CONVERSION AND NOTE AMENDMENT AGREEMENT
This Conversion and Note Amendment Agreement (this "Agreement") dated as of
December 11, 2001 is made by and among NTN COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), XXXXX INTERNATIONAL ("Xxxxx") and SHEPHERD
INVESTMENTS INTERNATIONAL, LTD. ("Shepherd"; collectively with Xxxxx, the
"Noteholders").
PRELIMINARY STATEMENTS
A. The Company and the Noteholders are parties to a Restructure Agreement,
dated as of January 26, 2001 (the "Restructure Agreement"), pursuant to which,
among other things, the Noteholders surrendered their existing 7% convertible
senior subordinated notes due 2001 (the "2001 Notes") to the Company and in
exchange were issued 4% convertible senior subordinated notes due 2003 (the
"2003 Notes") with substantially the same terms and provisions as the 2001
Notes, except that the 2003 Notes were (i) subject to conversion by the Company
into shares of common stock, par value $.005, of the Company (the "Common
Stock") at maturity at a conversion price of $1.275 per share and (ii) subject
to conversion by the Company in the event that the average price of the Common
Stock exceeded $2.50 per share for twenty (20) consecutive trading days.
B.Prior to the Restructure Agreement, the Company and the Noteholders
entered into an Exchange Agreement, dated as of October 5, 1998 (the "Exchange
Agreement"), pursuant to which, among other things, the Noteholders acquired the
2001 Notes by exchanging shares of the Company's Series B Preferred Stock. In
connection with the Exchange Agreement, the Company and the Noteholders also
entered into a Registration Rights Agreement, dated as of October 5, 1998.
C. The Company and the Noteholders desire to enter into this Agreement in
order to convert $2,000,000 of the aggregate principal amount of the 2003 Notes
for shares of Common Stock at a reduced conversion price. As consideration for
the exchange, the Company will permit the principal amount of the 2003 Notes
being converted to be reduced from $1.275 per share to $1.22 per share and the
interest rate on the remaining outstanding principal amount of the 2003 Notes
will increase from 4% to 8% as provided herein. The conversion price of the 2003
Notes outstanding after the closing of this Agreement will remain at $1.275 per
share and all other terms and conditions of the 2003 Notes shall remain the
same.
D. The shares to be issued upon conversion of the 2003 Notes have been
previously registered with the Securities and Exchange Commission on a
registration statement on Form S-3 (file no. 333-69383) and are covered by a
resale prospectus dated January 11, 1999. The restrictive legends on the stock
certificates will be removed upon resale of the shares either in compliance with
the prospectus delivery requirements of the registration statement or Rule 144
under the Securities Act of 1933.
E. Concurrently herewith, the Noteholders shall submit a conversion notice
in the form attached as Exhibit A to each 2003 Note, with such notice reflecting
a reduced conversion price of $1.22 per share. Immediately upon receipt of the
conversion notice, the
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Company shall (i) direct and cause its transfer agent to issue and deliver a
stock certificate to the each of the Noteholders representing such number of
shares of Common Stock as each such Noteholder is hereby acquiring, duly
executed on behalf of the Company and registered in the name of such Noteholder
or its designee and (ii) execute and deliver the Allonge to Convertible Senior
Subordinated Note dated as of the date hereof (the "Allonge") to each such
Noteholder.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Conversion and Note Amendment.
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(a) Conversion Notice. Each Noteholder shall deliver a conversion notice in
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the form attached as Exhibit A to each 2003 Note requesting the conversion of
$1,000,000 in the aggregate principal amount of such Noteholder's 2003 Note, for
an aggregate conversion request of $2,000,000 by all Noteholders. The Company
and the Noteholders agree that such conversion notice shall reflect a conversion
price of $1.22 per share, which is a reduction from the stated conversion price
of $1.275 per share. As described in Section 2(b) of the 2003 Notes, each
Noteholder shall record the conversion amount as a payment of principal on
Schedule I to its 2003 Note.
(b) Issuance of Shares. Upon receipt of the conversion notice pursuant to
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Section 1(a), the Noteholders shall be entitled to an aggregate number of
1,639,344 shares of Common Stock (divided evenly between each Noteholder) and an
amount in cash equal for any fractional shares valued at the conversion price.
Upon completion of the proceedings contemplated by this Section, the Company
shall direct and cause its transfer agent to issue and deliver a stock
certificate to each Noteholder representing such number of Common Shares which
such Noteholder is then acquiring, duly executed on behalf of the Company and
registered in the name of such Noteholder or its designee.
(c) Allonge. Upon receipt of the conversion notice pursuant to Section
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1(a), the Company shall execute and deliver a copy of the Allonge to each
Noteholder and such Noteholder shall attach the Allonge to the 2003 Note held in
its possession. The Allonge shall be in the form attached as Exhibit A hereto.
SECTION 2. Representations and Warranties.
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(a) Mutual Representations and Warranties. Each party hereto represents and
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warrants to the other parties that the following statements are true, correct
and complete:
(i) Power and Authority. Each party has all requisite corporate power
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and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its obligations under, this
Agreement.
(ii) Authorization of Agreement. The execution and delivery and
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performance of this Agreement has been duly authorized by all necessary
corporate action on the part of each party.
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(iii) No Conflict. The execution and delivery by each party of this
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Agreement, and the performance by each party of this Agreement and the
Allonge do not and will not (1) violate any provision of any law or any
governmental rule or regulation applicable to such party, the certificate
of incorporation or bylaws or other organizational documents of such party,
or any order, judgment or decree of any court or other agency of government
binding on such party, (2) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
contractual obligation of such party, (3) result in or require the creation
or imposition of any lien upon any of the properties or assets of such
party or (4) require any approval of stockholders or limited partners or
any approval or consent of any person under any contractual obligation of
such party.
(iv) Governmental Consents. The execution and delivery by each party
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of this Agreement and the Allonge, and the performance by each party of
this Agreement and the Allonge do not and will not require any registration
with, consent or approval of, or notice to, or action by, any federal,
state or other governmental authority or regulatory body.
(v) Binding Obligation. This Agreement has been duly executed and
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delivered by each party and is the legally valid and binding obligation of
each party, enforceable against each party in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
(vi) No Commission. No commission or other remuneration has been paid
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or given directly or indirectly for soliciting this Agreement.
(b) Representation and Warranties by the Company. The Company represents
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and warrants to the other parties that the shares of Common Stock to be received
by the Noteholders under this Agreement are (1) duly authorized and validly
issued, fully paid and non-assessable, (2) free from all taxes, liens and
charges with respect to the issue thereof, and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company and (3)
entitled to the rights set forth in its certificate of incorporation.
(c) Representations and Warranties by Noteholders. Each Noteholder makes
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the representations and warranties set forth on Exhibit B hereto.
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SECTION 3. Miscellaneous.
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(a) Governing Law. This Agreement shall be governed by and interpreted in
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accordance with the laws of the State of New York without regard to the
principles of conflict of laws.
(b) Counterparts. This Agreement may be executed in two or more identical
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counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, provided that a facsimile signature shall be
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considered due execution and shall be binding upon
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the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
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reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
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unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other prior
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oral or written agreements between or among the Noteholders and the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the documents referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Noteholder makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers or other communications
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required or permitted to be given under the terms of this Agreement shall be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile; (iii) three
days after being sent by U.S. certified mail, return receipt requested, or (iv)
one day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications are set forth on the signature
page hereto. Each party shall provide five days' prior written notice to the
other party of any change in address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
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to the benefit of the parties and their respective successors and assigns.
(h) No Third Party Beneficiaries. This Agreement is intended for the
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benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Several Representations and Warranties. Each Noteholder shall be
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responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to be
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done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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(k) No Strict Construction. The language used in this Agreement will be
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deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(l) Equitable Relief. Each party recognizes that in the event that it fails
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to perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the other
party. Each party therefore agrees that the other parties shall be entitled to
seek temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
(m) Consent to Jurisdiction. The parties hereto expressly submit themselves
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to the exclusive jurisdiction of the state and federal courts of Delaware in any
action or proceeding relating to this Agreement or any of the other documents
contemplated hereby or any of the transactions contemplated hereby or thereby.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection that it may now or hereafter have to the laying of venue of any
such action, suit or proceeding brought in such a court and any claim that any
such action, suit or proceeding brought in such a court has been brought in an
inconvenient forum. The parties hereto irrevocably and unconditionally consent
to the service of process of any of the aforementioned courts in any such
action, suit or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, at their respective addresses set forth or
provided for herein, such service to become effective 10 days after such
mailing. Nothing herein shall affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against the other parties in any other jurisdiction.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 11th day of December, 2001.
NOTEHOLDERS:
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XXXXX INTERNATIONAL
By: ________________________________
Name:
Title:
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
By: ________________________________
Name:
Title:
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
COMPANY:
NTN COMMUNICATIONS, INC.
By: ________________________________
Name:
Title:
0000 Xx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
S-1
EXHIBIT A
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FORM OF ALLONGE
ALLONGE TO CONVERTIBLE SENIOR SUBORDINATED NOTE
By this Allonge to the attached 4% Convertible Senior Subordinated Note Due
2003 (the "Note"), the undersigned, NTN COMMUNICATIONS, INC., a Delaware
corporation, acknowledges and agrees that pursuant to the Conversion and Note
Amendment Agreement dated December 11, 2001 by and among the Company and the
holder of the Note, effective the date hereof, the interest rate shall be
increased to 8% per annum from 4% per annum on the Note to which this Allonge is
attached. Concurrently on the date hereof, the holder of the Note is converting
$1,000,000 in principal amount of the Note and the outstanding principal amount
under the Note is thereby reduced by such amount.
Dated: December 11, 2001
NTN COMMUNICATIONS, INC.
By:
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Title:
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A-1
EXHIBIT B
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Each Noteholder represents and warrants with respect to only itself that:
(i) Investment Purpose. Such person (i) is purchasing and/or acquiring the
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securities and (ii) upon exercise or conversion of any securities, will acquire
any shares of Common Stock underlying such security then issuable for its own
account, for investment only and not with a present view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act of 1933 (the "1933 Act");
provided, however, that by making the representations herein, such person does
not agree to hold any securities for any minimum or other specific term and
reserves the right to dispose of the securities at any time in accordance with
or pursuant to a registration statement or an exemption under the 1933 Act.
(ii) Accredited Investor Status. Such person is an "accredited investor" as
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that term is defined in Rule 501(a) of Regulation D.
(iii) Reliance on Exemptions. Such person understands that the securities
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are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
person's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such person set forth herein in order to
determine the availability of such exemptions and the eligibility of such person
to acquire the securities.
(iv) Information. Such person and its advisors, if any, have been furnished
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with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the securities which
have been specifically requested by such person. Such person and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
(v) No Governmental Review. Such person understands that no United States
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federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the securities or the
fairness or suitability of the investment in the securities nor have such
authorities passed upon or endorsed the merits of the offering of the
securities.
(vi) Transfer or Resale. Such person understands that except as provided in
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separate registration rights agreements between the Company and such person: (i)
the securities have not been and are not being registered under the 1933 Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such person shall
have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such securities can be sold, assigned
or transferred pursuant to Rule 144 promulgated under the 1933 Act (or a
successor rule thereto) ("Rule 144"); (ii) any sale of such securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule
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144 and further, if Rule 144 is not applicable, any resale of such securities
under circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the Securities and Exchange Commission thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
(vii) Legends. Such person understands that the certificates or other
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instruments representing the securities shall bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any securities upon which it is
stamped, if (1) any such securities are sold or transferred pursuant to an
effective registration statement under the 1933 Act, (2) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a form reasonably acceptable to the Company, to the effect that a public
sale, assignment or transfer of such securities may be made without registration
under the 1933 Act, or (3) any of the securities can be sold pursuant to Rule
144(k) under the 1933 Act (or any successor rule thereto).
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