stock, $.001 par value,
20,000,000 shares authorized actual and as adjusted;
9,979,000 shares issued and outstanding actual;
10,479,000 shares issued and outstanding as adjusted... 9,979 10,479
Additional paid-in capital............................... 9,740,038 11,469,538
Accumulated deficit...................................... (13,720,092) (13,720,092)
Total stockholders' equity............................... (3,970,075) (2,240,075)
Total capitalization........................ $(3,970,075) $(2,240,075)
Buzztime may issue up to 300,000 shares of Buzztime common stock pursuant
to its employee stock option plan; to date, no options have been issued pursuant
to such plan. Buzztime may also issue up to 159,236 shares of Series A Preferred
Stock (or the Buzztime common stock into which the Series A Preferred Stock is
convertible) upon exercise of warrants pursuant to that Warrant Agreement dated
June 8, 2001 between Buzztime and Scientific-Atlanta Strategic Investments,
L.L.C., a Delaware limited liability company and an indirect wholly owned
subsidiary of Scientific Atlanta, Inc. These warrants only vest upon the
satisfaction of certain conditions and none of the warrants had vested as of May
5, 2003.
Schedules to Securities Purchase Agreement of dated May 5, 2003
SCHEDULE 4.6(b)
Certain Rights
Pursuant to Subscription Agreement entered on January 15, 2003, the Company
granted registration rights to the purchaser, Xxxxxx X. Xxxxxxx, with respect to
1,000,000 shares of the Company's common stock and 500,000 shares of the
Company's common stock underlying a warrant. No piggyback registration rights
have been granted to such shares.
Pursuant to the Right of First Refusal and Exchange Agreement entered on
June 8, 2001 by and among the Company, Buzztime, and Scientific-Atlanta
Strategic Investments, L.L.C. ("S-A"), the Company granted Form S-3 and
piggyback registration rights to S-A for all shares of the Company's common
stock receivable upon exercise of certain exchange rights. On January 16, 2003,
S-A exercised its exchange rights in full and acquired 1,000,000 shares of the
Company's common stock that were subject to the registration rights. Under the
piggyback registration rights, the shares held by S-A have priority behind only
the Company and have priority over all other securities.
Pursuant to the Investor Rights Agreement entered into on June 8, 2001 by
and between Buzztime and S-A, Buzztime granted demand, Form S-3 and piggyback
registration rights to S-A for all shares of Buzztime common stock held by S-A
as a result of the conversion from Buzztime Series A preferred stock. As of the
date hereof, S-A presently holds warrants for the purchase of 159,236 shares of
Buzztime Series A preferred stock, which is convertible into Buzztime common
stock at a one-to-one conversion rate. Under the piggyback registration rights,
the shares held by S-A have priority behind only the Company and have priority
over all other securities. As of the date hereof, none of the warrants held by
S-A have vested. In addition, Buzztime granted S-A preemptive rights provided
that S-A holds at least 500,000 shares of Buzztime common stock on an
as-converted basis. As of the date hereof, S-A does not presently qualify for
such preemptive rights.
The Company has entered into an oral agreement with Xxxxx Xxxxxxx
Xxxxxxxxxx Associates LLC, in which the Company agreed to grant Form S-3
registration rights with respect to 118,750 shares of the Company's common stock
underlying outstanding warrants. No piggyback registration rights have been
granted with respect to such shares.
Schedules to Securities Purchase Agreement of dated May 5, 2003
SCHEDULE 4.7
Litigation
NTN Communications, Inc. v. Long Range Systems, Inc.
In April, 2003, NTN Communications, Inc. filed a complaint in San Diego Superior
Court against Long Range Systems, Inc. alleging defamation and trade libel,
intentional interference with prospective economic advantage, Xxxxxx Act
(trademark violations) and California unfair competition. The complaint alleges
that LRS made false statements in its complaint and press release regarding
NTN's products infringing LRS patents, that LRS intentionally made false
statements to disrupt NTN's business relationships with its clients, that LRS
registered the domain name: xxx.xxxxxxxxxxx.xxx in violation of NTN's trademark
rights.
NTN Communications, Inc. v. Signologies Northeast, LLC
In November 2002, NTN filed a complaint and request for preliminary injunction
against Signologies NE, LLC in the U.S. Xxxxxxxx Xxxxx, Xxxxxxxx xx Xxx
Xxxxxxxxx. A preliminary injunction was issued on November 5, 2002, prohibiting
Signologies NE from using the Signologies xxxx, domain name and requiring them
to deliver for impounding all materials bearing the Signologies xxxx; all assets
acquired by NTN pursuant to the Asset Purchase Agreement entered into with Hysen
Technologies, Inc., NTN seeks attorneys' fees and costs as well as exemplary
damages in addition to a permanent injunction.
Schedules to Securities Purchase Agreement of dated May 5, 2003
SCHEDULE 4.9
Intellectual Property
1. Coast Business Credit:
In accordance with the Loan and Security Agreement whereby NTN granted Coast
Business Credit a security interest in all present and future assets, including
without limitation such general intangibles as copyrights, trademarks and
patents, NTN entered into the following agreements:
a) Patent and Trademark Security Agreement, dated August 6, 1999, by and
between NTN Communications, Inc. and Coast Business Credit, a division of
Southern Pacific Bank
b) Security Agreement in Copyrighted Works, dated August 6, 1999, by and
between NTN Communications, Inc., Coast Business Credit, a division of
Southern Pacific Bank
2. JTECH Communications, Inc.
Correspondence has been received from JTECH Communications, Inc. requesting NTN
Wireless to cease and desist from usage of JTECH marks in promotional material
and stickers used for relabeling of JTECH pagers following repair by NTN
Wireless.
Schedules to Securities Purchase Agreement of dated May 5, 2003
SCHEDULE 4.12
Consents
None
APPENDIX I
FORM OF WARRANT
APPENDIX II
NTN COMMUNICATIONS, INC.
INVESTOR'S CERTIFICATE OF RESALE OF THE SHARES
The undersigned, an officer of, or other person duly authorized by
_____________________________________, hereby certifies that the undersigned was
the holder of the Shares evidenced by the attached stock certificate(s) since
such Shares were originally issued by the issuer of such Shares, and, as the
holder of such Shares, the undersigned sold ________ of such Shares on _________
in accordance with Registration Statement no. _______________, and the
requirement of delivering a current prospectus has been complied with in
connection with the sale of such Shares.
Name of Holder
By:
---------------------------------------------------------
Title:
------------------------------------------------------
Appendix III
FORM OF NTN INVESTOR RIGHTS AGREEMENT
APPENDIX IV
FORM OF BUZZTIME INVESTOR RIGHTS AGREEMENT
APPENDIX V
FORM OF LICENSING AGREEMENT
APPENDIX VI
FORM OF OPINION OF O'MELVENY & XXXXX LLP
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
May 7, 2003
Media General, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Re: Purchase of Securities from NTN Communications, Inc. and
Buzztime Entertainment, Inc.
Ladies and Gentlemen:
We have acted as counsel to NTN Communications, Inc., a Delaware
corporation ("NTN"), and Buzztime Entertainment, Inc., a Delaware corporation
("Buzztime"; collectively with NTN, the "Companies"), in connection with the
issuance and sale of 2,666,667 shares of NTN common stock, par value $.005 per
share (the "NTN Shares"), and warrants (the "Warrants") to purchase 500,000
shares of Buzztime common stock, par value $.001 per share (the "Buzztime
Shares") pursuant to the Securities Purchase Agreement, dated as of May 5, 2003
by and among NTN, Buzztime and you (the "Purchase Agreement"), and the Licensing
Agreement, dated as of May 7, 2003 by and among NTN, Buzztime and you (the
"Licensing Agreement"). Except as otherwise indicated, capitalized terms used in
this opinion and defined in the Purchase Agreement will have the meanings given
in the Purchase Agreement.
In our capacity as such counsel, we have examined originals or copies of
those corporate or other records and documents we considered appropriate,
including the following:
(a) the Purchase Agreement;
(b) the NTN Investor Rights Agreement;
(c) the Buzztime Investor Rights Agreement;
(d) the Warrant; and
(e) the Licensing Agreement.
As to relevant factual matters, we have relied upon, among other things,
the factual representations in the Transaction Documents (as defined below). In
addition, we have obtained and relied upon those certificates of public
officials we considered appropriate. The Purchase Agreement, the NTN Investor
Page 2
Rights Agreement, the Buzztime Investor Rights Agreement, the Warrant and the
Licensing Agreement are collectively referred to as the "Transaction Documents."
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with originals of all
documents submitted to us as copies. To the extent the Companies' obligations
depend on the enforceability of a Transaction Document against the other parties
to such Transaction Document, we have assumed that such Transaction Document is
enforceable against such other parties.
On the basis of such examination, our reliance upon the assumptions in this
opinion and our consideration of those questions of law we considered relevant,
and subject to the limitations and qualifications in this opinion, we are of the
opinion that:
1. Each of the Companies is a corporation validly existing under the
laws of the State of Delaware, with corporate power to own its
properties and assets, to carry on its business as described in
the Form 10-K, to enter into the Transaction Documents and to
perform its obligations under the Transaction Documents.
2. The execution, delivery and performance of the Transaction
Documents have been duly authorized by all necessary corporate
action on the part of each Company and the Transaction Documents
have been duly executed and delivered by each Company.
3. The NTN Shares have been duly authorized by all necessary
corporate action on the part of NTN and, upon payment for and
delivery of such shares in accordance with the Purchase Agreement
and the Licensing Agreement and the countersigning of the
certificates representing such shares by a duly authorized
signatory of the registrar of NTN, the NTN shares will be validly
issued, fully paid and non-assessable.
4. The Warrant Shares, Renewal License Fee Shares, and Exchange
Shares have been duly authorized by all necessary corporate
action on the part of the applicable Company and, upon payment
for, exercise or exchange for, and delivery of such shares in
accordance with the applicable Transaction Document and the
countersigning of the certificates representing such shares by a
duly authorized signatory of the registrar of the applicable
Company for such shares, such shares will be validly issued,
fully paid and non-assessable.
5. Assuming the accuracy of your representations in Section 5 of the
Purchase Agreement and the receipt of appropriate
Page 3
representations of Comerica Bank-California as contemplated in
Section 5.15 of the NTN Investor Rights Agreement (and continued
accuracy of all such representations in the future), it is not
necessary in connection with the sale of the Securities under the
circumstances contemplated by the Transaction Documents to
register the Securities under the Securities Act of 1933, as
amended. We express no opinion as to the securities laws of any
jurisdiction.
6. The execution and delivery by each Company of the Transaction
Documents will not, and the performance by each Company of its
obligations under the Transaction Documents will not, (i) violate
the certificate of incorporation and bylaws of such Company or
(ii) violate the current Delaware General Corporation Law or any
current federal statute, rule or regulation that we have, in the
exercise of customary professional diligence, recognized as
applicable to such Company or to transactions of the type
contemplated by the Transaction Documents.
We express no opinion as to the effect of subsequent issuances of
securities of either Company to the extent that such issuances may result in
such Company not having enough remaining authorized but unissued shares of
common stock for the issuance, exercise or conversion of the Warrant Shares,
Renewal License Fee Shares or Exchange Shares. We also advise you that, as a
result of the operation of the antidilution or adjustment provisions of the
Transaction Documents, the Warrants Shares and the Exchange Shares may become
exercisable or convertible into more shares of common stock for the applicable
Company than remain authorized but unissued.
For the purposes of the opinions expressed in paragraph 6, we have assumed
that neither Company will take any future discretionary action (including a
decision not to act) permitted by the Transaction Documents that would cause the
performance of the Transaction Documents to violate any Delaware or federal
statute, rule or regulation. Our opinion in paragraph 6(ii) is subject to public
policy considerations, statutes or court decisions that may limit the right of a
party to obtain indemnification.
The law covered by this opinion is limited to the present federal laws of
the United States and the present Delaware General Corporation Law. We express
no opinion as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction. We
express no opinion as to the effect of subsequent issuances of securities of
either Company to the extent that such issuances may be integrated with the
issuance of the Securities under Rule 502 of Regulation D promulgated under the
Securities Act. Except as expressly set forth in paragraph 5 above, we express
no opinion concerning federal or state securities laws or regulations.
Page 4
This opinion is furnished by us as special counsel for the Companies and
may be relied upon by you only in connection with the Transaction Documents. It
may not be used or relied upon by you for any other purpose or by any other
person, nor may copies be delivered to any other person, without in each
instance our prior written consent. This opinion is expressly limited to the
matters set forth above and we render no opinion, whether by implication or
otherwise, as to any other matters. We assume no obligation to update or
supplement this opinion to reflect any facts or circumstances that arise after
the date of this opinion and come to our attention, or any future changes in
laws.
Respectfully submitted,
O'MELVENY & XXXXX LLP
