-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FQlBc6cqxEVruHOerYimy8SvID8jjSSKrhYA+61T/dHBDr8Ov+iC4+uPxN++cUfA agSGkNPrr9yQyk1r0abRPw== 0000944209-97-001464.txt : 19971110 0000944209-97-001464.hdr.sgml : 19971110 ACCESSION NUMBER: 0000944209-97-001464 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971031 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971107 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NTN COMMUNICATIONS INC CENTRAL INDEX KEY: 0000748592 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 311103425 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11460 FILM NUMBER: 97709610 BUSINESS ADDRESS: STREET 1: 5966 LA PLACE COURT STREET 2: STE 100 CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 6194387400 MAIL ADDRESS: STREET 1: 5966 LA PLACE COURT STREET 2: STE 100 CITY: CARLSBAD STATE: CA ZIP: 92008 FORMER COMPANY: FORMER CONFORMED NAME: ALROY INDUSTRIES INC DATE OF NAME CHANGE: 19850411 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 31, 1997 NTN COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 1-11460 31-1103425 (Commission File Number) (I.R.S. Employer Identification No.) 5966 LA PLACE COURT 92008 CARLSBAD, CALIFORNIA (Zip Code) (Address of principal executive offices) (760) 438-7400 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) ================================================================================ Item 5. Other Events. ------------ On October 31, 1997, NTN Communications, Inc., a Delaware corporation (the "Company"), issued and sold to two institutional investors 70,000 shares of the Company's Series B Convertible Preferred Stock, $100 stated value per share (the "Series B Preferred Stock"), for an aggregate purchase price of $7,000,000. A portion of the net proceeds from the private placement will be used to repay approximately $3.9 million (including accrued interest) of indebtedness of the Company to GTECH Corporation. The balance of the net proceeds will be used to augment the Company's working capital and for general corporate purposes. The Series B Preferred Stock provides for a cumulative annual dividend of $4 per share, payable in quarterly installments of $1 per share on the last day of January, April, July and October of each year, commencing January 31, 1998. Under the terms of the Certificate of Designations, Preferences and Rights of the Series B Preferred Stock, any holder of Series B Preferred Stock is entitled to convert 25% of the Series B Preferred Stock owned by the holder into shares of Common Stock (the "Conversion Shares") on or after the earlier (the "Initial Conversion Date") of (i) the effective date of a Registration Statement (the "Registration Statement") covering the Conversion Shares to be filed with the Securities and Exchange Commission or (ii) February 28, 1998. An additional 25% of the Series B Preferred Stock owned by a holder will become convertible on each of the dates 60, 90 and 120 days, respectively, following the Initial Conversion Date. Notwithstanding the foregoing, no holder will be entitled to convert Series B Preferred Stock to the extent that the Conversion Shares issuable upon such conversion would cause the aggregate shares of Common Stock beneficially owned by the holder and its affiliates to exceed 4.9% of the shares of Common Stock outstanding following such conversion. Any outstanding shares of the Series B Preferred Stock not converted by October 31, 2000 will automatically be converted as of such date. The number of Conversion Shares issuable upon conversion of each share of Series B Preferred Stock will be determined by dividing the sum of $100 plus any accrued and unpaid dividends on the Series B Preferred Stock by the "Conversion Price" then in effect. The Conversion Price will be equal to the lesser of (a) 140% of the average of the closing bid prices of the Common Stock on the American Stock Exchange on the five trading days immediately preceding the Initial Conversion Date, but in no event higher than $3.50 per share (the "Conversion Ceiling"); and (b) 85% of the lowest average of the closing bid prices of the Common Stock on any three trading days during the 20 trading days immediately preceding the conversion date. The Conversion Price and the Conversion Ceiling are subject to adjustment in certain events, including stock dividends or subdivisions or reclassifications of the Common Stock. The actual number of Conversion Shares into which the Series B Preferred Stock shall be converted will depend on the Conversion Price in effect on the relevant conversion date, but the Company will not be required to issue Conversion Shares to the extent that it is prohibited from doing so by applicable law or the rules or regulations of the American Stock Exchange or other exchange on which the Common Stock is then traded. Consequently, the Company will not issue any Conversion Shares if, as a consequence of such issuance and all prior issuances of Conversion Shares, the aggregate number of Conversion Shares would exceed 19.9% of the Common Stock outstanding as of October 31, 1997. In such event, the holder may elect to have the Company either (i) redeem the Series B Preferred Stock for cash at the redemption price described below, (ii) rescind the conversion and retain the Series B Preferred Stock, subject to the future right to convert on the terms described herein or (iii) issue shares of Common Stock at a conversion price equal to the average of the closing bid prices of the Common Stock for the five trading days immediately preceding the date on which the Company receives the holder's election. The Company's sale of Series B Preferred Stock described above was not registered under the Securities Act of 1933 (the "Act") in reliance on exemptions from registration under the Act for offers 2. and sales not involving a public offering. As a result, neither the Series B Preferred Stock nor any Conversion Shares may be resold or transferred unless subsequently registered under the Act or an exemption from such registration is available. In this connection, the Company has agreed to file on behalf of the Series B Preferred Stock holders a Registration Statement under the Act covering the resale of the Conversion Shares. If a Registration Statement under the Act covering the resale of the Conversion Shares has not been declared effective on or before February 28, 1998, the Company will be required to pay the holders of the Series B Preferred Stock, in cash, certain amounts until the Registration Statement is declared effective, as follows: (i) for the 30-day period beginning March 1, 1998, an amount equal to 1% of the quotient of $100 plus any accrued but unpaid dividends, divided by the Conversion Price, for each share of Series B Preferred Stock; and (ii) for each consecutive 30-day period beginning April 1, 1998, an amount equal to 2% of the quotient of $100 plus any accrued and unpaid dividends, divided by the Conversion Price, for each share of Series B Preferred Stock. Moreover, in the event the Registration Statement shall not have been declared effective on or before May 29, 1998, the Company will be required to redeem the Series B Preferred Stock for cash at a redemption price per share of Series B Preferred Stock equal to the number of Conversion Shares then issuable upon conversion of a share of Series B Preferred Stock multiplied by the average of the closing bid prices of the Common Stock on the five trading days preceding May 29, 1998. The terms of the sales of shares described above were determined by arm's- length negotiations between the Company and the investors or their representatives. The investors and the representatives are not affiliated with the Company or any of its officers, directors or affiliates. 3. Item 7. Financial Statements and Exhibits. --------------------------------- (c) Exhibits. The following exhibits included with this report are made part hereof: 4.1 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of NTN Communications, Inc. 10.1 Securities Purchase Agreement, dated October 31, 1997, by and among NTN Communications, Inc., Stark International and Shephard International Investments, Ltd. 4. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NTN COMMUNICATIONS, INC. Date: November 6, 1997 By /S/ Gerald Sokol, Jr. ---------------------------------------- Gerald Sokol, Jr. Chief Executive Officer and President 5. EXHIBIT INDEX Exhibit Sequential No. Description Page No. - --------- ------------------------------------------------------- ------------ 4.1 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of NTN Communications, Inc. 10.2 Securities Purchase Agreement, dated October 31, 1997, by and among NTN Communications, Inc., Stark International and Shephard International Investments, Ltd. 6. EX-4.1 2 CERTIFICATE OF DESIGNATIONS EXHIBIT 4.1 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK OF NTN COMMUNICATIONS, INC. NTN Communications, Inc. (the "COMPANY"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Certificate of Incorporation, as amended, of the Company, and pursuant to Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company at a meeting duly held, adopted resolutions (i) authorizing a new series of the Company's previously authorized preferred stock, $.005 par value per share, and (ii) providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of eighty-five thousand (85,000) shares of Series B Convertible Preferred Stock of the Company, as follows: RESOLVED, that the Company is authorized to issue 85,000 shares of Series B Convertible Preferred Stock (the "SERIES B PREFERRED SHARES"), $.005 par value per share, and the stated value shall be $100 per share (the "STATED VALUE") which shall have the following powers, designations, preferences and other special rights: (1) Dividends. The holders of the outstanding Series B Preferred --------- Shares shall be entitled to receive cumulative dividends at the annual rate of $4.00 per Series B Preferred Share. Such dividends shall be payable in quarterly payments of $1.00 per share on the last day of January, April, July and October of each year, commencing on January 31, 1998 (each of such dates being a "DIVIDEND PAYMENT DATE"). Such dividend shall accrue on each Series B Preferred Share from October 31, 1997 and shall accrue from day-to-day, whether or not earned or declared. Dividend payments made with respect to Series B Preferred Shares may be made, subject to the terms hereof, in cash or, at the option of and in the sole discretion of the Board of Directors, in full or in part, (i) by issuing fully paid and nonassessable Series B Preferred Shares such that the Stated Value of such Series B Preferred Shares plus the amount of cash dividend paid in part, if any, is equal to the amount of the cash dividend which would otherwise be paid on such Dividend Payment Date if such dividend were paid entirely in cash or (ii) by increasing the Stated Value of the Series B Preferred Shares by the amount of such dividend such that the amount of such increase in the Stated Value of the Series B Preferred Shares plus the amount of cash dividend paid in part, if any, is equal to the amount of the cash dividend which would otherwise be paid on such Dividend Payment Date if such dividend were paid entirely in cash. If the Board of Directors shall elect to pay any part of a dividend by such increase in Stated Value, the Company shall provide notice to such effect to the holders of the Series B Preferred Shares by no later than the applicable Dividend Payment Date. The issuance of such Series B Preferred Shares or any such increase in the Stated Value (plus the amount of cash dividend, if any, paid together therewith) shall constitute full payment of such dividend. In no event shall an election by the Board of Directors to pay dividends, in full or in part, in cash on any Dividend Payment Dates preclude the Board of Directors from electing any other available alternative in respect of all or any portion of any subsequent dividend. Declared but unpaid dividends shall not bear interest. (2) Holder's Conversion of Series B Preferred Shares. A holder of ------------------------------------------------ Series B Preferred Shares shall have the right, at such holder's option, to convert the Series B Preferred Shares into shares of the Company's common stock, $.005 par value per share (the "COMMON STOCK"), on the following terms and conditions: (a) Conversion Right. Subject to the provisions of Sections ---------------- 2(f) below, any holder of Series B Preferred Shares shall be entitled to convert at any time or times (i) 25% of the number of Series B Preferred Shares owned by such holder on or after the earlier of (I) the date the Registration Statement (as defined below) is declared effective by the United States Securities and Exchange Commission (the "SEC") and (II) 120 days after the initial date of issuance of the Series B Preferred Shares (the "SCHEDULED EFFECTIVE DATE"), (ii) an additional 25% of the Series B Preferred Shares held by such holder commencing on or after 60 days after the first 25% of such shares becomes convertible, (iii) an additional 25% of the Series B Preferred Shares held by such holder commencing on or after 90 days after the first 25% of such shares becomes convertible and (iv) the remaining 25% of the Series B Preferred Shares held by such holder commencing on or after 120 days after the first 25% of such Shares becomes convertible, into fully paid and nonassessable shares (rounded to the nearest whole share in accordance with Section 2(g) below) of Common Stock, at the Conversion Rate (as defined below); provided, however, that in no event shall any holder be entitled to convert Series A Preferred Shares in excess of that number of Series A Preferred Shares which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates to exceed 4.9% of the outstanding shares of the Common Stock following such conversion. For purposes of this paragraph beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. (b) Conversion Rate. The number of shares of Common Stock --------------- issuable upon conversion of each of the Series B Preferred Shares pursuant to -2- Sections (2)(a) and 2(f) shall be determined according to the following formula (the "CONVERSION RATE"): $100 + amount of accrued but unpaid dividends --------------------------------------------- Conversion Price For purposes of this Certificate of Designations, the following terms shall have the following meanings: (i) "CONVERSION PRICE" means as of any Conversion Date (as defined below) or other date of determination, the lower of (I) 140% of the average Closing Bid Prices of the Common Stock on the five trading days immediately preceding the date on which the first 25% of the Series B Preferred Shares becomes convertible in accordance with Section 2(a), but in no event greater than $3.50 (the "Conversion Ceiling") and (II) 85% of the lowest average of Closing Bid Prices of the Common Stock on any three trading days during the 20 trading days immediately preceding the Conversion Date, subject to adjustment as provided herein; (ii) "CLOSING BID PRICES" means, for any security as of any date, the last closing bid price on the American Stock Exchange ("AMEX") as reported by Bloomberg, L.P. ("Bloomberg"), or, if the AMEX is not the principal securities exchange for such security, the last closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, or, if no last closing trade price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc., the last closing trade price of such security as reported by Bloomberg; and (iii) "AVERAGE MARKET PRICE" means the average of the Closing Bid Prices of the Common Stock for the five trading days immediately preceding the applicable date. (c) Effect of Failure to Obtain and Maintain Effectiveness of --------------------------------------------------------- Registration Statement. If the registration statement (the "REGISTRATION - ---------------------- STATEMENT") covering the resale of the shares of Common Stock issuable upon conversion of the Series B Preferred Shares and required to be filed by the Company pursuant to the Registration Rights Agreement between the Company and the initial holders of the Series B Preferred Shares (THE "REGISTRATION RIGHTS AGREEMENT") is not declared effective by the SEC on or before the Scheduled Effective Date, then each holder of Series B Preferred Shares shall be entitled to the following payments until such time as the Registration Statement is declared effective by the SEC (all such payments to be made in cash and nonrefundable on the first day of the relevant thirty (30) day period): (A) for the thirty (30) day period beginning immediately following the Scheduled Effective Date and ending 30 days following the -3- Scheduled Effective Date, an amount equal to the product of (I) (.01), multiplied by (II) the quotient of (y) 100 (plus any accrued but unpaid dividends thereon) divided by (z) the Conversion Price, multiplied by (III) the number of Series B Preferred Shares held by such holder. (B) for each consecutive thirty (30) day period beginning 31 days following the Scheduled Effective Date, an amount equal to the product of (I) (.02), multiplied by (II) the quotient of (y) 100 (plus any accrued but unpaid dividends thereon) divided by (z) the Conversion Price, multiplied by (III) the number of Series B Preferred Shares held by such holder; provided however that if, and only if, the Company has at all times used its best efforts to have the Registration Statement declared effective by the SEC and such Registration Statement shall not have been declared effective within 90 days after the Scheduled Effective Date the Company shall be required to redeem the Series B Preferred Shares in accordance with Section 3(a) and in connection therewith the Company shall pay the holders of the Series B Preferred Shares a price per Series B Preferred Share equal to the Major Transaction Redemption Price. (d) Adjustment to Conversion Price--Dilution and Other Events. In --------------------------------------------------------- order to prevent dilution of the rights granted under this Certificate of Designations, the Conversion Ceiling and the Closing Bid Prices for any days during any measuring period prior to any of the events set forth below (the "Adjusting Closing Bid Prices") will be subject to adjustment from time to time as provided in this Section 2(d). (i) Adjustment upon Declaration of Dividends and Other Events. --------------------------------------------------------- If the Company shall (I) declare a dividend or make a distribution in shares of Common Stock, (II) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (III) combine or reclassify the outstanding Common Stock into a smaller number of shares, the Conversion Ceiling and the Adjusting Closing Bid Prices in effect on the record date of such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted. (ii) Adjustment upon Issuance of Convertible Securities with ------------------------------------------------------- Conversion Ceilings. If and whenever on or after the date of issuance of the - ------------------- Series B Preferred Shares, the Company in any manner issues or sells any stock or other securities convertible into or exchangeable for Common Stock ("Convertible Securities") and the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is subject to a Conversion Ceiling (the "New Convertible Securities Ceiling") which is greater than the Conversion Ceiling immediately prior to such time, then from and after the time of such issue or sale, the Conversion Ceiling shall be increased, if necessary, so that it shall not be less than the New Convertible Securities Ceiling. -4- (iii) Notices. ------- (A) Immediately upon any adjustment pursuant hereto of the Conversion Price, the Company will give written notice thereof to each holder of Series B Preferred Shares, setting forth in reasonable detail and certifying the calculation of such adjustment. (B) The Company will give written notice to each holder of Series B Preferred Shares at least twenty (20) days prior to the date on which the Company closes its books or takes a record (I) with respect to any dividend or distribution upon the Common Stock, or (II) for determining rights to vote with respect to any Organic Change, dissolution or liquidation; provided that in no event shall such notice be provided to such holder prior to such information being made known to the public. "Organic Change" shall mean any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock. "Person" shall mean an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. (C) The Company will also give written notice to each holder of Series B Preferred Shares at least twenty (20) days prior to the date on which any Organic Change, dissolution or liquidation will take place. (iv) Successive adjustments in the Conversion Ceiling and the Adjusting Closing Bid Prices shall be made whenever any event specified above shall occur. All calculations under this Section 2(d) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment in the Conversion Price shall be made if the amount of such adjustment would be less than $0.01, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or more. (e) Mechanics of Conversion. Subject to the Company's inability to ----------------------- fully satisfy its obligations under a Conversion Notice (as defined below) as provided for in Section 5 below: (i) Holder's Delivery Requirements. To convert Series B Preferred Shares into full shares of Common Stock on any date (the "CONVERSION DATE"), the holder thereof shall (A) deliver or transmit by facsimile, for receipt on or prior to 11:59 p.m., Pacific Time on such date, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE"), to the Company or its designated transfer agent (the "TRANSFER AGENT"), and (B) surrender to a common carrier -5- for delivery to the Company or the Transfer Agent as soon as practicable following such date, the original certificates representing the Series B Preferred Shares being converted (or an indemnification undertaking with respect to such shares in the case of their loss, theft or destruction) (the "PREFERRED STOCK CERTIFICATES") and the originally executed Conversion Notice. (ii) Company's Response. Upon receipt by the Company of a ------------------ facsimile copy of a Conversion Notice, the Company shall immediately send, via facsimile, a confirmation of receipt of such Conversion Notice to such holder. Upon receipt by the Company or the Transfer Agent of the Preferred Stock Certificates to be converted pursuant to a Conversion Notice, together with the originally executed Conversion Notice, the Company or the Transfer Agent (as applicable) shall, on the next business day following the date of receipt (or the second business day following the date of receipt if received after 11:00 a.m. local time of the Company or Transfer Agent, as applicable), (I) issue and surrender to a common carrier for overnight delivery to the address as specified in the Conversion Notice, a certificate, registered in the name of the holder or its designee, for the number of shares of Common Stock to which the holder shall be entitled, or (II) credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder's or its designee's balance account with The Depository Trust Company. (iii) Dispute Resolution. In the case of a dispute as to the ------------------ determination of the Conversion Price, the Company shall promptly issue to the holder the number of shares of Common Stock that is not disputed and shall submit the disputed determinations or arithmetic calculations to the holder via facsimile within one (1) business day of receipt of such holder's Conversion Notice. If such holder and the Company are unable to agree upon the determination of the Conversion Price within one (1) business day of such disputed determination or arithmetic calculation being submitted to the holder, then the Company shall within one (1) business day submit via facsimile the disputed determination of the Conversion Price to an independent, reputable accounting firm of national standing acceptable to the Company and such holder of Series B Preferred Shares. The Company shall cause such accounting firm to perform the determinations or calculations and notify the Company and the holder of the results no later than forty-eight (48) hours from the time it receives the disputed determinations or calculations. Such accounting firm's determination, shall be binding upon all parties absent manifest error. (iv) Record Holder. The person or persons entitled to receive ------------- the shares of Common Stock issuable upon a conversion of Series B Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (v) Company's Failure to Timely Convert. If the Company shall ----------------------------------- fail (other than as a result of the situations described in Section 4(a) with respect to which the holder has elected, and the Company has satisfied its obligations under, one of -6- the options set forth in subparagraphs (i) through (iv) of Section 4(a)) to issue to a holder on a timely basis as described in this Section 2(e), a certificate for the number of shares of Common Stock to which such holder is entitled upon such holder's conversion of Series B Preferred Shares, the Company shall pay damages to such holder equal to the greater of (A) actual damages incurred by such holder as a result of such holder's needing to "buy in" shares of Common Stock to satisfy its securities delivery requirements ("Buy In Actual Damages") and (B) after the effective date of the Registration Statement if the Company fails to deliver such certificates within five days after the last possible date which the Company could have issued such Common Stock to such holder without violating this Section 2(e), on each date such conversion is not timely effected in an amount equal to 1% of the product of (A) the number of shares of Common Stock not issued to the holder on a timely basis and to which such holder is entitled and (B) the Closing Bid Price of the Common Stock on the last possible date which the Company could have issued such Common Stock to such holder without violating this Section 2(e). (f) Mandatory Conversion. If any Series B Preferred Shares -------------------- remain outstanding on the Mandatory Conversion Date (as defined below), then all such Series B Preferred Shares shall be converted as of such date in accordance with this Section 2 as if the holders of such Series B Preferred Shares had given the Conversion Notice on the Mandatory Conversion Date, and the Conversion Date had been fixed as of the Mandatory Conversion Date, for all purposes of this Section 2, and all holders of Series B Preferred Shares shall thereupon and within two (2) business days thereafter surrender all Preferred Stock Certificates, duly endorsed for cancellation, to the Company or the Transfer Agent. No person shall thereafter have any rights in respect of Series B Preferred Shares, except the right to receive shares of Common Stock on conversion thereof as provided in this Section 2. "MANDATORY CONVERSION DATE" means October 31, 2000. (g) Fractional Shares. The Company shall not issue any ----------------- fraction of a share of Common Stock upon any conversion. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one Series B Preferred Share by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of a fraction of a share of Common Stock. If, after the aforementioned aggregation, the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up or down to the nearest whole share. (h) Taxes. The Company shall pay any and all taxes which may be ----- imposed upon it with respect to the issuance and delivery of Common Stock upon the conversion of the Series B Preferred Shares. (3) Redemption. ---------- (a) Redemption Upon Major Transaction. After a Major Transaction --------------------------------- (as defined below), the Company shall be required to redeem all of the Series B Preferred -7- Shares at a price per Series B Preferred Share equal to the product of (I) the aggregate number of shares of Common Stock for which each such Series B Preferred Share would be converted into on the date of the public announcement of such Major Transaction or the next date on which the exchange or market on which the Common Stock is traded is open if such public announcement is made (X) after 12:00 p.m., Pacific Time, time on such date or (Y) on a date on which the exchange or market on which the Common Stock is traded is closed, multiplied by (II) the Average Market Price of the Common Stock on such date ("Major Transaction Redemption Price"). (b) Redemption Option Upon Triggering Event. In addition to all --------------------------------------- other rights of the holders of Series B Preferred Shares contained herein, after a Triggering Event (as defined below), each holder of Series B Preferred Shares shall have the right in accordance with Section 3(f), at such holder's option, to require the Company to redeem all or a portion of such holder's Series B Preferred Shares at a price per Series B Preferred Share equal to the product of (I) the aggregate number of shares of Common Stock for which each such Series B Preferred Share would be converted into as of the date immediately preceding such Triggering Event on which the exchange or market on which the Common Stock is traded is open multiplied by (II) the Average Market Price of the Common Stock on such date ("TRIGGERING EVENT REDEMPTION PRICE" and, collectively with "Major TRANSACTION REDEMPTION PRICE," the "REDEMPTION PRICE"). (c) "Major Transaction". A "Major Transaction" shall be deemed ----------------- to have occurred at such time as any of the following events: (i) the consolidation or merger of the Company with or into another Person (other than pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or pursuant to a merger after which the holders of the Company's outstanding capital stock immediately prior to the merger own a number of shares of the resulting company's outstanding capital stock sufficient to elect a majority of the resulting company's board of directors); (ii) the sale or transfer of substantially all of the Company's assets (other than a sale or transfer to an entity controlling, controlled by or under common control with the Company); or (iii) a purchase, tender or exchange offer for more than 50% of the outstanding shares of Common Stock is made and accepted by the holders thereof. (d) "Triggering Event". A "Triggering Event" shall be deemed ---------------- to have occurred at such time as any of the following events: (i) notice from the Company that Common Stock issued or issuable upon conversion of the Series B Preferred Shares cannot be sold under the Registration Statement (the "Suspension Period"), for any period of 45 consecutive days that is (A) after the date the Registration Statement has been declared effective by the SEC and (B) prior to the time that the Conversion Shares may be sold without limitation -8- in accordance with Rule 144(k) under the 1933 Act; provided that any demand for redemption under this Section 3(d)(i) must be made by a holder of Series B Preferred Shares within 10 days after receipt of notice from the Company of the termination of the Suspension Period; and, provided further that if the aggregate number of days in all Suspension Periods (the "Suspension Days") is equal to or greater than forty-five (45) days, then the Mandatory Conversion Date shall be extended by the number of Suspension Days; (ii) the failure of the Common Stock or the Conversion Shares to be listed on the AMEX, The New York Stock Exchange or the Nasdaq National Market System for a period of 15 consecutive days; provided however that any demand for redemption under this Section 3(d)(ii) must be made by a holder of Series B Preferred Shares within 30 days after receipt of the Notice of Triggering Event (as defined in Section 3(f)); or (iii) the Company's notice to any holder of Series B Preferred Shares, including by way of public announcement, at any time, of its intention not to comply with proper requests for conversion of any Series B Preferred Shares into shares of Common Stock, including due to any of the reasons set forth in Section 4(a) below, except in any case in which the basis for such intention by the Company is a bona fide dispute as to the right of such holder to such conversion. (e) Mechanics of Redemption Upon Major Transaction. No sooner ---------------------------------------------- than fifteen (15) days nor later than ten (10) days prior to the consummation of a Major Transaction, but not prior to the public announcement of such Major Transaction, the Company shall deliver written notice thereof via facsimile and overnight courier ("NOTICE OF MAJOR TRANSACTION") to each holder of Series B Preferred Shares. (f) Mechanics of Redemption at Option of Holder Upon Triggering ----------------------------------------------------------- Event. Within one (1) day after the occurrence of a Triggering Event, the ----- Company shall deliver written notice thereof via facsimile and overnight courier ("NOTICE OF TRIGGERING EVENT") to each holder of Series B Preferred Shares. At any time after receipt of a Notice of Triggering Event, but only for as long as the facts giving rise to the Triggering Event continue to exist, the holders of at least two-thirds (2/3) of the Series B Preferred Shares then outstanding may require the Company to redeem all of the Series B Preferred Shares by delivering written notice thereof via facsimile and overnight courier ("Notice of Redemption at Option of HolderUpon Triggering Event") to the Company, which Notice of Redemption at Option of Holder Upon Triggering Event shall indicate (i) the number of Series B Preferred Shares that such holders are voting in favor of redemption and (ii) the applicable Redemption Price, as calculated pursuant to Section 3(b) above. (g) Payment of Redemption Price. Upon the occurrence of a Major --------------------------- Transaction or the Company's receipt of a Notice(s) of Redemption at Option of Holder Upon Triggering Event from the holders of at least two-thirds (2/3) of the Series B Preferred Shares then outstanding, the Company shall immediately notify each holder by -9- facsimile of the mechanics of the delivery of each holder's Preferred Stock Certificate and, if applicable, the Company's receipt of such requisite notices necessary to effect a redemption and each holder of Series B Preferred Shares shall thereafter promptly send such holder's Preferred Stock Certificates to be redeemed to the Company or its Transfer Agent. The Company shall deliver the applicable Redemption Price to such holder within thirty (30) days after the Company's delivery of a Notice of Major Transaction or the Company's receipt of the requisite notices required to affect a redemption; provided that a holder's Preferred Stock Certificates shall have been so delivered to the Company or its Transfer Agent; provided further that if the Company is unable to redeem all of the Series B Preferred Shares, the Company shall redeem an amount from each holder of Series B Preferred Shares equal to such holder's pro-rata amount (based on the number of Series B Preferred Shares held by such holder relative to the number of Series B Preferred Shares outstanding) of all Series B Preferred Shares being redeemed. If the Company shall fail to redeem all of the Series B Preferred Shares submitted for redemption (other than pursuant to a dispute as to the arithmetic calculation of the Redemption Price), in addition to any remedy such holder of Series B Preferred Shares may have under this Certificate of Designations and the Securities Purchase Agreement between the Company and the initial holders of the Series B Preferred Shares (the "SECURITIES PURCHASE AGREEMENT"), the Redemption Price payable in respect of such unredeemed Series B Preferred Shares shall bear interest at the rate of 1.25% per month (prorated for partial months) until paid in full. In the case of a Triggering Event, until the Company pays such unpaid Redemption Price in full to each holder, holders of at least two-thirds (2/3) of the Series B Preferred Shares then outstanding, including shares of Series B Preferred Shares submitted for redemption pursuant to this Section 3 and for which the applicable Redemption Price has not been paid, shall have the option (the "VOID OPTIONAL REDEMPTION OPTION") to, in lieu of redemption, require the Company to promptly return to each holder all of the Series B Preferred Shares that were submitted for redemption by such holder under this Section 3 and for which the Redemption Price has not been paid, by sending written notice thereof to the Company via facsimile (the "VOID OPTIONAL REDEMPTION NOTICE"). Upon the Company's receipt of such Void Optional Redemption Notice(s) and prior to payment of the full Redemption Price to each holder, (i) the Notice(s) of Redemption at Option of Holder Upon Triggering Event shall be null and void with respect to those Series B Preferred Shares submitted for redemption and for which the Redemption Price has not been paid, and (ii) the Company shall immediately return any Series B Preferred Shares submitted to the Company by each holder for redemption under this Section 3(i) and for which the Redemption Price has not been paid. Notwithstanding the foregoing, in the event of a dispute as to the determination of the arithmetic calculation of the Redemption Price, such dispute shall be resolved pursuant to Section 2(e)(iii) above. Payments provided for in this Section 3 shall have priority to payments to other stockholders in connection with a Major Transaction. (4) Inability to Fully Convert. -------------------------- (a) Holder's Option if Company Cannot Fully Convert. If, upon ----------------------------------------------- the Company's receipt of a Conversion Notice, the Company cannot issue shares of Common -10- Stock registered for resale under the Registration Statement for any reason, including, without limitation, because the Company (x) does not have a sufficient number of shares of Common Stock authorized and available, (y) is otherwise prohibited by applicable law or by the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or its Securities, including without limitation the AMEX, from issuing all of the Common Stock which is to be issued to a holder of Series B Preferred Shares pursuant to a Conversion Notice or (z) fails to have a sufficient number of shares of Common Stock registered for resale under the Registration Statement, then the Company shall issue as many shares of Common Stock as it is able to issue in accordance with such holder's Conversion Notice and pursuant to Section 2(e) above and, with respect to the unconverted Series B Preferred Shares, the holder, solely at such holder's option, can elect to (unless the Company issues and delivers the Conversion Shares underlying the unconverted Series B Preferred Shares prior to the holder's election hereunder, in which case such holder shall only be entitled to receive Buy In Actual Damages under Section 2(e)(v)) : (i) require the Company to redeem from such holder those Series B Preferred Shares for which the Company is unable to issue Common Stock in accordance with such holder's Conversion Notice ("MANDATORY REDEMPTION") at a price per Series B Preferred Share (the "MANDATORY REDEMPTION PRICE") equal to the Triggering Event Redemption Price as of such Conversion Date; (ii) if the Company's inability to fully convert Series B Preferred Shares is pursuant to Section 4(a)(z) above, require the Company to issue restricted shares of Common Stock in accordance with such holder's Conversion Notice and pursuant to Section 2(e) above; (iii) void its Conversion Notice and retain or have returned, as the case may be, the nonconverted Series B Preferred Shares that were to be converted pursuant to such holder's Conversion Notice; or (iv) if the Company's inability to fully convert Series B Preferred Shares is pursuant to the AMEX rules and regulations described in Section 4(a)(y) above, require the Company to issue shares of Common Stock in accordance with such holder's Conversion Notice and pursuant to Section 2(e) above at a Conversion Price equal to the Average Market Price of the Common Stock for the five (5) consecutive trading days preceding such holder's Notice in Response to Inability to Convert (as defined below). (b) Mechanics of Fulfilling Holder's Election. The Company shall ------------------------------------------ immediately send via facsimile to a holder of Series B Preferred Shares, upon receipt of a facsimile copy of a Conversion Notice from such holder which cannot be fully satisfied as described in Section 4(a) above, a notice of the Company's inability to fully satisfy such holder's Conversion Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such Inability to Fully Convert Notice shall indicate (i) the reason why the Company is unable -11- to fully satisfy such holder's Conversion Notice, (ii) the number of Series B Preferred Shares which cannot be converted and (iii) the applicable Mandatory Redemption Price. Such holder must within five (5) business days of receipt of such Inability to Fully Convert Notice deliver written notice via facsimile to the Company ("NOTICE IN RESPONSE TO INABILITY TO CONVERT") of its election pursuant to Section 4(a) above. (c) Payment of Redemption Price. If such holder shall elect to --------------------------- have its shares redeemed pursuant to Section 4(a)(i) above, the Company shall pay the Mandatory Redemption Price in cash to such holder within thirty (30) days of the Company's receipt of the holder's Notice in Response to Inability to Convert. If the Company shall fail to pay the applicable Mandatory Redemption Price to such holder on a timely basis as described in this Section 4(c) (other than pursuant to a dispute as to the determination of the arithmetic calculation of the Redemption Price), in addition to any remedy such holder of Series B Preferred Shares may have under this Certificate of Designations and the Securities Purchase Agreement, such unpaid amount shall bear interest at the rate of 1.25% per month (prorated for partial months) until paid in full. Until the full Mandatory Redemption Price is paid in full to such holder, such holder may void the Mandatory Redemption with respect to those Series B Preferred Shares for which the full Mandatory Redemption Price has not been paid and receive back such Series B Preferred Shares. Notwithstanding the foregoing, if the Company fails to pay the applicable Mandatory Redemption Price within such thirty (30) days time period due to a dispute as to the determination of the arithmetic calculation of the Redemption Price, such dispute shall be resolved pursuant to Section 2(e)(iii) above. (d) Pro-rata Conversion and Redemption. In the event the Company ---------------------------------- receives a Conversion Notice from more than one holder of Series B Preferred Shares on the same day and the Company can convert and redeem some, but not all, of the Series B Preferred Shares pursuant to this Section 4, the Company shall convert and redeem from each holder of Series B Preferred Shares electing to have Series B Preferred Shares converted and redeemed at such time an amount equal to such holder's pro-rata amount (based on the number of Series B Preferred Shares held by such holder relative to the number of Series B Preferred Shares outstanding) of all Series B Preferred Shares being converted and redeemed at such time. (5) Reissuance of Certificates. In the event of a conversion or -------------------------- redemption pursuant to this Certificate of Designations of less than all of the Series B Preferred Shares represented by a particular Preferred Stock Certificate, the Company shall promptly cause to be issued and delivered to the holder of such Series B Preferred Shares a preferred stock certificate representing the remaining Series B Preferred Shares which have not been so converted or redeemed. (6) Reservation of Shares. The Company shall, so long as any of the --------------------- Series B Preferred Shares are outstanding, reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Shares, such number of shares of Common Stock as shall from time to -12- time be sufficient to effect the conversion of all of the Series B Preferred Shares then outstanding; provided that the number of shares of Common Stock so reserved shall at no time be less than 200% of the number of shares of Common Stock for which the Series B Preferred Shares are at any time convertible; provided further that such shares of Common Stock so reserved shall be allocated for issuance upon conversion of Series B Preferred Shares pro rata among the holders of Series B Preferred Shares based on the number of Series B Preferred Shares held by such holder relative to the total number of authorized Series B Preferred Shares. (7) Voting Rights. Holders of Series B Preferred Shares shall have no ------------- voting rights, except as required by law, including but not limited to the General Corporation Law of the State of Delaware, and as expressly provided in this Certificate of Designations. (8) Liquidation, Dissolution, Winding-Up. In the event of any ------------------------------------ voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Shares shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the "PREFERRED FUNDS"), before any amount shall be paid to the holders of any of the capital stock of the Company of any class junior in rank to the Series B Preferred Shares in respect of the preferences as to the distributions and payments on the liquidation, dissolution and winding up of the Company, an amount per Series B Preferred Share equal to the sum of (i) $100 and (ii) all accrued and unpaid dividends (such sum being referred to as the "LIQUIDATION VALUE"); provided that, if the Preferred Funds are insufficient to pay the full amount due to the holders of Series B Preferred Shares and holders of shares of other classes or series of preferred stock of the Company that are of equal rank with the Series B Preferred Shares as to payments of Preferred Funds (the "PARI PASSU SHARES"), then each holder of Series B Preferred Shares and Pari Passu Shares shall receive a percentage of the Preferred Funds equal to the full amount of Preferred Funds payable to such holder as a liquidation preference, in accordance with their respective Certificate of Designations, Preferences and Rights, as a percentage of the full amount of Preferred Funds payable to all holders of Series B Preferred Shares and Pari Passu Shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other Person, nor the sale or transfer by the Company of less than substantially all of its assets, shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company. (9) Preferred Rank. All shares of Common Stock shall be of junior -------------- rank to all Series B Preferred Shares in respect to the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company. The rights of the shares of Common Stock shall be subject to the preferences and relative rights of the Series B Preferred Shares. As long as at least one-third (1/3) of the Series B Preferred Shares initially issued remain outstanding, then without the prior express written consent -13- of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares, the Company shall not hereafter authorize or issue additional or other capital stock that is of senior rank to the Series B Preferred Shares in respect of the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company. Without the prior express written consent of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares, the Company shall not hereafter authorize or make any amendment to the Company's Certificate of Incorporation or bylaws, or file any resolution of the board of directors of the Company with the Delaware Secretary of State containing any provisions, which would adversely affect or otherwise impair the rights or relative priority of the holders of the Series B Preferred Shares relative to the holders of the Common Stock or the holders of any other class of capital stock. In the event of the merger or consolidation of the Company with or into another corporation, the Series B Preferred Shares shall maintain their relative powers, designations and preferences provided for herein and no merger shall result inconsistent therewith. (10) Restriction on Redemption and Cash Dividends with respect to ------------------------------------------------------------ Other Capital Stock. Until all of the Series B Preferred Shares have been ------------------- converted or redeemed as provided herein, the Company shall not, directly or indirectly, declare or pay any cash dividend on its Common Stock without the prior express written consent of the holders of not less than two- thirds (2/3) of the then outstanding Series B Preferred Shares. (11) Vote to Change the Terms of Series B Preferred Shares. The ----------------------------------------------------- affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares, shall be required for any change to this Certificate of Designations or the Company's Certificate of Incorporation which would amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series B Preferred Shares. (12) Lost or Stolen Certificates. Upon receipt by the Company of --------------------------- evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Preferred Stock Certificates representing the Series B Preferred Shares, and, in the case of loss, theft or destruction, of any indemnification undertaking by the holder to the Company and, in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Company shall execute and deliver new preferred stock certificate(s) of like tenor and date; provided, however, the Company shall not be obligated to re-issue preferred stock certificates if the holder contemporaneously requests the Company to convert such Series B Preferred Shares into Common Stock. -14- IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be signed by Gerald Sokol, its President and Chief Executive Officer, as of the 31st day of October 1997. NTN COMMUNICATIONS, INC. By: /s/ Gerald Sokol, Jr. ---------------------------------- Name: Gerald Sokol Its: President and Chief Executive Officer -15- EXHIBIT I NTN COMMUNICATIONS, INC. CONVERSION NOTICE Reference is made to the Certificate of Designations, Preferences and Rights of NTN Communications, Inc. (the "CERTIFICATE OF DESIGNATIONS"). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series B Convertible Preferred Stock, $.005 par value per share (the "SERIES B PREFERRED SHARES"), of NTN Communications, Inc., a Delaware corporation (the "COMPANY"), indicated below into shares of Common Stock, $.005 par value per share (the "COMMON STOCK"), of the Company, by tendering the stock certificate(s) representing the share(s) of Series B Preferred Shares specified below as of the date specified below. Date of Conversion: ________________________________________ Number of Series B Preferred Shares to be converted: ________________________________________ Stock certificate no(s). of Series B Preferred Shares to be converted: ________________________________________ Please confirm the following information: Conversion Price: _________________________________________ Number of shares of Common Stock to be issued: _________________________________________ Please issue the Common Stock and, if applicable, any check drawn on an account of the Company into which the Series B Preferred Shares are being converted in the following name and to the following address: Issue to: _________________________________________ _________________________________________ _________________________________________ _________________________________________ Facsimile Number: _________________________________________ Authorization: _________________________________________ By:______________________________________ Title:___________________________________ Dated: _________________________________________ EX-10.2 3 SECURITIES PURCHASE AGREEMENT EXHIBIT 10.2 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 31, 1997, by and among NTN Communications, Inc., a Delaware corporation, with headquarters located at 5966 La Place Court, Carlsbad, CA 92008 (the "COMPANY"), and the investors listed on the Schedule of Buyers attached hereto (individually, a "BUYER" and collectively, the "BUYERS"). WHEREAS: A. The Company and the Buyers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 ACT"); B. The Company has authorized the following new series of its Preferred Stock, $.005 par value per share (the "PREFERRED STOCK"): the Company's Series B Convertible Preferred Stock ("SERIES B PREFERRED STOCK") which shall be convertible into shares of the Company's Common Stock, $.005 par value per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in accordance with the terms of the Company's Certificate of Designations, Preferences and Rights of the Series B Preferred Shares, in the form attached hereto as Exhibit A (the "CERTIFICATE OF DESIGNATIONS"); --------- C. The Buyers wish to purchase, upon the terms and conditions stated in this Agreement, an aggregate of $7 million of Series B Preferred Stock in the respective amounts set forth opposite each Buyer's name on the Schedule of Buyers; and D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS --------- AGREEMENT") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws. NOW THEREFORE, the Company and the Buyers hereby agree as follows: 1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES. ---------------------------------------------- a. Purchase of Series A Preferred Shares. Subject to the ------------------------------------- satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to the Buyers and the Buyers shall purchase from the Company an aggregate of 70,000 shares of Series B Preferred Stock (the "SERIES B PREFERRED SHARES"), in the respective amounts set forth opposite each Buyer's name on the Schedule of Buyers (the "CLOSING"). The per share purchase price (the "PURCHASE PRICE") of the Preferred Shares shall be $100 or an aggregate purchase price of $7 million. b. Closing Date. The date and time of the Closing (the "CLOSING ------------ DATE") shall be 10:00 a.m. Central Standard Time on October 31, 1997, subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or such later date as is mutually agreed to by the Company and the Buyers). c. Form of Payment. On the Closing Date, (i) each Buyer shall --------------- pay the Purchase Price to the Company for the Series B Preferred Shares to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company's written wire instructions, and (ii) the Company shall deliver to each Buyer, a stock certificate representing such number of the Series B Preferred Shares which such Buyer is then purchasing (as indicated opposite such Buyer's name on the Schedule of Buyers), duly executed on behalf of the Company and registered in the name of such Buyer or its designee (the "STOCK CERTIFICATES"). 2. BUYER'S REPRESENTATIONS AND WARRANTIES. -------------------------------------- Each Buyer represents and warrants with respect to only itself that: a. Investment Purpose. Such Buyer (i) is acquiring the Series B ------------------ Preferred Shares and (ii) upon conversion of the Series B Preferred Shares, will acquire the Conversion Shares then issuable, for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold any Series B Preferred Shares for any minimum or other specific term and reserves the right to dispose of Series B Preferred Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. b. Accredited Investor Status. Such Buyer is an "accredited -------------------------- investor" as that term is defined in Rule 501(a)(3) of Regulation D. c. Reliance on Exemptions. Such Buyer understands that the ---------------------- Series B Preferred Shares and the Conversion Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Series B Preferred Shares and the Conversion Shares. d. Information. Such Buyer and its advisors, if any, have been ----------- furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Series B Preferred Shares and the Conversion Shares which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives 2 shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. Such Buyer understands that its investment in the Series B Preferred Shares and the Conversion Shares involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Series B Preferred Shares and the Conversion Shares. e. No Governmental Review. Such Buyer understands that no ---------------------- United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Series B Preferred Shares or the Conversion Shares or the fairness or suitability of the investment in the Series B Preferred Shares or the Conversion Shares nor have such authorities passed upon or endorsed the merits of the offering of the Series B Preferred Shares or the Conversion Shares. f. Transfer or Resale. Such Buyer understands that except as ------------------ provided in the Registration Rights Agreement: (i) the Series B Preferred Shares and the Conversion Shares have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule thereto) ("RULE 144"); (ii) any sale of such securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. g. Legends. Such Buyer understands that the certificates or ------- other instruments representing the Series B Preferred Shares and, until such time as the sale of the Conversion Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares, except as set forth below, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR 3 THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Series B Preferred Shares or the Conversion Shares upon which it is stamped, if (i) the Series B Preferred Shares or the Conversion Shares are registered for sale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Series B Preferred Shares or the Conversion Shares may be made without registration under the 1933 Act, or (iii) such holder provides the Company with reasonable assurances that the Series B Preferred Shares or the Conversion Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. Each Buyer acknowledges, covenants and agrees to sell the Series B Preferred Shares and the Conversion Shares represented by a certificate(s) from which the legend has been removed, only pursuant to (i) a registration statement effective under the 1933 Act, or (ii) advice of counsel that such sale is exempt from registration required by Section 5 of the 1933 Act. In the event the above legend is removed from the Series B Preferred Shares or the Conversion Shares, the Company may, upon reasonable advance notice to the holder, require that the above legend be placed on any Series B Preferred Shares or Conversion Shares that cannot then be sold pursuant to an effective registration statement or Rule 144(k) under the 1933 Act (or any successor rule thereto). h. Authorization; Enforcement. This Agreement has been duly and -------------------------- validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. i. Residency. Such Buyer is a resident of that country --------- specified in the Schedule of Buyers. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. --------------------------------------------- The Company represents and warrants to each of the Buyers that except as (i) set forth on the indicated Schedule or (ii) disclosed in the Company's Form 10-K for the fiscal year ended December 31, 1996, the Company's Quarterly Reports on Form 10-Q for the three months and six months ended March 31, 1997 and June 30, 1997, respectively, and the Company's 1997 Proxy Statement (collectively, the "SEC DOCUMENTS"): a. Organization and Qualification. The Company and its ------------------------------ subsidiaries (a complete list of which is set forth in Schedule 3(a)) are corporations duly organized and 4 validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power to own their properties and to carry on their business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole or on the transaction contemplated hereby. b. Authorization; Enforcement; Compliance with Other ------------------------------------------------- Instruments. (i) The Company has the requisite corporate power and authority to - ----------- enter into and perform this Agreement and the Registration Rights Agreement, and to issue the Series B Preferred Shares and the Conversion Shares in accordance with the terms hereof and the Certificate of Designations, (ii) the execution and delivery of this Agreement and the Registration Rights Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the issuance of the Series B Preferred Shares and the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion thereof, have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, except that, as provided in the Certificate of Designations, the issuance of certain Conversion Shares may be restricted in the absence of stockholder approval in accordance with Section 713 of the AMEX Listing Standards Policies and Requirements, (iii) this Agreement and the Registration Rights Agreement have been duly executed and delivered by the Company, (iv) this Agreement and the Registration Rights Agreement constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies, and (v) prior to the Closing Date, the Certificate of Designations will have been filed with the Secretary of State of the State of Delaware and will be in full force and effect, enforceable against the Company in accordance with its terms. c. Capitalization. As of the date hereof, the authorized -------------- capital stock of the Company consists of 50,000,000 shares of Common Stock, of which as of October 27, 1997, 23,672,001 shares were issued and outstanding, and 10,000,000 shares of Preferred Stock, of which as of October 27, 1997, 161,112 shares were issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable. Except as disclosed in Schedule 3(c), no shares of Common Stock or Preferred Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as disclosed in Schedule 3(c), as of the date hereof, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or 5 rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities and (iii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement). Except as disclosed in Schedule 3(c), there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Series B Preferred Shares or the Conversion Shares as described in this Agreement. The Company has furnished to the Buyer true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto. d. Issuance of Securities. The Series B Preferred Shares are ---------------------- duly authorized and, upon issuance in accordance with the terms hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issue thereof and (iii) entitled to the rights and preferences set forth in the Certificate of Designations. Not less than 200% of the number of shares of Common Stock necessary to provide for the issuance of the Conversion Shares based on the trading price of the Common Stock as of the date hereof have been duly authorized and reserved for issuance upon conversion of the Series B Preferred Shares. Upon conversion in accordance with the Certificate of Designations, the Conversion Shares will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. e. No Conflicts. Except as disclosed in Schedule 3(e), the ------------ execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, the performance by the Company of its obligations under the Certificate of Designations and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the principal market or exchange on which the Common Stock is traded or listed) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected. Except as disclosed in Schedule 3(e), neither the Company nor its subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance or 6 regulation of any governmental entity, except for those violations that individually or in the aggregate would not have a material adverse effect on the business of the Company or any of its subsidiaries. Except as specifically contemplated by this Agreement and as required under the 1933 Act, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental or regulatory or self- regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement or perform its obligations under the Certificate of Designations in accordance with the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the American Stock Exchange. The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing or to delisting of the Common Stock by the American Stock Exchange. f. SEC Documents; Financial Statements. Since December 31, ----------------------------------- 1996, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "DESIGNATED SEC DOCUMENTS"). The Company has delivered to the Buyer or its representative true and complete copies of the Designated SEC Documents. As of their respective dates, the Designated SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the Designated SEC Documents, and none of the Designated SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the Designated SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyer which is not included in the Designated SEC Documents, including, without limitation, information referred to in Section 2(d) of this Agreement, contains when read in conjunction with the SEC Documents and the Schedules hereto any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are or were made, not misleading. 7 g. Absence of Certain Changes. Except as disclosed in Schedule -------------------------- 3(g) or the Company's Quarterly Report on Form 10-Q for the three months and six months ended March 31, 1997 and June 30, 1997, and as filed with the SEC on May 20, 1997 and August 14, 1997, respectively, since December 31, 1996 there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company and its subsidiaries taken as a whole. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. h. Absence of Litigation. There is no action, suit, proceeding, --------------------- inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or its subsidiaries or their respective directors or officers, or the Common Stock, wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement, the Registration Rights Agreement, or any of the documents contemplated herein or (iii), except as expressly set forth in the SEC Documents or in Schedule 3(h), have a material adverse effect on the business, operations, properties, financial condition, results of operation or prospects of the Company and its subsidiaries taken as a whole. i. Acknowledgment Regarding Buyers' Purchase of Series B ----------------------------------------------------- Preferred Shares. The Company acknowledges and agrees that each of the Buyers is - ---------------- acting solely in the capacity of arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that each Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any of the Buyers or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Buyer's purchase of the Series B Preferred Shares or the Conversion Shares. The Company further represents to each Buyer that the Company's decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives. The Company has not provided to any Buyer any nonpublic information that, in the opinion of the Company, is material to a decision to purchase or sell Common Stock. j. No General Solicitation. Neither the Company, nor any of its ----------------------- affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Series B Preferred Shares or the Conversion Shares. k. No Integrated Offering. Neither the Company, nor any of its ---------------------- affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Series B Preferred Shares or the Conversion Shares under the 8 1933 Act or cause this offering of Series B Preferred Shares and Conversion Shares to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the American Stock Exchange. l. Employee Relations. Neither the Company nor any of its ------------------ subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company's or its subsidiaries' employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good. m. Intellectual Property Rights. Except as set forth on ---------------------------- Schedule 3(m), the Company and its subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on Schedule 3(m), none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or are expected to expire or terminate in the near future. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth on Schedule 3(m), there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. n. Environmental Laws. The Company and its subsidiaries (i) are ------------------ in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where the failure to comply with such laws or regulations or to receive or comply with such permits, licenses, approvals would not have a material adverse effect on the Company and its subsidiaries taken as a whole. o. Title. The Company and its subsidiaries have good and ----- marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each 9 case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(o) or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries. p. Insurance. The Company and each of its subsidiaries are --------- insured by insurers of recognized financial responsibility against such losses and risks and in such amounts is prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole. q. Regulatory Permits. The Company and its subsidiaries possess ------------------ all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit except where the failure to possess such certificates, authorizations and permits would not have a material adverse effect on the business of the Company or any of its subsidiaries. r. Internal Accounting Controls. The Company and each of its ---------------------------- subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company's board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. s. No Materially Adverse Contracts, Etc. Neither the Company ------------------------------------ nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the reasonable judgment of the Company's officers has a material adverse effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. t. Tax Status. Except as set forth on Schedule 3(t), the ---------- Company and each of its subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions 10 reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply and there are no unpaid taxes in any material amount. u. Certain Transactions. Except as set forth on Schedule 3(u) -------------------- or in the SEC Documents and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director or any such employee has a substantial interest or is an officer, director, trustee or partner. v. Dilutive Effect. The Company understands and acknowledges --------------- that the number of Conversion Shares issuable upon conversion of the Series B Preferred Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Series B Preferred Shares in accordance with this Agreement and the Certificate of Designations is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. 4. COVENANTS. --------- a. Best Efforts. Each party shall use its best efforts timely ------------ to satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement. b. Form D. The Company agrees to file a Form D with respect to ------ the Series B Preferred Shares and the Conversion Shares as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Series B Preferred Shares and the Conversion Shares for, or obtain exemption for the Series B Preferred Shares and the Conversion Shares for, sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. c. Reporting Status. Until the earlier of (i) the date as of ---------------- which the Investors (as that term is defined in the Registration Rights Agreement) may sell all of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date on which (A) the Investors shall have sold all the 11 Conversion Shares and (B) none of the Series B Preferred Shares is outstanding (the "Registration Period"), the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination. d. Use of Proceeds. The Company will use the proceeds from the --------------- sale of the Series B Preferred Shares for substantially the same purposes and in substantially the same amounts as indicated in Schedule 4(d). e. Financial Information. The Company agrees to send the --------------------- following to each Investor (as that term is defined in the Registration Rights Agreement) during the Registration Period: (i) within five (5) days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any registration statements or amendments filed pursuant to the 1933 Act; (ii) within one (1) day after release thereof, copies of all press releases issued by the Company or any of its subsidiaries and (iii) copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders. f. Reservation of Shares. The Company shall take all action --------------------- necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 200% of the number of shares of Common Stock needed to provide for the issuance of the Conversion Shares based on the trading price of the Common Stock at such time. g. Listing. The Company shall promptly secure the listing of ------- the Conversion Shares upon The American Stock Exchange, Inc. ("AMEX") (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, the listing of all Conversion Shares from time to time issuable under the terms of this Agreement and the Registration Rights Agreement on each national securities exchange and automated quotation system (including the Nasdaq National Marketing System), if any, upon which shares of Common Stock are then listed. The Company shall promptly provide to each Buyer copies of any notices it receives from the AMEX regarding the continued eligibility of the Common Stock for listing on the AMEX. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(g). h. Expenses. Each of the Company and the Buyers shall each pay -------- its respective costs and expenses incurred by such party in connection with the negotiation, investigation, preparation, execution, delivery and performance of this Agreement and the Registration Rights Agreement; provided, that, subject to Section 9(l) below, at or following the Closing as the Buyers may request, the Company shall reimburse the Buyers for Buyers' attorneys' fees and expenses in connection with this Agreement and the Registration Rights Agreement up to an aggregate of $12,500. 12 i. Additional Issuances of Securities. ---------------------------------- (a) Right of First Refusal. For a period of 270 days from and ---------------------- after the Closing Date, if the Company shall desire to issue any Common Stock or any security convertible, exchangeable or exercisable for Common Stock or any other right to acquire any Common Stock pursuant to an offering under Regulation D or Regulation S of the Securities Exchange Act of 1934, as amended (other than pursuant to stock option plans with employees or directors of the Company) in any such case with an acquisition price for each share of Common Stock that is proposed to be less than the Average Market Price (as defined in the Certificate of Designations) of the Common Stock on the date of such issuance (the "Discounted Securities"), then the Company shall first comply with the terms of this Section 4(i). (b) Notice Requirements. The Company shall notify, or cause to ------------------- be notified, the Buyers not less than ten (10) business days nor more than twenty (20) business days prior to the time the Company intends to consummate such issuance (the "Issuance Notice"). The Issuance Notice shall set forth all of the terms of such proposed issuance. (c) Exercise of Right of First Refusal. The right of first ---------------------------------- refusal provided for in this Section 4(i) may be exercised by the Buyers by delivery of a written notice to the Company (the "Exercise Notice"), within ten (10) business days following receipt of the Issuance Notice (the "Refusal Period"). The Exercise Notice shall state that the Buyers agree to purchase all or any specified part of the proposed issuance of Discounted Securities on terms substantially equal to the terms set forth in the Issuance Notice. (d) Right to Issue Discounted Securities. After expiration of the Refusal Period, if the provisions of this Section 4(i) have been complied with in all respects by the Company and no Exercise Notice has been given, or if given, the Buyers have not agreed to purchase all of the Discounted Securities set forth in the Issuance Notice, the Company shall have the right for ninety (90) business days following the termination of the Refusal Period to issue the Discounted Securities, or any portion thereof not being purchased by the Buyers, specified in the Issuance Notice on the terms described in the Issuance Notice without further notice to the Buyers, but after such ninety (90) business days, no such issuance of Discounted Securities may be made without again giving notice to the Buyers and complying with all of the requirements of this Section 4(i). (e) The Company will not issue any Series B Preferred Shares other than to the Buyers as contemplated hereby or as otherwise contemplated in the Certificate of Designations. 5. TRANSFER AGENT INSTRUCTIONS. --------------------------- The Company shall issue irrevocable instructions to its transfer agent (in the form attached hereto as Exhibit E) to issue certificates, registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Series B Preferred Shares (the "Irrevocable Transfer Agent Instructions"). Prior to registration of the Conversion Shares 13 under the 1933 Act, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act) will be given by the Company to its transfer agent and that the Series B Preferred Shares and the Conversion Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall affect in any way each Buyer's obligations and agreement to comply with all applicable securities laws upon resale of the Series B Preferred Shares or Conversion Shares. If a Buyer provides the Company with an opinion of counsel, reasonably satisfactory in form and substance to the Company, that registration of a resale by such Buyer of any of the Series B Preferred Shares or the Conversion Shares is not required under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5, that the Buyers shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. ---------------------------------------------- The obligation of the Company hereunder to issue and sell the Series B Preferred Shares to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion: a. Such Buyer shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company. b. Such Buyer shall have delivered to the Company the Purchase Price for the Series B Preferred Shares being purchased by such Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company. c. The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and such Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date. 14 7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. ------------------------------------------------- The obligation of each Buyer hereunder to purchase the Series B Preferred Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer's sole benefit and may be waived by such Buyer at any time in its sole discretion: a. The Company shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to such Buyer. b. The Certificate of Designations, shall have been filed with the Secretary of State of the State of Delaware, and a copy thereof certified by such Secretary of State shall have been delivered to such Buyer. c. The Common Stock shall be authorized for quotation on the AMEX, trading in the Common Stock issuable upon conversion of the Series B Preferred Shares to be traded on the AMEX shall not have been suspended by the SEC or the AMEX and all of the Conversion Shares issuable upon conversion of the Series B Preferred Shares to be sold at the Closing shall be listed upon the AMEX. d. The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer including, without limitation, an update as of the Closing Date regarding the representation contained in Section 3(c) above. e. Such Buyer shall have received the opinion of the Company's counsel dated as of the Closing Date, in form, scope and substance reasonably satisfactory to such Buyer and in substantially the form of Exhibit C attached --------- hereto. f. The Company shall have executed and delivered to such Buyer the Stock Certificates (in such denominations as such Buyer shall request) for the Series B Preferred Shares being purchased by such Buyer at the Closing. g. The Board of Directors of the Company shall have adopted the resolutions in substantially the form of Exhibit D attached hereto. --------- 15 h. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Shares, at least 200% of the number of shares of Common Stock necessary to provide for the issuance of the Conversion Shares based on the trading price of the Common Stock as of the Closing Date. i. The Irrevocable Transfer Agent Instructions, in the form of Exhibit E attached hereto, shall have been delivered to and acknowledged in - --------- writing by the Company's transfer agent. j. The transactions contemplated hereby shall not violate any law, regulation or order then in effect and applicable to Buyers or the Company. 8. INDEMNIFICATION. --------------- (a) In consideration of each Buyer's execution and delivery of this Agreement and acquiring the Series B Preferred Shares and Conversion Shares hereunder and in addition to all of the Company's other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of Series B Preferred Shares and Conversion Shares and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "BUYER INDEMNITEES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Buyer Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "BUYER INDEMNIFIED LIABILITIES"), incurred by any Buyer Indemnitee (and shall advance the same) as a result of, or arising out of, or relating to (a) subject to Section 9(i), any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Certificate of Designations or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, the Certificate of Designations or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Buyer Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Buyer Indemnitees, any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Series B Preferred Shares or the status of such Buyer or holder of the Series B Preferred Shares or the Conversion Shares as an investor in the Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Buyer Indemnified Liabilities which is permissible under applicable law. (b) In consideration of the Company's execution and delivery of this Agreement and selling the Series B Preferred Shares and Conversion Shares hereunder and in 16 addition to all of the Buyers' other obligations under this Agreement, the Buyers shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "COMPANY INDEMNITEES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Company Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "COMPANY INDEMNIFIED LIABILITIES"), incurred by any Company Indemnitee (and shall advance the same) as a result of, or arising out of, or relating to (a) subject to Section 9(i), any misrepresentation or breach of any representation or warranty made by the Buyers in this Agreement or the Registration Rights Agreement, or (b) any breach of any covenant, agreement or obligation of the Buyers contained in this Agreement or the Registration Rights Agreement. To the extent that the foregoing undertaking by the Buyers may be unenforceable for any reason, the Buyers shall make the maximum contribution to the payment and satisfaction of each of the Company Indemnified Liabilities which is permissible under applicable law. 9. GOVERNING LAW; MISCELLANEOUS. ---------------------------- a. Governing Law. This Agreement shall be governed by and ------------- interpreted in accordance with the laws of the State of Delaware without regard to the principles of conflict of laws. b. Counterparts. This Agreement may be executed in two or more ------------ identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof. c. Headings. The headings of this Agreement are for convenience -------- of reference and shall not form part of, or affect the interpretation of, this Agreement. d. Severability. If any provision of this Agreement shall be ------------ invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. e. Entire Agreement; Amendments. This Agreement supersedes all ---------------------------- other prior oral or written agreements between the Buyers, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. 17 f. Notices. Any notices, consents, waivers or other ------- communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: NTN Communications, Inc. 5966 La Place Court Carlsbad, CA 92008 Telephone: (760) 438-7400 Facsimile: (760) 930-1187 Attention: President With a copy to: Troy & Gould 1801 Century Park East 16th Floor Los Angeles, CA 90067 Telephone: (310 ) 553-4441 Facsimile: (310) 201-4746 Attention: William D. Gould If to the Transfer Agent: American Stock Transfer & Trust Co. 6201 16th Avenue 3rd Floor Brooklyn, NY 11219 Telephone: (718) 921-8275 Facsimile: (718) 921-8331 Attention: Paul Caroppoli If to a Buyer, to its address and facsimile number on the Schedule of Buyers, with copies to such Buyer's counsel as set forth on the Schedule of Buyers. Each party shall provide five (5) days' prior written notice to the other party of any change in address or facsimile number. g. Successors and Assigns. This Agreement shall be binding upon ---------------------- and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Series B Preferred Shares. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyers, except pursuant to a Major Transaction (as defined in Section 3(c) of the Certificate of Designations) 18 with respect to which the Company is in compliance with Section 3 of the Certificate of Designations. A Buyer may assign some or all of its rights hereunder without the consent of the Company, provided, however, that (i) any such assignment shall not release such Buyer from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption and (ii) no Buyer may assign its rights hereunder in a manner that would cause the offering of Series B Preferred Shares hereunder to be required to be registered under the 1933 Act. h. No Third Party Beneficiaries. This Agreement is intended for ---------------------------- the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. i. Survival. Unless this Agreement is terminated under Section -------- 9(l), the representations and warranties of the Company and the Buyers contained in Sections 3 and 2, respectively, shall survive the Closing until one year after the Company has filed its Form 10-K for the fiscal year ended December 31, 1997 including without limitation all financial statements thereto. Unless this agreement is terminated under Section 9(l), the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8, shall survive the Closing. Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder. j. Publicity. The Company and each Buyer shall have the right --------- to approve before issuance any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions as is required by applicable law and regulations (although each Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release and shall be provided with a copy thereof). k. Further Assurances. Each party shall do and perform, or ------------------ cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. l. Termination. In the event that the Closing shall not have ----------- occurred with respect to a Buyer on or before five (5) business days from the date hereof due to the Company's or such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated pursuant to this Section 9(l), the Company shall remain obligated to reimburse the Buyers for the expenses described in Section 4(h) above. m. Placement Agent. The Company acknowledges that it has --------------- engaged a placement agent in connection with the sale of the Series B Preferred Shares, which placement 19 agent may have formally or informally engaged other agents on its behalf. The Company shall be responsible for the payment of any placement agent's fees or broker's commissions relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney's fees and out of pocket expenses) arising in connection with any such claim. n. No Strict Construction. The language used in this ---------------------- Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 20 IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above. COMPANY: BUYERS: - ------- ------ NTN COMMUNICATIONS, INC. STARK INTERNATIONAL By: /s/ Gerald Sokol, Jr. By: /s/ --------------------------------- ------------------------------- Name: Gerald Sokol Name: Its: President and Chief Executive Its: Officer SHEPHERD INVESTMENTS INTERNATIONAL, LTD. By: /s/ ------------------------------ Name: Its: SCHEDULE OF BUYERS
Number of Investor Address and Series B Investor's Advisors and Legal Investor Name Facsimile Number Preferred Shares Counsel Address - --------------------- -------------------------- ---------------- ----------------------------- Stark International c/o Staro Asset Management 35,000 Eleazer Klein, Esq. (United States) 1500 West Market Street Schulte Roth Zabel LLP Mequon, Wisconsin 53092 New York, NY 10022 Fax: (414) 241-1888 Fax: (212) 593-5955 Shepherd International c/o Staro Asset Management 35,000 Eleazer Klein, Esq. Investments, Ltd. 1500 West Market Street Schulte Roth Zabel LLP (Bermuda) Mequon, Wisconsin 53092 New York, NY 10022 Fax: (414) 241-1888 Fax: (212) 593-5955
Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(a) Subsidiaries ------------ Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(c) ------------- Capitalization -------------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(e) ------------- Conflicts --------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(g) ------------- Material Changes ---------------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(h) ------------- Litigation ---------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(m) ------------- Intellectual Property --------------------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(t) ------------- Tax Status ---------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 3(u) ------------- Certain Transactions -------------------- Schedules to Securities Purchase Agreement of October 1997 SCHEDULE 4(d) ------------- Use of Proceeds --------------- EXHIBIT A Form of Certificate of Designations, Preferences and Rights of the Series B Preferred Shares EXHIBIT B Form of Registration Rights Agreement EXHIBIT C Form of Company Counsel Opinion EXHIBIT D Form of Resolutions Adopted by the Company's Board of Directors EXHIBIT E Form of Irrevocable Transfer Agent Instructions -----END PRIVACY-ENHANCED MESSAGE-----