-----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, P6pk/FGeIUZdByMuGuDar7qK46T37DHhptQ0RjzEeowGOZdOngQg/dQLHMQkfJRb ePSyFmGqdd5MZCyVIPx/Dg== 0000950116-96-001109.txt : 19961203 0000950116-96-001109.hdr.sgml : 19961203 ACCESSION NUMBER: 0000950116-96-001109 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961002 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961017 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NTN CANADA INC CENTRAL INDEX KEY: 0000797313 STANDARD INDUSTRIAL CLASSIFICATION: 4841 IRS NUMBER: 112805051 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18066 FILM NUMBER: 96644881 BUSINESS ADDRESS: STREET 1: 14 METEOR DR CITY: ETOBOCOKE ONTARIO STATE: A6 BUSINESS PHONE: 4166756666 MAIL ADDRESS: STREET 1: 14 METEOR DR CITY: ETOBICOKE ONTARIO STATE: A6 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 2, 1996 NTN CANADA, INC. (Exact name of registrant as specified in its charter) New York 0-18066 11-2805051 --------- --------- ------------ (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 14 Meteor Drive, Etobicoke, Ontario Canada M9W 1A4 (Address of principal executive offices, including zip code) (416) 675-6666 (Registrant's telephone number, including area code) Not applicable (Former name or former address, if changed since last report.) Item 2. Acquisition or Disposition of Assets. On October 2, 1996, NTN Canada, Inc. (the "Registrant"), through its wholly-owned subsidiary NTN Interactive Network Inc. ("Interactive"), acquired, effective as of October 1, 1996, all of the outstanding capital stock of Magic Lantern Communications Ltd., a Canadian corporation ("Magic Lantern"), pursuant to a Share Purchase Agreement, dated October 1, 1996 (the "Agreement"), among Interactive, Connolly-Daw Holdings Inc. ("Connolly-Daw"), 1199846 Ontario Ltd. ("1199846") and Douglas Connolly and Wendy Connolly (jointly, the "Connollys"), a copy of the Agreement being annexed hereto as Exhibit "10.1", and is incorporated herein by reference thereto. The aggregate purchase price was $1,450,000 (Canadian), $200,000 (Canadian) of which was paid in cash to Connolly-Daw. The balance of the aggregate purchase price was satisfied by the delivery of a Non-Negotiable Promissory Note (the "Connolly-Daw Note") in the principal amount of $703,133 (Canadian) and payable to Connolly-Daw, and a Non-Negotiable Promissory Note (the "1199846 Note" and, together with the Connolly-Daw Note, the "Notes") in the amount of $546,867 and payable to 1199846. Copies of the Connolly-Daw Note and 1199846 Note are annexed hereto as Exhibits "10.2" and "10.3", respectively, and are incorporated herein by reference thereto. Under the terms of the Notes, Interactive has the right (the "Share Payment Option") to deliver to Connolly-Daw and 1199846 (the "Vendors"), respectively, in lieu of payment of the principal amounts of the Notes, such shares of the common stock, par value $.07 per share (the "Common Stock") of the Registrant, in accordance with a specified schedule therein. Pursuant to the provisions of the Notes, Interactive, the Registrant and Connolly-Daw have entered into an option agreement (the "Connolly-Daw Option Agreement"), a copy of which is annexed hereto as Exhibit "10.4" and is incorporated herein by reference thereto, and Interactive, the Registrant and 1199846 2 have entered into an option agreement (the "1199846 Option Agreement"), a copy of which is annexed hereto as Exhibit "10.5" and is incorporated herein by reference thereto, pursuant to which the Registrant, at each of the Vendors' option, shall be obligated to purchase from the Vendors, (the "Put Option") and each of the Vendors, at the Registrant's option, shall be obligated to sell to the Registrant (the "Call Option"), a specified number of shares of Common Stock at a price (i) equal to 90% of the average closing price of Registrant's Common Stock during the 20-day period ending on the business day preceding the exercise of such Put Option, and (ii) equal to 110% of the average closing price of Registrant's Common Stock for the 20-day period ending on the business day preceding the exercise of such Call Option. In addition, the Vendors have the right to require Interactive to deliver shares of Common Stock in lieu of payment of the amounts due pursuant to the Notes. The Registrant has guaranteed the delivery of the aforesaid shares to either, or both, of Connolly-Daw and 1199846 if such election is made. Pursuant to a Registration Rights Agreement, dated October 1, 1996 (the "Registration Rights Agreement"), a copy of which is annexed hereto as Exhibit "10.6" and is incorporated herein by reference thereto, the Registrant has granted certain registration rights under the Securities Act of 1933 with respect to the shares issuable upon exercise of the Share Payment Option. In addition, pursuant to a Share Purchase Agreement dated October 1, 1996, Interactive acquired 1,000 Class A special shares of Magic Lantern owned by Telesat Canada for $250,000 (Canadian). A copy of this agreement is annexed hereto as Exhibit "10.7", and is incorporated herein by reference thereto. 3 The following schedules to the Agreement are not annexed hereto, but the Registrant, upon request, shall provide a copy of any omitted schedule: Schedule "A" - Financial Statements Schedule "B" - Particulars of Purchased Shares; Information re: Authorized and Issued Capital Schedule "C" - List of Subsidiaries and Share Capital Thereof Schedule "D" - Undisclosed Liabilities Schedule "E" - Liens, Charges and Encumbrances Schedule "F" - Equipment and Other Personal Property Leases Schedule "G" - Real Property Leases Schedule "H" - Legal Descriptions of Real Property Owned Schedule "I" - Standard Form Distribution Rights Agreement Schedule "J" - Employment Contracts, Directors, Officers, Employees and Independent Contractors Schedule "K" - Other Material Contracts Schedule "L" - Litigation Schedule "M" - Description of Insurance Policies Schedule "N" - Bank Accounts Schedule "O" - Intellectual and Industrial Property Schedule "P" - Vehicular Equipment Owned or Leased Schedule "Q" - Addresses of Company and Subsidiaries 4 Item 7. Financial Statements and Exhibits. (a) The Registrant intends to provide the following financial statements and pro forma financial information under cover of a Form 8 Amendment to this Current Report on Form 8-K, which shall be filed no later than December 16, 1996. (1) Audited balance sheet of Magic Lantern as of August 31, 1996. (2) Audited statements of income and cash flows of Magic Lantern for the twelve month period ended August 31, 1996. (3) Pro forma information of Magic Lantern and the Registrant as of and for the period ended August 31, 1996 and (4) Audited balance sheet and statements of income and cash flows of the Registrant for the periods required by Sections 3-01 and 3-02 of Regulation S-X. (b) Set forth below is a list of the Exhibits applicable to this Current Report on Form 8-K, numbered in accordance with Item 601 of Regulation S-K. 10.1 Share Purchase Agreement, dated the 1st day of October, 1996, by and between Connolly-Daw Holdings Inc., 1199846 Ontario Ltd., Douglas Connolly and Wendy Connolly and NTN Interactive Network Inc. 10.2 Non-Negotiable Promissory Note, dated October 1, 1996, by and between NTN Interactive Network Inc., as Debtor, and Connolly- Daw Holdings Inc., as Creditor. 10.3 Non-Negotiable Promissory Note, dated October 1, 1996 by and between NTN Interactive Network Inc., as Debtor, and 1199846 Ontario Ltd., as Creditor. 10.4 Registration Rights Agreement, dated October 1, 1996, by and between NTN Canada, Inc., Connolly-Daw Holdings Inc. and 1199846 Ontario Ltd. 5 10.5 Option Agreement, dated the 1st day of October, 1996, by and between Connolly-Daw Holdings Inc., NTN Interactive Network Inc. and NTN Canada, Inc. 10.6 Option Agreement, dated the 1st day of October, 1996, by and between 1199846 Ontario Ltd., NTN Interactive Network Inc. and NTN Canada, Inc. 10.7 Share Purchase Agreement, dated the 1st day of October, 1996 by and between NTN Interactive Network Inc. and Telesat Canada. 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NTN CANADA, INC. a New York Corporation by: Peter Rona --------------------------- Peter Rona, President Date: October 2, 1996 EXHIBIT INDEX 10.1 Share Purchase Agreement, dated the 1st day of October, 1996, by and between Connolly-Daw Holdings Inc., 1199846 Ontario Ltd., Douglas Connolly and Wendy Connolly and NTN Interactive Network Inc. 10.2 Non-Negotiable Promissory Note, dated October 1, 1996, by and between NTN Interactive Network Inc., as Debtor, and Connolly-Daw Holdings Inc., as Creditor. 10.3 Non-Negotiable Promissory Note, dated October 1, 1996 by and between NTN Interactive Network Inc., as Debtor, and 1199846 Ontario Ltd., as Creditor. 10.4 Registration Rights Agreement, dated October 1, 1996, by and between NTN Canada, Inc., Connolly-Daw Holdings Inc. and 1199846 Ontario Ltd. 10.5 Option Agreement, dated the 1st day of October, 1996, by and between Connolly-Daw Holdings Inc., NTN Interactive Network Inc. and NTN Canada, Inc. 10.6 Option Agreement, dated the 1st day of October, 1996, by and between 1199846 Ontario Ltd., NTN Interactive Network Inc. and NTN Canada, Inc. 10.7 Share Purchase Agreement, dated the 1st day of October, 1996 by and between NTN Interactive Network Inc. and Telesat Canada. EX-10.1 2 SHARE PURCHASE AGREEMENT Exhibit 10.1 SHARE PURCHASE AGREEMENT THIS AGREEMENT made the 1st day of October, 1996, B E T W E E N: CONNOLLY-DAW HOLDINGS INC., a corporation incorporated pursuant to the laws of the Province of Ontario (hereinafter referred to as "Connolly-Daw"), and 1199846 ONTARIO LTD., a corporation incorporated pursuant to the laws of the Province of Ontario (hereinafter referred to as "1199846"), (hereinafter collectively referred to as the "Vendors"), OF THE FIRST PART; - and - DOUGLAS CONNOLLY and WENDY CONNOLLY, both of the City of Oakville, in the Province of Ontario, (hereinafter collectively referred to as the "Connollys"), OF THE SECOND PART; - and - NTN INTERACTIVE NETWORK INC., a corporation amalgamated pursuant to the laws of Canada, (hereinafter referred to as the "Purchaser"), OF THE THIRD PART. WHEREAS the Vendors beneficially own and control all of the issued and outstanding shares in the capital of Magic Lantern Communications Ltd., a corporation amalgamated pursuant to the laws of Canada (hereinafter 2 referred to as the "Company"), save and except for 1,000 Class A special shares in the capital of the Company which are beneficially owned and controlled by Telesat Canada; AND WHEREAS 1199846 beneficially owns and controls 20.1% of the issued and outstanding shares in the capital of 745695 Ontario Ltd., a corporation incorporated pursuant to the laws of the Province of Ontario (hereinafter referred to as "745695"), with the remaining 79.9% of the issued and outstanding shares in the capital of 745695 being beneficially owned and controlled by the Company; AND WHEREAS the Vendors desire to sell and the Purchaser desires to purchase the said issued and outstanding shares in the capital of the Company owned by the Vendors, all upon and subject to the terms and conditions hereinafter set forth; AND WHEREAS 1199846 desires to sell and the Purchaser desires to purchase the said issued and outstanding shares in the capital of 745695 owned by 1199846, all upon and subject to the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the premises and the mutual agreements and covenants herein contained (the adequacy of which consideration as to each of the parties hereto is hereby mutually admitted), the parties hereto hereby covenant and agree as follows: ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION 1.1 Definitions. Whenever used in this Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and terms shall have the respective meanings ascribed to them as follows: (a) "Agreement" means this Share Purchase Agreement and all instruments supplemental hereto or in amendment or confirmation hereof; (b) "Business" means the businesses presently carried on by the Company and its Subsidiaries consisting of the marketing and distribution of video programming and other media resource material, the operation of a fulfillment service bureau, the operation of a video dubbing and production facility, and the operation of a digital conversion service bureau; 3 (c) "Business Day" means a day other than a Saturday, Sunday or any day on which the principal commercial banks located at Toronto, Ontario are not open for business during normal banking hours; (d) "Closing" means the completion of the sale to and purchase by the Purchaser of the Purchased Shares hereunder by the transfer and delivery of documents of title thereto and the payment of the purchase price therefor as contemplated herein; (e) "Closing Date" means the 1st day of October, 1996, or such other date as the Parties may agree as the date upon which the Closing shall take place; (f) "Closing Time" means 10:00 o'clock a.m. Toronto time, on the Closing Date or such other time on such date as the Parties may agree as the time at which the Closing shall take place; (g) "Financial Statements" means the unaudited consolidated financial statements of the Company and its Subsidiaries for the period ended July 31, 1996, consisting of a balance sheet and a statement of income and retained earnings, as reported upon by Messrs. Harendorf, Lebane, Moss, Chartered Accountants, a copy of which is annexed as Schedule "A" hereto; (h) "Parties" means the Vendors, the Connollys and the Purchaser, collectively, and "Party" means any one of them; (i) "Person" means any individual, corporation, partnership, trustee or trust or unincorporated association, and pronouns have a similarly extended meaning; (j) "Purchaser's Counsel" means Messrs. Walker, Head, Barristers and Solicitors, of Pickering, Ontario; (k) "Purchase Price" means the purchase price to be paid by the Purchaser to the Vendors for the Purchased Shares as provided in Article 2 hereof; (l) "Purchased Shares" means the 33,363 issued and outstanding common shares in the capital of the Company and the 201 issued and outstanding common shares in the capital of 745695, all as shown in Schedule "B" hereto; 4 (m) "Subsidiaries" means the corporations listed in Schedule "C" hereto and "Subsidiary" means any one of the said corporations listed in Schedule "C" hereto, all of the issued and outstanding securities of which are beneficially owned and controlled as follows, as shown in the said Schedule: (i) Sonoptic Technologies Inc. - 75% of the issued and outstanding securities of which are beneficially owned and controlled by the Company, with the remaining 25% being beneficially owned and controlled by Provincial Holdings Ltd.; (ii) 745695 - 79.9% of the issued and outstanding securities of which are beneficially owned and controlled by the Company, with the remaining 20.1% being beneficially owned and controlled by 1199846; (iii) B.C. Learning Connection Inc. - all of the issued and outstanding securities of which are beneficially owned and controlled by 745695; and (n) "Vendors' Counsel" means Messrs. Jackson L. Chercover, Q. C., Barristers and Solicitors, of Toronto, Ontario. Terms defined in the preamble to this Agreement shall have the same meanings herein as are ascribed thereto in the preamble. 1.2 Gender and Number - Words importing the singular include the plural and vice versa; words importing gender include all genders. 1.3 Entire Agreement - This Agreement, including the Schedules hereto, together with the agreements and other documents to be delivered pursuant hereto, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supercede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties and there are no warranties, representations or other agreements between the Parties in connection with the subject matter hereof except as specifically set forth herein and therein. 1.4 Waivers, etc. - No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Agreement, in whole or in part, shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 5 1.5 Other Words and Phrases - In this Agreement, unless otherwise expressly provided, (i) the words "hereof", "herein", "hereto" and "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection, paragraph or other subdivision, and (ii) all references to designated "Articles", "Sections", "Subsections", "paragraphs" or other subdivisions are to the designated Articles, Sections, Subsections, paragraphs and other subdivisions of this Agreement. 1.6 Headings - The Article and Section headings contained herein are included solely for convenience of reference, are not intended to be full or accurate descriptions of the content thereof and shall not be considered part of this Agreement. 1.7 Applicable Law - This Agreement and the rights, obligations and relations of the Parties shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and the courts of Ontario shall have exclusive jurisdiction to entertain any action in connection with this Agreement. 1.8 Currency - Unless otherwise specified, all references to currency herein are deemed to mean lawful money of Canada, and all amounts to be paid or calculated pursuant to this Agreement are to be paid or calculated in lawful money of Canada. 1.9 Accounting Terms - All accounting terms shall have the meanings ascribed to them in accordance with generally accepted accounting principles, and all references to "generally accepted accounting principles" shall be deemed to be, unless otherwise specified, reference to accounting principles which are generally accepted in Canada. 1.10 Schedules - The following are the schedules attached to and incorporated in this Agreement by reference and deemed to be an integral part hereof: Schedule "A" - Financial Statements Schedule "B" - Particulars of Purchased Shares; Information re: Authorized and Issued Capital Schedule "C" - List of Subsidiaries and Share Capital Thereof Schedule "D" - Undisclosed Liabilities Schedule "E" - Liens, Charges and Encumbrances Schedule "F" - Equipment and Other Personal Property Leases Schedule "G" - Real Property Leases 6 Schedule "H" - Legal Descriptions of Real Property Owned Schedule "I" - Standard Form Distribution Rights Agreement Schedule "J" - Employment Contracts, Directors, Officers, Employees and Independent Contractors Schedule "K" - Other Material Contracts Schedule "L" - Litigation Schedule "M" - Description of Insurance Policies Schedule "N" - Bank Accounts, etc. Schedule "O" - Intellectual and Industrial Property Schedule "P" - Vehicular Equipment Owned or Leased Schedule "Q" - Addresses of Company and Subsidiaries Schedule "R" - Promissory Note (Connolly-Daw) Schedule "S" - Promissory Note (1199846) ARTICLE 2 PURCHASE AND SALE 2.1 Purchase Price - At the Closing Time, the Vendors shall sell and the Purchaser shall purchase the Purchased Shares for an aggregate purchase price of $1,450,000.00, $903,133.00 of which is payable to Connolly-Daw and $546,867.00 of which is payable to 1199846. 2.2 Action by Vendors and Purchaser at the Closing Time - (a) Delivery of Certificates, etc. - The Vendors shall transfer and deliver to the Purchaser at the Closing share certificates representing the Purchased Shares duly endorsed in blank for transfer. The Vendors shall take such steps as shall be necessary to cause the Company and 745695 to enter the Purchaser or its nominee upon the books of the Company and 745695 respectively as the holder of the Purchased Shares and to issue share certificates to the Purchaser or its nominee representing the Purchased Shares; (b) Payment to the Vendors - The Purchase Price specified in Section 2.1 shall be paid and satisfied by the delivery by the Purchaser to the Vendors at the Closing of the following: (i) a certified cheque or bank draft payable to or to the order of Connolly-Daw in the amount of $200,000.00; 7 (ii) a promissory note in favour of Connolly-Daw in the form set out in Schedule "R" hereto in the amount of $703,133.00; and (iii) a promissory note in favour of 1199846 in the form set out in Schedule "S" hereto in the amount of $546,867.00. 2.3 Place of Closing - The Closing shall take place at the Closing Time at the offices of the Purchaser's Counsel or at such other place as may be agreed upon by the Vendors and the Purchaser. 2.4 Tender - Any tender of documents or money hereunder may be made upon the Parties or their respective counsel, and money may be tendered by official bank draft drawn upon a Canadian chartered bank or by negotiable cheque payable in Canadian funds and certified by a Canadian chartered bank or trust company. ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Vendors and the Connollys - The Vendors and the Connollys hereby jointly and severally represent and warrant to the Purchaser as follows and acknowledge that the Purchaser is relying on such representations and warranties in connection with the transactions contemplated by this Agreement: (a) Organization and Valid Existence; the Vendors - The Vendors are corporations duly incorporated and organized and are validly existing under the laws of the Province of Ontario and the Vendors have all necessary corporate power, authority and capacity to own and dispose of the Purchased Shares. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder have been duly authorized by all necessary corporate action on the part of the Vendors. (b) Enforceability of Obligations - This Agreement constitutes a valid and binding obligation of the Vendors enforceable against them in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. (c) Right to Sell - The Vendors: (i) are the sole beneficial owners of the Purchased Shares, which shares constitute all the issued and outstanding shares in the capital of the Company and 745695 save and except for 1,000 Class A special shares in the capital of the Company which are beneficially owned and controlled by Telesat Canada and 799 common shares in the capital of 745695 which are beneficially owned and controlled by the Company; 8 (ii) have the exclusive right to dispose of the Purchased Shares as herein provided and such disposition will not violate, contravene, breach or offend against or result in any default under any indenture, mortgage, lease, agreement, instrument, charter or by-law provision, statute, regulation, order, judgment, decree or law to which the Vendors are a party or subject or by which the Vendors are bound or affected; and (iii) are the holders of record of all the Purchased Shares, free and clear of any liens, charges, encumbrances or rights of others (other than the rights of the Purchaser hereunder) and no Person (other than the Purchaser hereunder) has any agreement, option or any rights capable of becoming an agreement or option for the acquisition of the Purchased Shares; (d) Licences, Registrations and Compliance - The Company and the Subsidiaries are registered, licensed or otherwise qualified as a corporation to do business in each jurisdiction in which the nature of their businesses or the property owned or leased by them makes such registration, licensing or other qualification necessary, and such registrations, licences or qualifications (as the case may be) are in good standing. Neither the Company nor any of the Subsidiaries are in violation of any applicable laws, regulations, orders, rules, decrees or ordinances. The Company and the Subsidiaries have offices in the Provinces of Ontario, New Brunswick and British Columbia and only at the addresses listed in Schedule "Q" hereto. Neither the Company nor any Subsidiary have in the past three years had offices at addresses other than those listed in Schedule "Q" hereto; (e) Organization and Valid Existence: the Company - The Company is a corporation duly amalgamated and organized and is validly existing under the laws of Canada, and has all necessary corporate power, authority and capacity to own and lease its property and assets (including, without limitation, the property and assets shown in the Financial Statements) and to carry on the Business as presently conducted by it; (f) Subsidiaries - The Company has no subsidiaries other than the Subsidiaries listed in Schedule "C" hereto. Each such Subsidiary is duly incorporated or continued and organized and validly exists under the laws of its jurisdiction of incorporation or continuance, as the case may be. The respective jurisdictions of incorporation or continuance, as the case may be, and the shares in the capital of such Subsidiaries issued to or in favour of the Company and/or any other 9 shareholder thereof are as set forth in Schedule "C". All such shares have been duly and validly issued, are outstanding as fully paid and non-assessable shares in the capital of the respective Subsidiaries and are owned beneficially and of record by the respective shareholders, free and clear of any liens, charges, encumbrances or rights of others. No options, warrants or other rights to purchase shares or other securities of any of the Subsidiaries have been authorized or agreed to be issued or are outstanding; (g) Capitalization - The authorized and issued share capital of the Company is as set forth in Schedule "B" hereto. All such issued share capital has been duly and validly issued and is outstanding as fully paid and non-assessable shares in the capital of the Company. No options, warrants or other rights to purchase shares or other securities of the Company have been authorized or agreed to be issued or are outstanding; (h) Financial Statements - The Financial Statements are true and correct and have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding period. The Financial Statements present a true and complete statement of the consolidated financial condition and assets and liabilities of the Company and its Subsidiaries as at July 31, 1996 and the other statement comprising the Financial Statements, being the statement of income and retained earnings, accurately sets forth the results of the operations of the Company and its Subsidiaries on a consolidated basis throughout the period covered thereby; (i) Absence of Undisclosed Liabilities - Except to the extent reflected or reserved against in the Financial Statements or incurred subsequent to the date thereof and disclosed in Schedule "D" and except as incurred in the ordinary and usual course of the Business of the Company or its Subsidiaries, neither the Company nor any Subsidiary has any outstanding indebtedness or any liabilities or obligations (whether accrued, absolute, contingent or otherwise) of a nature customarily reflected or reserved against in a balance sheet (including the notes thereto) prepared in accordance with generally accepted accounting principles; (j) Net Worth - The consolidated tangible net worth (paid-up capital plus earned and contributed surpluses) of the Company and its Subsidiaries, calculated in accordance with generally accepted accounting principles (applied on a basis consistent with those applied in connection with the Financial Statements) is not less than the consolidated tangible net worth of the Company and its Subsidiaries as at the date of, and as set forth in the Financial Statements; 10 (k) Tax Matters - Each of the Company and each Subsidiary has duly and timely filed all federal, provincial and local income, franchise, capital, sales or use, excise, fuel, property or other tax returns or reports required by any law or regulation to be filed by it and has duly paid all taxes, assessments and reassessments, and all other taxes, duties, governmental charges, penalties, interest and fines due and payable by it on or before the date hereof, save and except that, (i) the tax return for Sonoptic Technologies Inc. for the fiscal year ended September 30, 1995 was filed in September, 1996; (ii) the tax liability of the Company for the fiscal year ended September 30, 1995 has not been paid, given that the said tax liability will be offset by a loss carry back based on the tax return filed for the Company for the six month period ended March 31, 1996, all of which will result in a net refund to the Company; and (iii) the tax liability of 745695 for the fiscal year ended September 30, 1995, being approximately $2,000.00, has not yet been paid. Neither the Company nor any Subsidiary has received from any authority any assessment, reassessment or notice of underpayment of any taxes or other charges and no such notice is reasonably to be expected. The most recent year for which the federal income tax liability of the Company and the Subsidiaries has been reviewed and finally determined by the applicable authorities is its fiscal year ended September 30, 1995. 745695 has not yet been assessed by the Province of Ontario for the fiscal year ended September 30, 1995. There is no misrepresentation that is attributable to neglect, carelessness, wilful default or fraud in tax returns previously filed. No consents extending or waiving the time limited for reassessment of any taxes, duties, governmental charges, penalties, interest or fines, or any statutes of limitations related thereto have been filed with respect to the Company or any Subsidiary for any fiscal year. Each of the Company and the Subsidiaries has withheld from each payment made to any of its officers, former officers, directors, former directors, and employees and former employees the amount of all taxes and other deductions (including without limitation, income taxes, 11 unemployment, disability and other required taxes and contributions) required to be withheld and has paid the same together with the employer's share of same, if any (to the extent required to be paid so no such amount is past due), to the proper tax or other receiving officers within the prescribed times and has filed, in complete and accurate form, all information and other returns required pursuant to any applicable legislation within the prescribed times. The provision made for taxes included in the Financial Statements is sufficient for the payment of all accrued and unpaid federal, provincial and local income, franchise, capital, sales or use, excise, fuel, property or other taxes, assessments and reassessments, duties, governmental charges, penalties, interest and fines of, and payable by, the Company and the Subsidiaries whether or not disputed, for the period ended on such date and for all periods prior thereto. (l) Absence of Changes - Since the date of the Financial Statements there has not been: (i) any material change in the condition or operations of the business, assets or financial condition of the Company or its Subsidiaries other than changes in the ordinary and normal course of business, none of which has been materially adverse; or (ii) any damage, destruction or loss, labour trouble or other event, development or condition of any character (whether or not covered by insurance) materially and adversely affecting the business, assets, properties or future prospects of the Company or its Subsidiaries; (m) Absence of Unusual Transactions - Since the date of the Financial Statements neither the Company nor any Subsidiary has: (i) transferred, assigned, sold or otherwise disposed of any of the assets shown in the Financial Statements or cancelled any debts or claims except in each case in the ordinary and usual course of business; (ii) incurred or assumed any obligation or liability (fixed or contingent), except those listed in Schedule "D" hereto and except unsecured current obligations and liabilities incurred in the ordinary and normal course of business; (iii) issued or sold any shares in its capital or any warrants, bonds, debentures or other securities of the Company or any Subsidiary or issued, granted or delivered any right, option or other commitment for the issuance of any such shares, warrants, bonds, debentures or other securities; 12 (iv) discharged or satisfied any lien or encumbrance, or paid any obligation or liability (fixed or contingent) other than liabilities included in the Financial Statements and liabilities incurred since the date thereof in the ordinary and normal course of business; (v) declared or made any payment of any dividend or other distribution in respect of any shares in its capital or purchased or redeemed any such shares thereof or effected any subdivision, consolidation or reclassification of any such shares; (vi) suffered any operating loss or any extraordinary loss, or waived any rights of substantial value, or entered into any commitment or transaction not in the ordinary and usual course of business where such loss, rights, commitment or transaction is or would be material in relation to the Company or the Subsidiary, as the case may be; (vii) amended or changed or taken any action to amend or change its articles or by-laws; (viii) made any general wage or salary increases in respect of personnel which it employs; (ix) except as disclosed in Schedule "E" hereto, mortgaged, pledged, subjected to lien, granted a security interest in or otherwise encumbered any of its assets or property, whether tangible or intangible; or; (x) authorized or agreed or otherwise become committed to do any of the foregoing; (n) Title to Properties - Except as disclosed in the Financial Statements or in Schedule "E" hereto, the Company and its Subsidiaries have good and marketable title to all their respective properties, interests in properties and assets, real and personal, including without limitation those reflected in the Financial Statements or acquired since the date of the Financial Statements (except as since transferred, sold or otherwise disposed of in the ordinary and usual course of business), free and clear of all mortgages, pledges, liens, encumbrances or other charges of any kind or character; 13 (o) Leased Equipment - Schedule "F" sets forth a true and complete list of all equipment, other personal property and fixtures in the possession or custody of the Company and/or its Subsidiaries which, as of the date hereof, is leased or held under licence or similar arrangement and of the leases, licenses, agreements and other documentation relating thereto. (p) Collectibility of Accounts Receivable - The accounts receivable shown in the Financial Statements or acquired subsequent to the date thereof and prior to the date of this Agreement by the Company or its Subsidiaries either have been collected or are good and collectible within 120 days of the date the invoice in respect thereof was issued at the aggregate recorded amounts thereof (subject to no defence, counterclaim or set off), except to the extent of any reserves provided for such accounts in the Financial Statements as adjusted in the ordinary and usual course of business, and except for an account rendered to Hascom Television Distributors Limited in May/June of 1996 in the amount of $47,294.00, which amount shall be paid as follows: (i) $5,777.76 on September 1, 1996; (ii) $5,777.78 on each of December 1, 1996, March 1, 1997, June 1, 1997, September 1, 1997, December 1, 1997, March 1, 1998, June 1, 1998 and September 1, 1998; (q) Lease of Real Property - Neither the Company nor any Subsidiary is a party to or bound by any leases of real property other than those referred to in Schedule "G" hereto, and all interests held by the Company and its Subsidiaries as lessees under such leases are free and clear of any and all liens, charges and encumbrances of any nature and kind whatsoever. All rental and other payments required to be paid by the Company or any Subsidiary, as lessees, pursuant to such leases have been duly paid. Such leases are in full force and effect without amendment thereto and neither the Company nor any Subsidiary is otherwise in default in meeting its obligations contained in any such lease, and none of the lessors thereto are in default in meeting their obligations contained in any such lease; (r) Real Property - Particulars of all real property owned by the Company and its Subsidiaries are set forth in Schedule "H" hereto, and from the date hereof to and including the Closing Date the Purchaser or its agents shall, during normal business hours and upon reasonable notice, be entitled, at the Purchaser's own cost and expense, to attend upon and inspect the said real property and the buildings and improvements located thereon; 14 (s) Use - The buildings and improvements located on the real property referred to in paragraph (r) of this Section 3.1, the operation and maintenance thereof as now operated and maintained and the purposes for which they are presently being used, are not in breach in any material respect of any statute, by-law, ordinance, regulation, covenant, restriction or official plan (collectively the "Laws"), none of such buildings and improvements encroaches upon any other lands and there are no restrictive covenants or Laws which in any restrict or prohibit the use of the said buildings, improvements and real property for the purposes for which they are presently being used. All buildings and other structures located on the real property referred to in paragraph (r) of this Section 3.1 are not now and have never been insulated with urea formaldehyde foam insulation, nor do such buildings or structures contain any aluminum wiring or friable asbestos or any other substance containing a type of asbestos or asbestos product which is a hazardous product, toxic or priority substance or any other substance deemed hazardous or regulated by any laws or regulations of Canada or the Province of Ontario in force at the date hereof; (t) Condition of Assets - All material tangible assets of the Company and its Subsidiaries used in or in connection with the Business are in good condition, repair and (where applicable) proper working order, reasonable wear and tear excepted; (u) Distribution Rights Agreements - Annexed hereto as Schedule "I" is the standard form of distribution rights agreement entered into by the Company with its suppliers, wherein the Company obtains from the said suppliers the right to distribute their video programs, and none of the distribution rights agreements entered into by the Company with the said suppliers and in existence at the date hereof varies materially from the standard form annexed hereto as Schedule "I". Also set forth in Schedule "I" hereto is a complete list of all suppliers who have executed a distribution rights agreement with the Company, including the number of video titles covered thereby and such other particulars as are therein set forth; (v) Employment Contracts - Except as set out in Schedule "J" hereto, neither the Company nor the Subsidiaries have any written contracts of employment with any employees or any oral contracts of employment with any employees, and neither the Company nor the Subsidiaries have any employees who cannot be dismissed on not more than four months' notice without further liability, save and except David Stock. There is set 15 forth in Schedule "J" hereto the names and titles of all the directors, officers and employees of the Company and each Subsidiary, together with particulars of the material terms and conditions of employment or engagement of such persons, including rates of remuneration, benefits, positions held and date of commencement of employment. The employment records of the Company and each Subsidiary are true, complete and correct; Also set forth in Schedule "J" hereto is a complete list of all independent contractors, sub-contractors, and agents which are presently engaged by the Company or the Subsidiaries pursuant to contract, understanding or arrangement, written or oral, together with particulars of the material terms and conditions of the contract, understanding or arrangement. Neither the Company nor the Subsidiaries have any union or collective labour, pension, deferred profit sharing, stock option or other similar agreement and no attempts are being made by any trade union or employee association to organize or represent any employees of the Company or the Subsidiaries. There is not now any circumstances or conduct which could result in the filing of an unfair labour practice complaint; any such complaints previously raised and currently ongoing and the current status thereof are particularized in Schedule "L". No contracts, agreements or arrangements with any employees or unions shall be entered into by the Company or the Subsidiaries between the date hereof and the Closing Date except with the prior written consent of the Purchaser. As well, between the date hereof and the Closing Date there will be no material increase in the compensation (monetary or otherwise) of the employees of the Company or the Subsidiaries without the prior written consent of the Purchaser; (w) Material Contracts - Except for the liens, charges and encumbrances listed in Schedule "E", the equipment and other personal property leases and agreements referred to in Schedule "F", the real property leases listed in Schedule "G", the employment contracts listed in Schedule "J" and the contracts and agreements listed in Schedule "K", neither the Company nor any Subsidiary is a party to or bound by any material contract or commitment whether oral or written. The contracts and agreements listed in Schedule "K" are all in full force and effect unamended and no material default exists in respect thereof on the part of any of the parties thereto. Such contracts and agreements include all the presently outstanding material contracts entered into by the Company and its Subsidiaries in the course of carrying on their respective businesses and all quotations, orders or tenders for such contracts which remain open for acceptance. The Company and its Subsidiaries have the capacity, including the necessary personnel, equipment and supplies, to perform all their obligations thereunder; 16 (x) Absence of Guarantees - Neither the Company nor any Subsidiary has given or agreed to give, or is a party to or bound by, any guarantee of indebtedness or other obligations of third parties or any other commitment by which the Company or such Subsidiary is, or is contingently, responsible for such indebtedness or other obligation; (y) Absence of Conflicting Agreements - Neither the Company nor any Subsidiary is a party to, bound or affected by or subject to any indenture, mortgage, lease, agreement, instrument, charter or by-law provision, statute, regulation, order, judgment, decree or law which would be violated, contravened, breached by or under which default would occur, as a result of the execution and delivery of this Agreement or the consummation of any of the transactions provided for herein; (z) Litigation - Except as disclosed in Schedule "L" hereto, there is no suit, action, litigation, arbitration proceeding, governmental proceeding or hearing before an administrative tribunal, including appeals and applications for review, in progress, pending or threatened against or relating to the Company or its Subsidiaries or affecting its or their properties or business which, if determined adversely to the Company or its Subsidiaries, might materially and adversely affect the properties, business, future prospects or financial condition of the Company or its Subsidiaries. Except as shown in the said Schedule, there is not presently outstanding against the Company or any Subsidiary any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator. (aa) Bank Accounts, etc. - There is set forth in Schedule "N" hereto the name of each bank or other depository in which the Company and each Subsidiary maintains any bank account, trust account or safety deposit box and the names of all persons authorized to draw thereon or who have access thereto; (bb) Residence of the Vendors - The Vendors are not non-residents of Canada for the purposes of the Income Tax Act (Canada); (cc) Insurance - The Company and each Subsidiary maintain such policies of insurance, issued by responsible insurers, as are appropriate to their Business, property and assets, in such amounts and against such risks as are customarily carried and insured against by owners of comparable businesses, properties and assets; all such policies of insurance are in full force and effect and neither the Company nor any Subsidiary is in default, whether as to the payment of premium or otherwise, under the terms of any such policy. 17 Schedule "M" hereto sets forth a true and complete list of all such insurance policies presently maintained by the Company and the Subsidiaries together with a brief description of each such policy including the type of policy, name of insurer, coverage limits, expiration dates and annual premiums; (dd) Intellectual and Industrial Property - Attached as Schedule "O" is a true and correct schedule (including the appropriate registration numbers and expiration dates, if applicable) identifying all patents, patent rights or licences, patent applications, trade marks, trade mark registrations and applications, trade mark rights, trade names, trade secrets, service marks and applications therefore, copyrights and copyright registrations and copyright applications used in whole or in part in or required for the proper carrying on of the Business (collectively, the "Trade Marks"). The Trade Marks, both domestic and foreign, if any, are validly and beneficially owned by the Company or the Subsidiaries (as the case may be) with the right to use the same, and are in good standing and duly registered in all appropriate offices in Canada, Ontario, New Brunswick and British Columbia in order to preserve the rights thereof and thereto. The Company or the Subsidiaries or any of them (as the case may be) own or have the right to use the Trade Marks, and all intellectual and industrial property and technology necessary to carry on the Business in the ordinary and normal course and have taken all reasonable precautions in Canada, Ontario, New Brunswick and British Columbia to protect the Trade Marks, and all such intellectual and industrial property and technology. The operation of the Business does not infringe upon the intellectual or industrial property or technology of any other Person; (ee) Vehicular Equipment - Schedule "P" contains a list of all vehicular equipment owned or leased by the Company and its Subsidiaries. Such vehicular equipment is in roadworthy condition and is capable of satisfying the inspection requirements and performance standards prescribed by the Highway Traffic Act (Ontario) and the Regulations thereto, as may be amended from time to time, for its particular type or class; (ff) Copies of Agreements, etc. - True, correct and complete copies of all mortgages, leases, agreements, instruments and other documents listed in Schedules "E", "F", "G", "I", "J", "K" and "M" have been delivered to the Purchaser; 18 (gg) Corporate Records - The corporate records and minute books of the Company and each of the Subsidiaries contain complete and accurate copies of all by-laws of such corporations and minutes of all meetings and resolutions of the directors and shareholders of such corporations; all such meetings were duly called and held, all such by-laws and resolutions were duly passed and the share certificate books, registers of shareholders, registers of transfers and registers of directors of the Company and each of the Subsidiaries are complete and accurate in all material respects; (hh) Books of Account - The books and records of account of the Company and each of the Subsidiaries fairly and correctly set out and disclose in all material respects and in accordance with generally accepted accounting principles, consistently applied, the financial position of the Company and each of the Subsidiaries as of the date hereof and all material financial transactions of the Company and each of the Subsidiaries have been accurately recorded in such books and records; (ii) Third Party Approvals - There are no approvals, consents or waivers required to be obtained or applications required to be filed from or with governmental authorities in Canada or from any other Person whatsoever, including pursuant to any contracts containing prohibitions to the within transactions, in order to permit the transactions contemplated herein or to preserve the Business and/or assets of the Company and/or the Subsidiaries; (jj) Compliance with Environmental Laws - The Company, the Subsidiaries and the Business are in compliance with and have always been in compliance with all, and do not violate, and have not violated any, applicable federal, provincial, municipal or local laws, regulations, orders, governmental decrees, ordinances or any and all other legislation or regulatory instruments with respect to environmental, health or safety matters (collectively, "Environmental Laws"). The Company and the Subsidiaries have never been charged with or convicted of any offence under Environmental Laws. 19 None of the Company or the Subsidiaries is required to hold any licence, permit or approval under any Environmental Laws for any reason whatsoever (including in connection with the operation of the Business). None of the Company or the Subsidiaries have received any notification pursuant to any Environmental Laws that any work, repairs, construction or capital expenditures are required to be made in respect of any of the assets owned or used by them or any of them as a condition of continued compliance with any Environmental Laws; None of the Company or the Subsidiaries have received any notification pursuant to any Environmental Laws that any work, repairs, construction or capital expenditures are required to be made in respect of any of the assets owned or used by them or any of them as a condition of continued compliance with any Environmental Laws; (kk) Employment Equity - None of the Company or the Subsidiaries have received notice of any proposed or pending compliance review in respect of employment equity and no sanctions have been imposed on any of them for failing to honour their commitment to employment equity; (ll) 1113659 Ontario Ltd. ("1113659") - 1113659 is a corporation duly incorporated and validly existing under the laws of Ontario. 1113659 has no assets or liabilities and has never in the past carried on business. At present, the authorized capital of 1113659 consists of an unlimited number of Class "A" special shares, an unlimited number of Class "B" special shares and an unlimited number of common shares, of which none of the Class "A" special shares, none of the Class "B" special shares and 1,000 of the common shares (and no more) have been duly issued and are outstanding as fully paid and non-assessable shares. In respect of the said 1,000 issued and outstanding common shares, 660 are beneficially owned and controlled by Connolly-Daw, 300 are beneficially owned and controlled by Cornpepper Productions Ltd. and 40 are beneficially owned and controlled by Jackson L. Chercover. No options, warrants or other rights to purchase shares or other securities of 1113659 have been authorized or agreed to be issued or are outstanding. The Company has made arrangements to acquire, at a cost of $1,000.00, 50% of the issued and outstanding common shares of 1113659 on or before October 11, 1996, with the remaining 50% being acquired by International Tele-Film Enterprises Ltd. ("International") at the same time, with the net result being that, as soon as the said share transfers have been completed, 50% of the issued and outstanding common shares of 1113659 will be beneficially owned and controlled by the Company, with the remaining 50% being beneficially owned and controlled by International; (mm) Full Disclosure - None of the foregoing representations, warranties and statements of fact contains any untrue statement of material fact or omits to state any material fact necessary to make any such statement or representation not misleading to a prospective purchaser of the Purchased Shares seeking full information as to the Company, the Subsidiaries and 1113659 and their respective properties, business and affairs. 20 3.2 Representations and Warranties of the Purchaser - The Purchaser hereby represents and warrants to the Vendors as follows and acknowledges that the Vendors are relying on such representations and warranties in connection with the transactions contemplated by this Agreement: (a) Organization and Valid Existence - The Purchaser is a corporation duly amalgamated and organized and is validly existing under the laws of Canada and has all necessary corporate power, authority and capacity to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder have been duly authorized by all necessary corporate action on the part of the Purchaser; (b) Enforceability of Obligations - This Agreement constitute a valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought; (c) Residence of the Purchaser - The Purchaser is not a non-Canadian within the meaning of the Investment Canada Act. 3.3 No Broker - Each of the Parties represents and warrants to the others that all negotiations relating to this Agreement and the transactions contemplated hereby have been carried on between them directly and without the intervention of any other party in such manner as to give rise to any valid claims against any of the Parties for a brokerage commission, finder's fee or other like payment. 3.4 Non-Waiver - No investigations made by or on behalf of the Purchaser at any time shall have the effect of waiving, diminishing the scope of or otherwise affecting any representation or warranty made by the Vendors herein or pursuant hereto. 3.5 Nature and Survival of Representations, Warranties and Covenants - All statements contained in any certificate or other instrument delivered by or on behalf of a Party pursuant to or in connection with the transactions contemplated by this Agreement shall be deemed to be made by such Party hereunder. All representations, warranties, covenants and agreements herein contained on the part of each of the Parties shall survive the Closing, the execution and delivery hereunder of share or security transfer instruments and other documents of title to the Purchased Shares and the payment of the consideration therefor, provided that: (a) the representations and warranties contained in Section 3.1 (except with respect to tax matters), Section 3.2 and Section 3.3 shall only survive for a period of three (3) years from the Closing Time (such time hereinafter called the "Warranty Expiry Time"); and (b) the representations and warranties in respect of tax matters relating to fiscal years: 21 (i) in respect of which the Canadian Minister of National Revenue has the right to assess, reassess or make additional assessments pursuant to the Income Tax Act (Canada) as amended from time to time; or (ii) in respect of which any taxation authority of competent jurisdiction administering any tax legislation pursuant to which any of the Company or the Subsidiaries is required to report its income or file an income tax return has the right to assess, reassess or make additional assessments pursuant to the taxation legislation of such jurisdiction, shall survive until the date following the day that the rights of assessment or reassessment referred to in this sentence cease (such time hereinafter called the "Tax Warranty Expiry Time"). If no claim has been made against a Party hereto with respect to any incorrectness or misrepresentation in any such representation or warranty prior to the Warranty Expiry Time or within thirty (30) days of the expiry of the Tax Warranty Expiry Time, such Party shall have no further liability hereunder with respect to such representation and warranty. ARTICLE 4 CONDITIONS PRECEDENT TO THE PERFORMANCE BY THE PURCHASER AND THE VENDORS OF THEIR OBLIGATIONS UNDER THIS AGREEMENT 4.1 Purchaser's Conditions - The obligation of the Purchaser to complete the purchase of the Purchased Shares hereunder shall be subject to the satisfaction of, or compliance with, in all materials respects, at or before the Closing Time, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of the Purchaser and may be waived by it in whole or in part): (a) Truth and Accuracy of Representations of Vendors at the Closing Time - All of the representations and warranties of the Vendors made in or pursuant to this Agreement, including, without limitation, the representations and warranties made by the Vendors and set forth in Sections 3.1 and 3.3 hereof, shall be true and correct as at the Closing Time and with the same effect as if made at and as of the Closing Time (except as such representations and warranties may be affected by the occurrence of events or transactions expressly contemplated and permitted hereby or by transactions in the ordinary and 22 normal course of business), and the Purchaser shall have received a certificate from a duly authorized senior officer of each of the Vendors and from the Connollys confirming the truth and correctness of the representations and warranties of the Vendors and the Connollys contained herein; (b) Performance of Obligations - The Vendors shall have performed or complied with, in all respects, all of their obligations, covenants and agreements hereunder; (c) Receipt of Closing Documentation - All documentation relating to the due authorization and completion of the sale and purchase hereunder of the Purchased Shares and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Vendors of their obligations under this Agreement shall be satisfactory to the Purchaser and Purchaser's Counsel and the Purchaser shall have received copies of all such documentation or other evidence as it may reasonably request in order to establish the consummation of the transactions contemplated hereby and the taking of all corporate proceedings in connection therewith in compliance with these conditions, in form (as to certification and otherwise) and substance satisfactory to the Purchaser and Purchaser's Counsel; (d) Opinion of Counsel for the Vendors and the Company - The Purchaser shall have received from Vendors' Counsel an opinion dated the Closing Date, in form and substance satisfactory to Purchaser's Counsel, confirming such matters in regard to the Vendors, the Company, the Subsidiaries and the Business as are customary in transactions of this nature; (e) Consents, Authorizations and Registrations - All consents, approvals, orders and authorizations of any Persons or governmental authorities in Canada or elsewhere (or registrations, declarations, filings or recordings with any such authorities) required in connection with the completion of any of the transactions contemplated by this Agreement, the execution of this Agreement, the Closing or the performance of any of the terms and conditions hereof, shall have been obtained on or before the Closing Time; The Vendors shall have obtained and delivered to the Purchaser written consents, in form and substance satisfactory to the Purchaser, to the transactions contemplated herein which are 23 required pursuant to the personal property leases and agreements referred to in Schedule "F", the real property leases referred to in Schedule "G", the employment contracts referred to in Schedule "J" and the contracts and agreements listed in Schedule "K", including, without limiting the generality of the foregoing, such acknowledgements and confirmations of good standing from the lessors in respect of the real property leases referred to in Schedule "G" hereto as may be reasonably requested by the Purchaser; (f) Directors and Officers of the Company and Subsidiaries - The board of directors of the Company and each Subsidiary at the Closing Time shall consist of persons nominated by the Purchaser and there shall have been delivered to the Purchaser on or before the Closing Time the resignations of such persons as the Purchaser shall direct who are presently directors and/or officers of the Company and each Subsidiary from such positions and duly executed comprehensive releases from each such person and from the Vendor of all their claims respectively, against the Company and each Subsidiary, except for any claims for current unpaid remuneration; (g) Management Agreement - Connolly-Daw shall have entered into a management agreement with the Company upon terms satisfactory to the Purchaser, under which Connolly-Daw shall provide the services of the Connollys to the Company for a period of 11 months following Closing; (h) Indemnity - Connolly-Daw and each of the Connollys shall have entered into an indemnity agreement in favour of the Company upon terms and conditions satisfactory to the Purchaser, in respect of the management agreement referred to in Subsection 4.1(g) hereof; (i) Employment Agreements - Each of the Connollys shall have entered into an employment agreement with the Company upon terms satisfactory to the Purchaser, under which the Connollys shall be employed by the Company for a period of two years commencing on September 1, 1997; (j) Option Agreements - Each of the Vendors shall have entered into an option agreement with the Purchaser and NTN Canada, Inc. upon terms satisfactory to the Purchaser and NTN Canada, Inc., relating to the common shares in the capital of NTN Canada, Inc. referred to in the promissory notes annexed as Schedules "R" and "S" hereto respectively; 24 (k) Non-Competition, etc. - There shall have been delivered to the Purchaser from the Connollys an executed non-competition, non-solicitation and confidentiality agreement, which agreement shall provide that, for a period of 35 months (subject to an increase to 47 months in the case of Douglas Connolly in the event of certain specified circumstances) from the Closing, the Connollys shall not, either alone or in conjunction with any individual, firm, corporation, association or other entity (except for the Company, the Subsidiaries, the Purchaser or their affiliates), whether as principal, agent, shareholder or in any other capacity whatsoever; (i) carry on, be engaged in, concerned with or interested in, or give financial assistance to, directly or indirectly, any undertaking which is in whole or in part competitive with any of the businesses carried on by the Company and its Subsidiaries, or any of them, within the respective territories in which such businesses are then carried on (except for any equity share investment in a public company whose shares are listed on a recognized stock exchange where such share investment does not in the aggregate exceed five per cent (5%) of the issued equity shares of such company); (ii) attempt to solicit any suppliers, employees or customers away from the Company or any Subsidiary; (iii) take any act as a result of which the relations between the Company or its Subsidiaries and its or their customers, employees or others may be impaired or which may otherwise be detrimental to the Business; (iv) divulge to any Person any name, address or requirement of any customer of the Company or its Subsidiaries; or (v) divulge to any Person any process, method or device of the Business or any other confidential or financial information in respect of the Company or its Subsidiaries. (l) No Fire Damage - No substantial damage by fire or other hazard to the assets of the Company shall have occurred from the date hereof to the Closing Date; and 25 (m) Litigation - On the Closing Date, there shall be no litigation, governmental investigation or proceeding pending or threatened for the purpose of enjoining or preventing the consummation of any of the transactions contemplated by this Agreement or otherwise claiming that such consummation is improper. 4.2 Vendors' Conditions - The obligations of the Vendors to complete the sale of the Purchased Shares hereunder shall be subject to the satisfaction of or compliance with, at or before the Closing Time, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of the Vendors and may be waived by them in whole or in part): (a) Truth and Accuracy of Representations of Purchaser at Closing Time - All of the representations and warranties of the Purchaser made in or pursuant to this Agreement, including, without limitation, the representations and warranties made by the Purchaser and set forth in Sections 3.2 and 3.3 hereof, shall be true and correct as at the Closing Time and with the same effect as if made at and as of the Closing Time and the Vendors shall have received a certificate from a duly authorized senior officer of the Purchaser confirming the truth and correctness of the representations and warranties of the Purchaser contained herein; (b) Performance of Obligations - The Purchaser shall have performed or complied with, in all respects, all of its obligations, covenants and agreements hereunder; (c) Receipt of Closing Documentation - All documentation relating to the due authorization and completion of the sale and purchase hereunder of the Purchased Shares and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Purchaser of its obligations under this Agreement shall be satisfactory to the Vendors and Vendors' Counsel and the Vendors shall have received copies of all such documentation or other evidence as they may reasonably request in order to establish the consummation of the transactions contemplated hereby and the taking of all corporate proceedings in connection therewith in compliance with these conditions, in form (as to certification and otherwise) and substance satisfactory to the Vendors and Vendors' Counsel; (d) Management Agreement - The Company shall have entered into a management agreement with Connolly-Daw upon terms satisfactory to Connolly-Daw, under which Connolly-Daw shall provide the services of the Connollys to the Company for a period of 11 months following Closing; 26 (e) Indemnity - The Purchaser shall have entered into an indemnity agreement in favour of Connolly-Daw upon terms and conditions satisfactory to Connolly-Daw, in respect of the management agreement referred to in Subsection 4.2(d) hereof; (f) Employment Agreements - The Company shall have entered into an employment agreement with each of the Connollys upon terms satisfactory to the Connollys, under which the Connollys shall be employed by the Company for a period of two years commencing on September 1, 1997; (g) Indemnities - The Purchaser shall have entered into a separate indemnity agreement in favour of each of the Connollys upon terms and conditions satisfactory to the Connollys, in respect of the employment agreements referred to in Subsection 4.2(f) hereof; (h) Option Agreements - The Purchaser and NTN Canada, Inc. shall have entered into an option agreement with each of the Vendors, upon terms satisfactory to the Vendors, relating to the common shares in the capital of NTN Canada, Inc. referred to in the promissory notes annexed as Schedules "R" and "S" hereto respectively; (i) Undertakings - NTN Canada, Inc. shall have executed and delivered an undertaking in favour of each of the Vendors upon terms and conditions satisfactory to the Vendors, in respect of the common shares in the capital of NTN Canada, Inc. referred to in the promissory notes annexed as Schedules "R" and "S" hereto respectively; (j) Loans - The Purchaser shall have loaned to the Company the sum of $400,000.00 upon terms and bearing such rate of interest as shall be satisfactory to the Company, approximately $200,000.00 of which funds shall be used by the Company to retire its indebtedness with Cornpepper Productions Ltd., with the balance being applied by the Company against its outstanding indebtedness with the Royal Bank of Canada; and 27 (k) Litigation - On the Closing Date, there shall be no litigation, governmental investigation or proceeding pending or threatened for the purpose of enjoining or preventing the consummation of any of the transactions contemplated by this Agreement or otherwise claiming that such consummation is improper. ARTICLE 5 OTHER COVENANTS OF THE PARTIES 5.1 Conduct of Business Prior to Closing - During the period from the date of this Agreement to the Closing Time, the Vendors will cause the Company and its Subsidiaries to do the following: (a) Conduct Business in Ordinary Course - Except as otherwise contemplated or permitted by this Agreement, to conduct their respective businesses in the ordinary and normal course thereof and not, without the prior written consent of the Purchaser, to enter into any transaction which if effected before the date of this Agreement would constitute a material breach of the representations, warranties or agreements contained herein; (b) Continue Insurance - To continue in force all existing policies of insurance presently maintained by the Company and its Subsidiaries as set forth on Schedule "M" hereto; (c) Perform Obligations - To comply with all laws affecting the operation of the Business and to pay all required taxes and tax installments; and (d) Prevent Certain Changes - Not, without the prior written consent of the Purchaser, to take any of the actions, do any of the things or perform any of the acts described in paragraphs (i) to (x) inclusive of Subsection 3.1(m). 5.2 Access for Investigation - The Vendors shall cause the Company and its Subsidiaries to permit the Purchaser and its employees, agents, counsels and accountants or other representatives, between the date hereof and the Closing Time, without interference to the ordinary conduct of the Business of the Company and the Subsidiaries and at the Purchaser's sole cost and expense, to have free and unrestricted access during normal business hours to the premises and to all books, accounts, records and other data of the Company and the Subsidiaries (including, without limitation, all corporate, accounting and tax records of the Company and the Subsidiaries) and to the properties and assets of the Company and the Subsidiaries and to furnish with respect to the business, 28 properties and assets of the Company and the Subsidiaries as the Purchaser shall from time to time reasonably request to enable confirmation of the matters warranted in Section 3.1 hereof. Without limiting the generality of the foregoing, it is agreed that the accounting representatives of the Purchaser shall be afforded ample opportunity to make a full investigation of all aspects of the financial affairs of the Company and its Subsidiaries. Until the Closing Time, and in the event of the termination of this Agreement without consummation of the transactions contemplated hereby, the Purchaser will use its best efforts to keep confidential any information (unless readily available from public or published information or sources) obtained from the Company, any Subsidiary or the Vendors. If this Agreement is so terminated, promptly after such termination, all documents, work papers and other written material obtained from any Person in connection with this Agreement and not theretofore made public (including all copies thereof), shall be returned to the Person which provided such material. 5.3 Actions to Satisfy Closing Conditions - Each of the Parties hereby agrees to take all such actions as are within its power to control, and to use its best efforts to cause other actions to be taken which are not within its power to control, so as to ensure compliance with any conditions set forth in Article 4 hereof which are for the benefit of any other Party. ARTICLE 6 INDEMNIFICATION 6.1 Mutual Indemnifications for Breaches of Warranty, etc. - The Vendors and the Connollys hereby jointly and severally covenant and agree with the Purchaser, and the Purchaser hereby covenants and agrees with the Vendors (the Party or Parties so covenanting and agreeing to indemnify another Party being hereinafter in this Section 6.1 referred to as the "Indemnifying Party" and the party so to be indemnified being hereinafter referred to as the "Indemnified Party") to indemnify and save harmless the Indemnified Party, effective as and from the Closing Time, from and against any claims, demands, actions, causes of action, damage, loss, costs, liability or expense (hereinafter in this Article 6 called "Claims") which may be brought against the Indemnified Party and/or which it may suffer or incur as a result of, in respect of, or arising out of any material non-fulfillment of any covenant or agreement on the part of the Indemnifying Party under this Agreement or any incorrectness in or breach of any representation or warranty of the Indemnifying Party contained herein or in any certificate or other document furnished by the Indemnifying Party pursuant hereto. The foregoing obligation of indemnification in respect of such Claims shall be 29 (i) subject to the limitation mentioned in Section 3.5 hereof respecting the survival of the representations and warranties of the Parties; (ii) subject to the requirement that the Indemnifying Party shall, in respect of any Claim made by any third party, be notified in a timely manner by the Indemnified Party of all material particulars thereof and be afforded an opportunity at its sole cost and expense, to resist, defend and compromise the same; and (iii) applicable only to the extent that such Claims, in the aggregate, exceed $10,000.00. 6.2 Carriage of Action - (a) In the event that within 10 days after receipt of the notice referred to in clause (ii) of Section 6.1 hereof, the Indemnifying Party gives notice to the Indemnified Party that the Indemnifying Party wishes to dispute the matter in question, the Indemnifying Party shall have the right to litigate such matter in the name of the Indemnified Party using counsel chosen by the Indemnifying Party and the Indemnifying Party shall also have the right to settle or compromise such matter in the name of the Indemnified Party; provided, however, that contemporaneously with such compromise or settlement the Indemnifying Party shall pay or cause to be paid to the Indemnified Party, the amount owing under this indemnity with respect to such matter and provided further that: (i) the Indemnifying Party shall furnish security to the Indemnified Party in respect of any costs or damages arising in connection with any litigation; (ii) the Indemnifying Party shall agree to reimburse the Indemnified Party promptly in respect of all out-of-pocket expenses of the Indemnified Party in connection with such litigation or pending litigation; and (iii) the Indemnifying Party shall not be entitled to take any steps which would have the effect of forfeiting or otherwise terminating any contract, lease or other agreement, the benefit of which the Indemnified Party would otherwise be entitled to enjoy. 30 (b) In the event that the Indemnifying Party does not provide the notice referred to in Subsection 6.2(a) assuming the defence of the Claim, the Indemnified Party may defend against such Claim in such manner as it deems appropriate and may take such action as may be reasonably prudent in the circumstances to settle any such Claim. ARTICLE 7 GENERAL 7.1 Public Notices - Except for disclosures required by law, all public notices to third parties and all other publicity concerning the transactions contemplated by this Agreement shall be jointly planned and co-ordinated by the Vendors and the Purchaser and no Party shall act unilaterally in this regard without the prior approval of the other of them, such approval not to be unreasonably withheld. 7.2 Expenses - All costs and expenses (including, without limitation, the fees and disbursements of legal counsel) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such expenses. 7.3 Time - Time shall be of the essence hereof. 7.4 Notices - Any notice, direction or other document required or permitted to be given hereunder or for the purposes hereof (hereinafter in this Section 7.4 called a "notice") to any Party shall be in writing and shall be sufficiently given if delivered personally, or if sent by prepaid registered mail or if transmitted by facsimile to such Party: (a) in the case of a notice to Connolly-Daw at: Unit 38 775 Pacific Road Oakville, Ontario L6L 6M4 Facsimile No.: 905-827-1154 Attention: President with a copy to Vendors' Counsel at: Jackson L. Chercover, Q. C. Barristers & Solicitors 31 111 Avenue Road Suite 805 Toronto, Ontario M5R 3J8 Facsimile No.: 416-925-6811 Attention: Mr. Jackson L. Chercover, Q.C. (b) in the case of a notice to 1199846 at: Unit 38 775 Pacific Road Oakville, Ontario L6L 6M4 Facsimile No.: 905-827-1154 Attention: President with a copy to Vendors' Counsel at: Jackson L. Chercover, Q. C. Barristers & Solicitors 111 Avenue Road Suite 805 Toronto, Ontario M5R 3J8 Facsimile No.: 416-925-6811 Attention: Mr. Jackson L. Chercover, Q.C. (c) in the case of a notice to the Connollys at: Unit 38 775 Pacific Road Oakville, Ontario L6L 6M4 Facsimile No.: 905-827-1154 with a copy to: Jackson L. Chercover, Q. C. Barristers & Solicitors 111 Avenue Road 32 Suite 805 Toronto, Ontario M5R 3J8 Facsimile No.: 416-925-6811 Attention: Mr. Jackson L. Chercover, Q.C. (d) in the case of a notice to the Purchaser at: 14 Meteor Drive Etobicoke, Ontario M9W 1A4 Facsimile No.: 416-675-8838 Attention: President with a copy to Purchaser's Counsel at Walker, Head Barristers & Solicitors Suite 200, 1305 Pickering Parkway Pickering, Ontario L1V 3P2 Facsimile No. 905-420-1073 Attention: Mr. Victor A. Sgro or at such other address as the Party to whom such writing is to be given shall have last notified the Party giving the same in the manner provided in this section. Any notice delivered to the Party to whom it is addressed as hereinbefore provided shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day then the notice shall be deemed to have been given and received on the first Business Day next following such day. Any notice mailed as aforesaid shall be deemed to have been given and received on the third Business Day following the date of its mailing. Any notice transmitted by facsimile shall be deemed given and received on the first Business Day after its transmission. Failure to transmit timely or adequate notice to Vendor's Counsel or to Purchaser's Counsel, as the case may be, shall not invalidate, nullify or otherwise detrimentally affect the provision of same to a Party. 7.5 Assignment - Neither this Agreement nor any rights or obligations hereunder shall be assignable by any Party without the prior written consent of the other Parties hereto. Subject thereto, this Agreement shall enure to the benefit of 33 and be binding upon the Parties and their respective heirs, executors, administrators and successors (including any successor by reason of amalgamation of the Purchaser or the Vendors) and permitted assigns. 7.6 Further Assurances - The Parties hereto shall with reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby, and each Party shall provide such further documents or instruments required by any other Party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions, whether before or after the Closing. 7.7 Severability - If any covenant or provision of this Agreement is prohibited in whole or in part in any jurisdiction, such covenant or provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining covenants and provisions hereof and shall, as to such jurisdiction, be deemed to be severed from this Agreement to the extent of such prohibition. 7.8 Counterparts - This Agreement may be executed by the Parties in separate counterparts each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement. CONNOLLY-DAW HOLDINGS INC. Per: /s/ Wendy Connolly --------------------------------- President - Wendy Connolly Per: /s/ Douglas Connolly --------------------------------- Secretary - Douglas Connolly 1199846 ONTARIO LTD. Per: /s/ Douglas Connolly --------------------------------- President - Douglas Connolly Per: /s/ Wendy Connolly --------------------------------- Secretary-Treasurer - Wendy Connolly SIGNED, SEALED AND DELIVERED ) - in the presence of - ) ) /s/ Douglas Connolly - - ------------------------------ ) ---------------------------- WITNESS ) DOUGLAS CONNOLLY ) ) /s/ Wendy Connolly - - ------------------------------ ) ---------------------------- WITNESS ) WENDY CONNOLLY NTN INTERACTIVE NETWORK INC. Per: /s/ Peter Rona --------------------------------- President - Peter Rona EX-10.2 3 NON-NEGOTIABLE PROMISSORY NOTE Exhibit 10.2 NON-NEGOTIABLE PROMISSORY NOTE Amount: $703,133.00 Date: October 1, 1996 FOR VALUE RECEIVED, the undersigned, NTN INTERACTIVE NETWORK INC. (the "Debtor") acknowledges itself indebted and promises to pay, in accordance with the payment schedule referred to below, to or to the order of CONNOLLY-DAW HOLDINGS INC. (the "Creditor") at 49 Ennisclare Drive East, Oakville, Ontario L6J 4N3 or at such other place as the Creditor shall in writing direct, the principal amount of Seven Hundred and Three Thousand, One Hundred and Thirty-Three ($703,133.00) Dollars (the "Principal Sum") in lawful money of Canada, without interest before default and with interest after default on the amount of the Principal Sum in default at the annual rate of Royal Bank Prime (as hereinafter defined) plus four percent (4%) per annum, calculated from the date of default to the date of payment and compounded annually. For the purposes of this promissory note, "Royal Bank Prime" means the annual rate of interest announced from time to time by the Royal Bank of Canada as a reference rate then in effect for determining interest rates on Canadian dollar commercial loans in Canada. This promissory note is made and delivered pursuant to the provisions of a share purchase agreement made the first day of October, 1996 between the Creditor, 1199846 Ontario Ltd., Douglas Connolly, Wendy Connolly and the Debtor (the "Share Purchase Agreement"). Pursuant to the provisions of the Share Purchase Agreement, the Creditor entered into a management agreement with Magic Lantern Communications Ltd. ("Magic Lantern") dated the first day of October, 1996 (the "Management Agreement"), wherein the Creditor covenants and agrees to provide the managerial services of Douglas Connolly to Magic Lantern. Further pursuant to the provisions of the Share Purchase Agreement, Douglas Connolly entered into an employment agreement with Magic Lantern dated the first day of October, 1996 (the "Employment Agreement"). Further pursuant to the provisions of the Share Purchase Agreement, the Debtor, the Creditor and NTN Canada, Inc. entered into an option agreement dated the first day of October, 1996 (the "Option Agreement"), which provides in part for acceleration of this promissory note upon the occurrence of certain events therein specified, and accordingly, this promissory note is subject to the provisions of the Option Agreement. Payment shall be made in accordance with the following schedule: 2 (a) $78,133.00 on August 31, 1998; (b) $312,500.00 on August 31, 1999; and (c) $312,500.00 on August 31, 2000. Notwithstanding the foregoing, the Debtor shall have the right, exercisable between the date hereof and June 30, 1998 to elect to deliver to the Creditor, in lieu of the aforesaid payments, common shares in the capital of NTN Canada, Inc. (the "Common Shares"), in accordance with the following schedule: (a) 12,276 Common Shares on August 31, 1998; (b) 49,097 Common Shares on August 31, 1999; and (c) 49,096 Common Shares on August 31, 2000. Common Shares delivered to the Creditor in accordance with the foregoing schedule shall be accepted by the Creditor in full satisfaction of the payments otherwise required pursuant to the provisions of this promissory note. In the event the Debtor does not so elect to deliver Common Shares to the Creditor as aforesaid, the Creditor shall then have the right, exercisable between July 1, 1998 and July 31, 1998, to elect to require the Debtor to deliver to the Creditor, Common Shares in accordance with the foregoing schedule, in which event the Common Shares so delivered shall be accepted by the Creditor in full satisfaction of the payments otherwise required pursuant to the provisions of this promissory note. If and whenever at any time the outstanding Common Shares shall be subdivided, redivided or changed into a greater or consolidated into a lesser number of shares or reclassified into different shares, the aforesaid schedule shall be appropriately adjusted so that the Creditor shall, in the event the Debtor shall elect to deliver or the Creditor shall elect to receive, as the case may be, Common Shares in lieu of payment as above provided, be entitled to receive and shall accept, at the appropriate time, in lieu of the number of Common Shares to which it was theretofore entitled in accordance with the aforesaid schedule, the aggregate number of Common Shares that the Creditor would have been entitled to receive as a result of such subdivision, redivision, change, consolidation or reclassification if, on the effective date thereof, the Creditor had been the registered holder of the number of Common Shares to which it was theretofore entitled in accordance with the aforesaid schedule. 3 In the event Magic Lantern decides that it does not wish to extend the term of the Employment Agreement as provided in Article 10 of the Employment Agreement and Douglas Connolly decides that he does wish to extend the term of the Employment Agreement as so provided, and regardless of whether or not Magic Lantern and Douglas Connolly would otherwise have been able to agree upon the terms and conditions of the said extension assuming both parties had decided that they wished to extend the said term, the Creditor shall have the right, exercisable between September 1, 1998 and September 30, 1998, to elect to accelerate the payment (or delivery of the Common Shares, as the case may be), otherwise due on August 31, 2000, to August 31, 1999. At the option of the Debtor, the Principal Sum then remaining outstanding shall be automatically cancelled and forgiven by the Creditor and the Debtor shall automatically be forever released from any and all further liability hereunder without any payment (or delivery of Common Shares, as the case may be), upon the occurrence of any of the following events: (a) the wilful and continued malfeasance or gross negligence of Douglas Connolly in the performance of his duties under the Management Agreement and the failure by Douglas Connolly to remedy such conduct within 30 days of receipt of written notice from Magic Lantern specifying particulars of the said conduct; (b) the wilful and continued malfeasance or gross negligence of Douglas Connolly in the performance of his duties under the Employment Agreement and the failure by Douglas Connolly to remedy such conduct within 30 days of receipt of written notice from Magic Lantern specifying particulars of the said conduct; (c) Douglas Connolly's actual fraud, intentional misappropriation of a corporate opportunity or of Magic Lantern's funds, or embezzlement of Magic Lantern's funds; (d) the wilful disregard by Douglas Connolly of a directive of the board of directors of Magic Lantern and the failure by Douglas Connolly to remedy such conduct within 30 days of receipt of written notice from Magic Lantern specifying particulars of the said conduct; (e) the election by Douglas Connolly, during the term of the Management Agreement, not to provide his services to Magic Lantern, notwithstanding the terms and provisions of the Management Agreement; or 4 (f) the resignation by Douglas Connolly, during the term of the Employment Agreement, from Magic Lantern. Partial or full payment in advance may be made at any time or times without notice or bonus, subject to the prior written consent of the Creditor. All payments shall be applied firstly in payment of unpaid interest and the balance, if any, in reduction of the Principal Sum. The failure of the Creditor to exercise any right hereunder, in any particular instance, shall not constitute a waiver of such right in that or any other subsequent instance. Save and except as may be otherwise herein provided, the undersigned hereby waives demand and presentment for payment, notice of non-payment, protest and notice of protest of this promissory note. This promissory note shall enure to the benefit of the successors of the Creditor and shall be binding upon the undersigned and its successors. This promissory note may not be assigned in whole or in part. NTN INTERACTIVE NETWORK INC. Per: /s/ Peter Rona ______________________________ President - Peter Rona TO: CONNOLLY-DAW HOLDINGS INC. ("Connolly-Daw") UNDERTAKING ----------- Subject to the provisions of the promissory note (the "Promissory Note") in the principal sum of $703,133.00 (Canadian), dated October 1, 1996 and given by NTN Interactive Network Inc., a wholly-owned subsidiary of the undersigned, to Connolly-Daw, the undersigned hereby undertakes to deliver to Connolly-Daw the Common Shares (as defined in the Promissory Note) set forth in the Promissory Note if and when such shares are required to be delivered as set forth in the Promissory Note. DATED at Toronto, Ontario this 1st day of October, 1996. NTN CANADA, INC. Per: /s/ Peter Rona ______________________________ President - Peter Rona Per: /s/ David Auger ______________________________ Secretary - David Auger EX-10.3 4 NON-NEGOTIABLE PROMISSORY NOTE Exhibit 10.3 NON-NEGOTIABLE PROMISSORY NOTE ------------------------------ Amount: $546,867.00 Date: October 1, 1996 FOR VALUE RECEIVED, the undersigned, NTN INTERACTIVE NETWORK INC. (the "Debtor") acknowledges itself indebted and promises to pay, in accordance with the payment schedule referred to below, to or to the order of 1199846 ONTARIO LTD. (the "Creditor") at 49 Ennisclare Drive East, Oakville, Ontario L6J 4N3 or at such other place as the Creditor shall in writing direct, the principal amount of Five Hundred and Forty-Six Thousand Eight Hundred and Sixty-Seven ($546,867.00) Dollars (the "Principal Sum") in lawful money of Canada, without interest before default and with interest after default on the amount of the Principal Sum in default at the annual rate of Royal Bank Prime (as hereinafter defined) plus four percent (4%) per annum, calculated from the date of default to the date of payment and compounded annually. For the purposes of this promissory note, "Royal Bank Prime" means the annual rate of interest announced from time to time by the Royal Bank of Canada as a reference rate then in effect for determining interest rates on Canadian dollar commercial loans in Canada. This promissory note is made and delivered pursuant to the provisions of a share purchase agreement made the first day of October, 1996 between Connolly-Daw Holdings Inc. ("Connolly-Daw"), the Creditor, Douglas Connolly, Wendy Connolly and the Debtor (the "Share Purchase Agreement"). Pursuant to the provisions of the Share Purchase Agreement, Connolly-Daw entered into a management agreement with Magic Lantern Communications Ltd. ("Magic Lantern") dated the first day of October, 1996 (the "Management Agreement"), wherein Connolly-Daw covenants and agrees to provide the managerial services of Douglas Connolly to Magic Lantern. Further pursuant to the provisions of the Share Purchase Agreement, Douglas Connolly entered into an employment agreement with Magic Lantern dated the first day of October, 1996 (the "Employment Agreement"). Payment shall be made in accordance with the following schedule: (a) $312,500.00 on August 31, 1997; and (b) $234,367.00 on August 31, 1998. 10.3 2 Notwithstanding the foregoing, the Debtor shall have the right, exercisable between the date hereof and June 30, 1997 to elect to deliver to the Creditor, in lieu of the aforesaid payments, common shares in the capital of NTN Canada, Inc. (the "Common Shares"), in accordance with the following schedule: (a) 49,097 Common Shares on August 31, 1997; and (b) 36,821 Common Shares on August 31, 1998. Common Shares delivered to the Creditor in accordance with the foregoing schedule shall be accepted by the Creditor in full satisfaction of the payments otherwise required pursuant to the provisions of this promissory note. In the event the Debtor does not so elect to deliver Common Shares to the Creditor as aforesaid, the Creditor shall then have the right, exercisable between July 1, 1997 and July 31, 1997, to elect to require the Debtor to deliver to the Creditor, Common Shares in accordance with the foregoing schedule, in which event the Common Shares so delivered shall be accepted by the Creditor in full satisfaction of the payments otherwise required pursuant to the provisions of this promissory note. If and whenever at any time the outstanding Common Shares shall be subdivided, redivided or changed into a greater or consolidated into a lesser number of shares or reclassified into different shares, the aforesaid schedule shall be appropriately adjusted so that the Creditor shall, in the event the Debtor shall elect to deliver or the Creditor shall elect to receive, as the case may be, Common Shares in lieu of payment as above provided, be entitled to receive and shall accept, at the appropriate time, in lieu of the number of Common Shares to which it was theretofore entitled in accordance with the aforesaid schedule, the aggregate number of Common Shares that the Creditor would have been entitled to receive as a result of such subdivision, redivision, change, consolidation or reclassification if, on the effective date thereof, the Creditor had been the registered holder of the number of Common Shares to which it was theretofore entitled in accordance with the aforesaid schedule. At the option of the Debtor, the Principal Sum then remaining outstanding shall be automatically cancelled and forgiven by the Creditor and the Debtor shall automatically be forever released from any and all further liability hereunder without any payment (or delivery of Common Shares, as the case may be), upon the occurrence of any of the following events: (a) the wilful and continued malfeasance or gross negligence of Douglas Connolly in the performance of his duties under the Management Agreement and the failure by Douglas Connolly to 3 remedy such conduct within 30 days of receipt of written notice from Magic Lantern specifying particulars of the said conduct; (b) the wilful and continued malfeasance or gross negligence of Douglas Connolly in the performance of his duties under the Employment Agreement and the failure by Douglas Connolly to remedy such conduct within 30 days of receipt of written notice from Magic Lantern specifying particulars of the said conduct; (c) Douglas Connolly's actual fraud, intentional misappropriation of a corporate opportunity or of Magic Lantern's funds, or embezzlement of Magic Lantern's funds; (d) the wilful disregard by Douglas Connolly of a directive of the board of directors of Magic Lantern and the failure by Douglas Connolly to remedy such conduct within 30 days of receipt of written notice from Magic Lantern specifying particulars of the said conduct; (e) the election by Douglas Connolly, during the term of the Management Agreement, not to provide his services to Magic Lantern, notwithstanding the terms and provisions of the Management Agreement; or (f) the resignation by Douglas Connolly, during the term of the Employment Agreement, from Magic Lantern. Partial or full payment in advance may be made at any time or times without notice or bonus, subject to the prior written consent of the Creditor. All payments shall be applied firstly in payment of unpaid interest and the balance, if any, in reduction of the Principal Sum. The failure of the Creditor to exercise any right hereunder, in any particular instance, shall not constitute a waiver of such right in that or any other subsequent instance. Save and except as may be otherwise herein provided, the undersigned hereby waives demand and presentment for payment, notice of non-payment, protest and notice of protest of this promissory note. This promissory note shall enure to the benefit of the successors of the Creditor and shall be binding upon the undersigned and its successors. 4 This promissory note may not be assigned in whole or in part. NTN INTERACTIVE NETWORK INC. Per: /s/ Peter Rona ______________________________ President - Peter Rona TO: 1199846 ONTARIO LTD. ("1199846") UNDERTAKING ----------- Subject to the provisions of the promissory note (the "Promissory Note") in the principal sum of $546,867.00 (Canadian), dated October 1, 1996 and given by NTN Interactive Network Inc., a wholly-owned subsidiary of the undersigned, to 1199846, the undersigned undertakes to deliver to 1199846 the Common Shares (as defined in the Promissory Note) set forth in the Promissory Note if and when such shares are required to be delivered as set forth in the Promissory Note. DATED at Toronto, Ontario this 1st day of October, 1996. NTN CANADA, Inc. Per: /s/ Peter Rona ______________________________ President - Peter Rona Per: /s/ David Auger ______________________________ Secretary - David Auger EX-10.4 5 OPTION AGREEMENT Exhibit 10.4 OPTION AGREEMENT ---------------- THIS AGREEMENT made the 1st day of October, 1996, B E T W E E N: CONNOLLY-DAW HOLDINGS INC., a ----------------------------- corporation incorporated pursuant to the laws of the Province of Ontario, (hereinafter referred to as the "Vendor"), OF THE FIRST PART; - and - NTN INTERACTIVE NETWORK INC., a ------------------------------- corporation amalgamated pursuant to the laws of Canada, (hereinafter referred to as the "Corporation"), OF THE SECOND PART; - and - NTN CANADA, INC., a corporation ----------------- incorporated pursuant to the laws of the State of New York, (hereinafter referred to as "NTN Canada"), OF THE THIRD PART. WHEREAS: 1. Pursuant to a share purchase agreement dated October 1, 1996 (the "Share Purchase Agreement"), entered into between the Vendor, 1199846 Ontario Ltd. ("1199846"), Douglas Connolly, Wendy Connolly and the Corporation, the Vendor and 1199846 sold all of the issued and outstanding common shares in the capital of Magic Lantern Communications Ltd. ("Magic Lantern") to the Corporation and 10.4 2 1199846 sold 20.1% of the issued and outstanding shares in the capital of 745695 Ontario Ltd. to the Corporation; 2. As part of the consideration received by the Vendor in connection with the aforesaid transaction, the Vendor received a promissory note from the Corporation in the principal sum of $703,133.00 dated October 1, 1996 (the "Promissory Note"); 3. Pursuant to the provisions of the Promissory Note, the Corporation may elect to deliver to the Vendor or the Vendor may elect to receive from the Corporation, common shares in the capital of NTN Canada (the "Common Shares") in lieu of payment as therein provided; 4. Pursuant to the provisions of the Share Purchase Agreement, Douglas Connolly entered into an employment agreement with Magic Lantern dated October 1, 1996 (the "Employment Agreement"). NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the completion of the transactions contemplated by the Share Purchase Agreement, the respective covenants and agreements of the parties contained herein, the sum of One Dollar ($1.00) now paid by each party hereto to each of the other parties hereto and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto), the parties hereto hereby agree as follows: 1. Put Option - (1) In the event Magic Lantern decides that it does not wish to extend the term of the Employment Agreement as provided in Article 10 of the Employment Agreement and Douglas Connolly decides that he does wish to extend the term of the Employment Agreement as so provided, and regardless of whether or not Magic Lantern and Douglas Connolly would otherwise have been able to agree upon the terms and conditions of the said extension assuming both parties had decided that they wished to extend the said term, the Vendor shall, on or after September 1, 1999, have the right (hereinafter in this Article 1 referred to as the "Put Option") to require NTN Canada to purchase from the Vendor all, but not less than all, of the Common Shares acquired by the Vendor pursuant to the provisions of the Promissory Note, if any, which are then still beneficially owned by the Vendor (hereinafter in this Article 1 collectively referred to as the "Vendor's Shares"). In the event that the Vendor has not, as of such time, accelerated delivery of the Common Shares otherwise due on August 31, 2000 to August 31, 1999 pursuant to the provisions of the Promissory Note, the Vendor shall, prior to 3 giving to NTN Canada the Notice of Exercise (as hereinafter defined), accelerate delivery of the Common Shares otherwise due on August 31, 2000 to the date on which the Notice of Exercise is delivered to NTN Canada, which acceleration is hereby consented and agreed to by the Corporation and NTN Canada. (2) The Put Option shall be exercised by the Vendor giving to NTN Canada notice in writing (in this Article 1 referred to as the "Notice of Exercise") of its intention to exercise the Put Option. (3) Upon exercise of the Put Option, NTN Canada shall be obligated to purchase from the Vendor, and the Vendor shall be obligated to sell to NTN Canada, the Vendor's Shares in accordance with the provisions of Section 1(4) hereof. (4) The sale and purchase of the Vendor's Shares under this Article shall be completed on the following terms and conditions: (a) the purchase price payable for each of the Vendor's Shares shall be equal to 90% of the average closing price of the Common Shares during the twenty-trading day period ending on the business day which immediately precedes the day on which the Notice of Exercise is delivered by the Vendor to NTN Canada as reported by the NASDAQ "Small-Cap" market (or, if the Common Shares are not, at such time, included in the NASDAQ "Small-Cap" market, then such other market or exchange in which the Common Shares are then included; (b) the purchase price shall be payable by certified cheque or bank draft at the time of completion of the transaction; (c) the Vendor's Shares shall be free and clear of any liens, mortgages, charges and encumbrances whatsoever and the Vendor shall have good and marketable title thereto; (d) the completion of the sale shall take place at 10:00 a.m. (Toronto time) on the date being 60 days after the date on which the Vendor delivered the Notice of Exercise to NTN Canada, provided such day is not a Saturday, Sunday or statutory holiday, in which event the completion of the sale shall take place on the next business day thereafter. (5) The Put Option shall expire on September 30, 1999. 4 2. Call Option (1) In the event Magic Lantern decides that it does wish to extend the term of the Employment Agreement as provided in Article 10 of the Employment Agreement and Douglas Connolly decides that he does not wish to extend the term of the Employment Agreement as so provided, and regardless of whether or not Magic Lantern and Douglas Connolly would otherwise have been able to agree upon the terms and conditions of the said extension assuming both parties had decided that they wished to extend the said term, NTN Canada shall, on or after September 1, 1999, have the right (hereinafter in this Article 2 referred to as the "Call Option") to require the Vendor to sell to NTN Canada all, but not less than all, of the Common Shares acquired by the Vendor pursuant to the provisions of the Promissory Note, if any, which are then still beneficially owned by the Vendor (hereinafter in this Article 2 collectively referred to as the Vendor's Shares). The Vendor shall, forthwith upon NTN Canada giving to the Vendor the Notice of Exercise (as hereinafter defined), accelerate delivery of the Common Shares otherwise due on August 31, 2000 pursuant to the provisions of the Promissory Note to the date which is five business days after the date on which the Notice of Exercise is delivered to the Vendor, which acceleration is hereby consented and agreed to by the Vendor. (2) The Call Option shall be exercised by NTN Canada giving to the Vendor notice in writing (in this Article 2 referred to as the "Notice of Exercise") of its intention to exercise the Call Option. (3) Upon exercise of the Call Option, the Vendor shall be obligated to sell to NTN Canada, and NTN Canada shall be obligated to purchase from the Vendor, the Vendor's Shares in accordance with the provisions of Section 2(4) hereof. (4) The sale and purchase of the Vendor's Shares under this Article shall be completed on the following terms and conditions: (a) the purchase price payable for each of the Vendor's Shares shall be equal to 110% of the average closing price of the Common Shares during the twenty-trading day period ending on the business day which immediately precedes the day on which the Notice of Exercise is delivered by NTN Canada to the Vendor as reported by the NASDAQ "Small-Cap" market (or, if the Common Shares are not, at such time, included in the NASDAQ "Small-Cap" market, then such other market or exchange in which the Common Shares are then included; 5 (b) the purchase price shall be payable by certified cheque or bank draft at the time of completion of the transaction; (c) the Vendor's Shares shall be free and clear of any liens, mortgages, charges and encumbrances whatsoever and the Vendor shall have good and marketable title thereto; (d) the completion of the sale shall take place at 10:00 a.m. (Toronto time) on the date being 60 days after the date on which NTN Canada delivered the Notice of Exercise to the Vendor, provided such day is not a Saturday, Sunday or statutory holiday, in which event the completion of the sale shall take place on the next business day thereafter. (5) The Call Option shall expire on September 30, 1999. 3. General Provisions (1) Notices - Any notice, direction or other document required or permitted to be given hereunder or for the purposes hereof (hereinafter in this Section 3(1) called a "notice") to any party shall be in writing and shall be sufficiently given if delivered personally or if sent by prepaid registered mail to such party: (a) in the case of a notice to the Vendor, at: 49 Ennisclare Drive East Oakville, Ontario L6J 4N3 (b) in the case of a notice to the Corporation, at: 14 Meteor Drive Etobicoke, Ontario M9W 1A4 (c) in the case of a notice to NTN Canada, at: 14 Meteor Drive Etobicoke, Ontario M9W 1A4 6 or at such other address as may be given by such party to the other parties hereto in writing from time to time. All such notices shall be deemed to have been received when delivered or, if mailed, 48 hours after 12:01 a.m. on the day following the day of the mailing thereof. (2) Additional Considerations - The parties shall sign such further and other documents, cause such meetings to be held, resolutions passed and by-laws enacted, exercise their vote and influence, do and perform and cause to be done and performed such further and other acts and things as may be necessary or desirable in order to give full effect to this Agreement and every part thereof. (3) Time of the Essence - Time shall be of the essence of this Agreement and of every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision. (4) Entire Agreement - This Agreement constitutes the entire agreement between the parties with respect to all of the matters herein and its execution has not been induced by, nor do any of the parties rely upon or regard as material, any representations or writings whatsoever not incorporated herein and made a part hereof and may not be amended or modified in any respect except by written instrument signed by the parties hereto. (5) Modification of Agreement - Any modification to this Agreement must be in writing and signed by the parties hereto or it shall have no effect and shall be void. (6) Assignment and Enurement - Neither this Agreement nor any rights or obligations of the Vendor under this Agreement shall be assignable by the Vendor without the prior written consent of the Corporation and NTN Canada. Subject to such consent, this Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. (7) Headings for Convenience Only - The division of this Agreement into Articles and Sections is for convenience of reference only and shall not affect the interpretation or construction of this Agreement. (8) Governing Law - This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such Province. 7 (9) Waiver - No term or condition of this Agreement shall be deemed waived unless such waiver is expressed in writing and signed by the parties hereto. Failure or delay on the part of any party to enforce any right hereunder shall not operate as a waiver hereof. (10) Gender - In this Agreement, words importing the singular number shall include the plural and vice versa, and words importing the use of any gender shall include the masculine, feminine and neuter genders and the word "person" shall include an individual, a trust, a partnership, a body corporate, an association or other incorporated or unincorporated organization or entity. (11) Severability - If any Article, Section or any portion of any Section of this Agreement is determined to be unenforceable or invalid for any reason whatsoever, that unenforceability or invalidity shall not affect the enforceability or validity of the remaining portions of this Agreement and such unenforceable or invalid Article, Section or portion thereof shall be severed from the remainder of this Agreement. IN WITNESS WHEREOF the parties hereto have duly executed this Agreement. CONNOLLY-DAW HOLDINGS INC. Per: /s/ Wendy Connolly ______________________________ President - Wendy Connolly Per: /s/ Douglas Connolly ______________________________ Secretary - Douglas Connolly NTN INTERACTIVE NETWORK INC. Per: /s/ Peter Rona ______________________________ President - Peter Rona NTN CANADA, INC. Per: /s/ Peter Rona ______________________________ President - Peter Rona Per: /s/ David Auger ______________________________ Secretary - David Auger EX-10.5 6 OPTION AGREEMENT Exhibit 10.5 OPTION AGREEMENT THIS AGREEMENT made the 1st day of October, 1996, B E T W E E N: 1199846 ONTARIO LTD., a corporation incorporated pursuant to the laws of the Province of Ontario, (hereinafter referred to as the "Vendor"), OF THE FIRST PART; - and - NTN INTERACTIVE NETWORK INC., a corporation amalgamated pursuant to the laws of Canada, (hereinafter referred to as the "Corporation"), OF THE SECOND PART; - and - NTN CANADA, INC., a corporation incorporated pursuant to the laws of the State of New York, (hereinafter referred to as "NTN Canada"), OF THE THIRD PART. WHEREAS: 1. Pursuant to a share purchase agreement dated October 1, 1996 (the "Share Purchase Agreement"), entered into between Connolly-Daw Holdings Inc. ("Connolly-Daw"), the Vendor, Douglas Connolly, Wendy Connolly and the Corporation, the Vendor and Connolly-Daw sold all of the issued and outstanding common shares in the capital of Magic Lantern Communications Ltd. ("Magic 2 Lantern") to the Corporation and the Vendor sold 20.1% of the issued and outstanding shares in the capital of 745695 Ontario Ltd. to the Corporation; 2. As part of the consideration received by the Vendor in connection with the aforesaid transaction, the Vendor received a promissory note from the Corporation in the principal sum of $546,867.00 dated October 1, 1996 (the "Promissory Note"); 3. Pursuant to the provisions of the Promissory Note, the Corporation may elect to deliver to the Vendor or the Vendor may elect to receive from the Corporation, common shares in the capital of NTN Canada (the "Common Shares") in lieu of payment as therein provided; 4. Pursuant to the provisions of the Share Purchase Agreement, Douglas Connolly entered into an employment agreement with Magic Lantern dated October 1, 1996 (the "Employment Agreement"). NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the completion of the transactions contemplated by the Share Purchase Agreement, the respective covenants and agreements of the parties contained herein, the sum of One Dollar ($1.00) now paid by each party hereto to each of the other parties hereto and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto), the parties hereto hereby agree as follows: 1. Put Option - (1) In the event Magic Lantern decides that it does not wish to extend the term of the Employment Agreement as provided in Article 10 of the Employment Agreement and Douglas Connolly decides that he does wish to extend the term of the Employment Agreement as so provided, and regardless of whether or not Magic Lantern and Douglas Connolly would otherwise have been able to agree upon the terms and conditions of the said extension assuming both parties had decided that they wished to extend the said term, the Vendor shall, on or after September 1, 1999, have the right (hereinafter in this Article 1 referred to as the "Put Option") to require NTN Canada to purchase from the Vendor all, but not less than all, of the Common Shares acquired by the Vendor pursuant to the provisions of the Promissory Note, if any, which are then still beneficially owned by the Vendor (hereinafter in this Article 1 collectively referred to as the "Vendor's Shares"). 3 (2) The Put Option shall be exercised by the Vendor giving to NTN Canada notice in writing (in this Article 1 referred to as the "Notice of Exercise") of its intention to exercise the Put Option. (3) Upon exercise of the Put Option, NTN Canada shall be obligated to purchase from the Vendor, and the Vendor shall be obligated to sell to NTN Canada, the Vendor's Shares in accordance with the provisions of Section 1(4) hereof. (4) The sale and purchase of the Vendor's Shares under this Article shall be completed on the following terms and conditions: (a) the purchase price payable for each of the Vendor's Shares shall be equal to 90% of the average closing price of the Common Shares during the twenty-trading day period ending on the business day which immediately precedes the day on which the Notice of Exercise is delivered by the Vendor to NTN Canada as reported by the NASDAQ "Small-Cap" market (or, if the Common Shares are not, at such time, included in the NASDAQ "Small-Cap" market, then such other market or exchange in which the Common Shares are then included; (b) the purchase price shall be payable by certified cheque or bank draft at the time of completion of the transaction; (c) the Vendor's Shares shall be free and clear of any liens, mortgages, charges and encumbrances whatsoever and the Vendor shall have good and marketable title thereto; (d) the completion of the sale shall take place at 10:00 a.m. (Toronto time) on the date being 60 days after the date on which the Vendor delivered the Notice of Exercise to NTN Canada, provided such day is not a Saturday, Sunday or statutory holiday, in which event the completion of the sale shall take place on the next business day thereafter. (5) The Put Option shall expire on September 30, 1999. 2. Call Option (1) In the event Magic Lantern decides that it does wish to extend the term of the Employment Agreement as provided in Article 10 of the Employment Agreement and Douglas Connolly decides that he does not wish to extend 4 the term of the Employment Agreement as so provided, and regardless of whether or not Magic Lantern and Douglas Connolly would otherwise have been able to agree upon the terms and conditions of the said extension assuming both parties had decided that they wished to extend the said term, NTN Canada shall, on or after September 1, 1999, have the right (hereinafter in this Article 2 referred to as the "Call Option") to require the Vendor to sell to NTN Canada all, but not less than all, of the Common Shares acquired by the Vendor pursuant to the provisions of the Promissory Note, if any, which are then still beneficially owned by the Vendor (hereinafter in this Article 2 collectively referred to as the Vendor's Shares). (2) The Call Option shall be exercised by NTN Canada giving to the Vendor notice in writing (in this Article 2 referred to as the "Notice of Exercise") of its intention to exercise the Call Option. (3) Upon exercise of the Call Option, the Vendor shall be obligated to sell to NTN Canada, and NTN Canada shall be obligated to purchase from the Vendor, the Vendor's Shares in accordance with the provisions of Section 2(4) hereof. (4) The sale and purchase of the Vendor's Shares under this Article shall be completed on the following terms and conditions: (a) the purchase price payable for each of the Vendor's Shares shall be equal to 110% of the average closing price of the Common Shares during the twenty-trading day period ending on the business day which immediately precedes the day on which the Notice of Exercise is delivered by NTN Canada to the Vendor as reported by the NASDAQ "Small-Cap" market (or, if the Common Shares are not, at such time, included in the NASDAQ "Small-Cap" market, then such other market or exchange in which the Common Shares are then included; (b) the purchase price shall be payable by certified cheque or bank draft at the time of completion of the transaction; (c) the Vendor's Shares shall be free and clear of any liens, mortgages, charges and encumbrances whatsoever and the Vendor shall have good and marketable title thereto; (d) the completion of the sale shall take place at 10:00 a.m. (Toronto time) on the date being 60 days after the date on which NTN Canada delivered the Notice of Exercise to the Vendor, provided such day is not a Saturday, Sunday or 5 statutory holiday, in which event the completion of the sale shall take place on the next business day thereafter. (5) The Call Option shall expire on September 30, 1999. 3. General Provisions (1) Notices - Any notice, direction or other document required or permitted to be given hereunder or for the purposes hereof (hereinafter in this Section 3(1) called a "notice") to any party shall be in writing and shall be sufficiently given if delivered personally or if sent by prepaid registered mail to such party: (a) in the case of a notice to the Vendor, at: 49 Ennisclare Drive East Oakville, Ontario L6J 4N3 (b) in the case of a notice to the Corporation, at: 14 Meteor Drive Etobicoke, Ontario M9W 1A4 (c) in the case of a notice to NTN Canada, at: 14 Meteor Drive Etobicoke, Ontario M9W 1A4 or at such other address as may be given by such party to the other parties hereto in writing from time to time. All such notices shall be deemed to have been received when delivered or, if mailed, 48 hours after 12:01 a.m. on the day following the day of the mailing thereof. (2) Additional Considerations - The parties shall sign such further and other documents, cause such meetings to be held, resolutions passed and by-laws enacted, exercise their vote and influence, do and perform and cause to be done and performed such further and other acts and things as may be necessary or desirable in order to give full effect to this Agreement and every part thereof. 6 (3) Time of the Essence - Time shall be of the essence of this Agreement and of every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision. (4) Entire Agreement - This Agreement constitutes the entire agreement between the parties with respect to all of the matters herein and its execution has not been induced by, nor do any of the parties rely upon or regard as material, any representations or writings whatsoever not incorporated herein and made a part hereof and may not be amended or modified in any respect except by written instrument signed by the parties hereto. (5) Modification of Agreement - Any modification to this Agreement must be in writing and signed by the parties hereto or it shall have no effect and shall be void. (6) Assignment and Enurement - Neither this Agreement nor any rights or obligations of the Vendor under this Agreement shall be assignable by the Vendor without the prior written consent of the Corporation and NTN Canada. Subject to such consent, this Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. (7) Headings for Convenience Only - The division of this Agreement into Articles and Sections is for convenience of reference only and shall not affect the interpretation or construction of this Agreement. (8) Governing Law - This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such Province. (9) Waiver - No term or condition of this Agreement shall be deemed waived unless such waiver is expressed in writing and signed by the parties hereto. Failure or delay on the part of any party to enforce any right hereunder shall not operate as a waiver hereof. (10) Gender - In this Agreement, words importing the singular number shall include the plural and vice versa, and words importing the use of any gender shall include the masculine, feminine and neuter genders and the word "person" shall include an individual, a trust, a partnership, a body corporate, an association or other incorporated or unincorporated organization or entity. (11) Severability - If any Article, Section or any portion of any Section of this Agreement is determined to be unenforceable or invalid for any reason whatsoever, that unenforceability or invalidity shall not affect the enforceability or validity of the remaining portions of this Agreement and such unenforceable or invalid Article, Section or portion thereof shall be severed from the remainder of this Agreement. 7 IN WITNESS WHEREOF the parties hereto have duly executed this Agreement. 1199846 ONTARIO LTD. Per: /s/ Douglas Connolly --------------------------------- President - Douglas Connolly Per: /s/ Wendy Connolly --------------------------------- Secretary - Treasurer Wendy Connolly NTN INTERACTIVE NETWORK INC. Per: /s/ Peter Rona --------------------------------- President - Peter Rona NTN CANADA, INC. Per: /s/ Peter Rona --------------------------------- President - Peter Rona Per: /s/ David Auger --------------------------------- Secretary - David Auger SCHEDULE "A" RELEASE TO: Magic Lantern Communications Ltd. (herein called the "Release") KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of Canada now paid by the Releasee to the undersigned (herein called the "Releasor"), the receipt and sufficiency of which is hereby acknowledged, the Releasor hereby remises, releases and forever discharges the Releasee, of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands whatsoever which against the Releasee, the Releasor, as a shareholder of the Releasee, ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of any cause, matter or thing whatsoever existing up to the present time relating to, or arising directly or indirectly by reason of or as a consequence of, the Releasor; having been a shareholder of the Releasee. AND in consideration of the foregoing, the Releasor covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the Releasee, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors and assigns of the Releasee and shall be binding upon and enforceable against the successors of the Releasor. IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: ______________________________ Per: ______________________________ SCHEDULE "B" MUTUAL RELEASE The undersigned hereby acknowledge and agree that the agreement between the undersigned and Canadian Satellite Learning Services Inc. dated October 13, 1995 (the "Agreement") is hereby terminated and cancelled and of no further force and effect, and the undersigned further hereby remise, release and forever discharge each other of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands which against each other, each of them ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of the Agreement. AND in consideration of the foregoing, each of the undersigned covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the other of them, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors of the undersigned and shall be binding upon and enforceable against the successors of the undersigned. IN WITNESS WHEREOF the undersigned has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: ______________________________ Per: ______________________________ MAGIC LANTERN COMMUNICATIONS LTD. Per: ______________________________ Per: ______________________________ RELEASE TO: Magic Lantern Communications Ltd. (herein called the "Releasee") KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of Canada now paid by the Releasee to the undersigned (herein called the "Releasor"), the receipt and sufficiency of which is hereby acknowledged, the Releasor hereby remises, releases and forever discharges the Releasee, of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands whatsoever which against the Releasee, the Releasor, as a shareholder of the Releasee, ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of any cause, matter or thing whatsoever existing up to the present time relating to, or arising directly or indirectly by reason of or as a consequence of, the Releasor having been a shareholder of the Releasee. AND in consideration of the foregoing, the Releasor covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the Releasee, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors and assigns of the Releasee and shall be binding upon and enforceable against the successors of the Releasor. IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: /s/ L. J. Boisvert ----------------------------------- L. J. Boisvert, President & C.E.O. Per: /s/ J. E. Perkins, ----------------------------------- J. E. Perkins, Secretary MUTUAL RELEASE The undersigned hereby acknowledge and agree that the agreement between the undersigned and Canadian Satellite Learning Services Inc. dated October 13, 1995 (the "Agreement") is hereby terminated and cancelled and of no further force and effect, and the undersigned further hereby remise, release and forever discharge each other of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands which against each other, each of them ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of the Agreement. AND in consideration of the foregoing, each of the undersigned covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the other of them, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors of the undersigned and shall be binding upon and enforceable against the successors of the undersigned. IN WITNESS WHEREOF the undersigned has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: /s/ L. J. Boisvert ----------------------------------- L. J. Boisvert, President & C.E.O. Per: /s/ J. E. Perkins, ----------------------------------- J. E. Perkins, Secretary MAGIC LANTERN COMMUNICATIONS LTD. Per: /s/ Douglas Connolly ----------------------------------- President, Douglas Connolly Per: /s/ Jackson L. Chercover ----------------------------------- Secretary, Jackson L. Chercover EX-10.6 7 REGISTRATION RIGHTS AGREEMENT Exhibit 10.6 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT, dated October 1, 1996 (the "Agreement"), is by and between NTN CANADA, INC., a New York corporation (the "Corporation"), and CONNOLLY-DAW HOLDINGS INC., an Ontario corporation ("Holdings"), and 1199846 ONTARIO LTD., an Ontario corporation ("1199846") (Holdings and 1199846 each being hereinafter individually referred to as a "Rightsholder," and, jointly, as the "Rightsholders"). W I T N E S E T H: WHEREAS, pursuant to a certain Share Purchase Agreement, of even date herewith (the "Purchase Agreement"), by and among the Rightsholders, NTN Interactive Network Inc., a corporation amalgamated pursuant to the laws of Canada and which is a wholly-owned subsidiary of the Corporation ("Interactive"), and certain others, amongst other things, the Rightsholders were issued promissory notes from Interactive (the "Promissory Notes") wherein Interactive may elect to deliver to the Rightsholders, and the Rightsholders shall have the right to require delivery of, common stock par value $0.0467 per share (the "Common Stock") of the Corporation in lieu of payment therein (the "Shares"); and WHEREAS, it is the desire of the parties hereto that the Corporation grant to the Rightsholders certain registration rights under the Securities Act of 1933, as amended (the "Act") with respect to the Shares, upon the terms and conditions hereinafter set forth; and WHEREAS, the number of Shares to which each of the Rightsholders are being hereby granted registration rights under the Act is set forth on Schedule I to this Agreement. NOW, THEREFORE, in consideration of the above premises and the mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 2 1. Registration or Qualification "Piggy-Back" Rights. (a) If at any time on or after September 1, 1997 and on or prior to August 31, 2002, the Corporation proposes to register or qualify any of its securities under the Act, or any other applicable federal or state law (other than a registration relating to: (i) a registration of a stock option, stock purchase or compensation or incentive plan or of stock issued or issuable pursuant to any such plan, or a dividend investment plan, (ii) a registration of securities proposed to be issued in exchange for securities or assets of, or in connection with a merger or consolidation with, another corporation, or (iii) a registration of securities proposed to be issued in exchange for other securities of the Corporation), it shall on each such occasion give written notice to each of the Rightsholders of its intention to do so and, upon the written request of any Rightsholder given within 20 days after receipt of any such notice (a "Request") (which Request shall (i) specify the number of Shares intended to be sold or disposed of, and (ii) describe the method of any proposed sale or other disposition thereof), the Corporation will use its best efforts to cause such Shares so specified in the Request to be registered or qualified under such Act or laws, to the extent requisite to permit the sale or other disposition thereof (in accordance with the method described by such Rightsholder in the Request, provided such method is in accordance with law); provided that, if, at any time after giving written notice of its intention to register or qualify any securities and prior to the effective date of the registration statement or qualification document filed in connection with such registration or qualification, the Corporation shall determine for any reason not to register or qualify or to delay registration or qualification of such securities, the Corporation may, at its election, give written notice of such determination to the Rightsholder who shall have given a Request and, thereupon: (i) in the case of a determination not to register or qualify, the Corporation shall be relieved of its obligation to register or qualify any Shares in connection with such registration or qualification, and (ii) in the case of a determination to delay registration or qualification, the Corporation shall be permitted to delay registering or qualifying any Shares for the same period as the delay in registering or qualifying such other securities. No registration effected under this Section 1 shall relieve the Corporation of its obligation to effect any registration or qualification upon demand otherwise granted to a Rightsholder under this Agreement or any other agreement with the Corporation. The Corporation shall keep effective and maintain any registration or qualification specified in this Paragraph 1(a) for a period of not less than the greater of: (i) three (3) months or (ii) the period within which such other securities shall remain subject to such registration or qualification. (b) If (i) a registration or qualification pursuant to this Section 1 involves an underwritten offering of the securities so being registered or qualified, whether or not for sale for the account of the Corporation, to be distributed on a firm commitment basis by or through one or more underwriters under 3 underwriting terms appropriate for such a transaction, and (ii) the managing underwriter of such offering shall advise the Corporation and the holders of the Shares who have made a Request to include their Shares in such registration, in a letter, that the number of securities requested to be included in such offering (whether by a Request or by means of a request of another party to whom the Corporation may have otherwise granted registration rights under the Act) exceeds the number which can be sold in such offering, then the Corporation may include in such offering all securities originally proposed by the Corporation to be sold, whether or not for its own account, and may decrease, pro rata, the number of Shares and other securities so proposed to be sold and so requested to be included in such offering (whether by a Request or by means of a request of another party to whom the Corporation may have otherwise granted registration rights under the Act) to the extent necessary to reduce the number of securities to be included in such offering to the level recommended by the managing underwriter. The holders of Shares to be distributed by such underwriters shall be parties to the underwriting agreement between the Corporation and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Corporation to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Shares and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Shares. Any such holder of Shares shall not be required to make any representations or warranties to or agreements with the Corporation or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Shares and such holder's intended method of distribution and any other representation(s) required by law. (c) Notwithstanding the provisions of this Section 1, a holder of Shares may participate and cause the registration or qualification of the holder's Shares (or portions thereof), pursuant to the provisions of this Section 1, only to the extent of two registrations or qualifications and only with respect to the holder's Shares as set forth in Schedule I to this Agreement. 2. Registration on Demand. (a) At any time during the period commencing on September 1, 1997 and terminating on August 31, 2002, and on a one time only basis, upon the written request (a "Demand Request") of the holder or holders of at least fifty (50%) percent of the Shares that the Corporation effect a registration under the Act of all or part of the Shares of such holder(s), specifying the intended method of disposition thereof and whether or not such requested registration is to relate to an underwritten offering, the Corporation will promptly give written notice (a "Demand Notice") of such Demand Request to all other holders of 4 outstanding Shares and, thereupon, the Corporation will, on one occasion, use its best efforts to effect the registration under the Act, within three (3) months of the date the Demand Notice is given, of: (i) the Shares which the Corporation shall have been so requested to register in the Demand Request, and (ii) all other Shares which the Corporation has been requested to register by the holders thereof by written request (the "Secondary Demand Request") given to the Corporation within 30 days after the giving of the Demand Notice (which Secondary Demand Request shall specify the intended method of disposition of such Shares and whether or not such disposition will be an underwritten offering), on an appropriate form and to the extent requisite to permit the disposition (in accordance with the intended methods thereof as set forth in Demand Request and all Secondary Demand Requests) of the Shares so to be registered. (b) Whenever the Corporation shall effect a registration pursuant to Paragraph 2(a) above in connection with an underwritten offering by one or more holders of Shares, no securities other than Shares shall be included among the securities covered by such registration, unless: (i) the managing underwriter of such offering shall have advised each holder of Shares to be subject to such registration that the inclusion of such other securities would not adversely affect such offering or (ii) the holders of all Shares subject to such registration shall have consented in writing to the inclusion of such other securities. (c) Registrations made pursuant to Paragraph 2(a) above shall be on an appropriate registration form selected by the Corporation and reasonably acceptable to the holders of at least fifty (50%) percent of the Shares so to be registered, and as shall permit the disposition of all of the Shares in accordance with the method(s) of disposition specified in the Demand Request and all Secondary Demand Requests. (d) The Corporation will pay all registration expenses in connection with any registration requested pursuant to Paragraph 2(a) above, provided, that the Corporation's obligation to pay all such registration expenses shall be limited to one registration to be made pursuant to Paragraph 2(a) above, whether or not the securities so registered are successfully sold pursuant to such registration. (e) If the requested demand registration pursuant to this Section 2 is to involve an underwritten offering, the underwriter or managing underwriter or selling agent shall be subject to the approval of the Corporation, which approval may not be unreasonably withheld. (f) If the requested demand registration pursuant to this Section 2 involves an underwritten offering, and the managing underwriter shall advise the Corporation in writing that, in its opinion, the number of Shares requested to be included 5 in such registration exceeds the number which can be sold in such offering within a price range acceptable to the holders of at least fifty (50%) percent of the Shares requested to be included in such registration, the Corporation will include in such registration, to the extent of the number which the Corporation is so advised can be sold in such offering, such Shares requested to be included in such registration pro rata among the holders thereof requesting such registration on the basis of the percentage of Shares held by the holders of Shares which have requested that such Shares be included. In connection with any registration as to which the provisions of this Paragraph 2(f) apply, no securities other than Shares shall be covered by such registration. 3. Registration Procedures. (a) If and whenever the Corporation is required to use its best efforts to effect the registration or qualification of any Shares under the Act as provided in this Agreement, the Corporation shall expeditiously as possible: (i) prepare and file with the Securities and Exchange Commission ("SEC") the requisite registration or qualification statement to effect such registration or qualification and thereafter use its best efforts to cause such registration or qualification statement to become effective; provided that, the obligation of the Corporation to effect such registration or qualification and/or cause such registration or qualification statement to become effective, may be postponed for (A) such period of time when the financial statements of the Corporation required to be included in such registration statement are not available (due solely to the fact that such financial statements have not been prepared in the regular course of business of the Corporation), or (B) any other bona fide corporate purpose, but then only for a period not to exceed 90 days; provided further that the Corporation may refuse to make a registration or qualification of Shares when and during the period that the subject Shares may be disposed of by reasons of the availability of an exemption from registration under the Act, or the rules and regulations promulgated thereunder, including, without limitation, Rule 144; and provided further, that the Corporation may discontinue or delay any registration or qualification of Shares being registered or qualified pursuant to Section 1 above at any time prior to the effective date of the registration or qualification statement relating thereto, but only in accordance with Paragraph 1(a) above; (ii) prepare and file with the SEC such amendments and supplements to such registration or qualification statement and the prospectus used in connection therewith as may be necessary to keep such registration or qualification statement effective and to comply with the provisions of the Act with respect to the disposition of all securities covered by 6 such registration or qualification statement, until the earlier of: (A) such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the Rightsholders whose Shares are subject to such registration or qualification statement as set forth in such statement, or (B) nine months from the original effective date of such registration or qualification statement; (iii) furnish to such Rightsholder whose Shares are subject to such registration such number of conformed copies of such registration or qualification statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration or qualification statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Act, in conformity with the requirements of the Act, and such other documents, as such Rightsholder may reasonably request; (iv) use its best efforts to register or qualify all Shares and other securities covered by such registration statement under such other securities or Blue Sky laws of the State of New York and such other jurisdictions as such Rightsholder shall reasonably request (but only if such Rightsholder shall advance to the Corporation funds necessary to enable the Corporation to pay all applicable fees and application costs as are required by such other jurisdictions), to maintain such registration or qualification in effect for so long as such registration or qualification statement remains in effect, and to take any other action which may be reasonably necessary or advisable to enable such Rightsholder to consummate the disposition of such Rightsholder's Shares in such jurisdictions, except that the Corporation shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not (but for the requirements of this Subparagraph 3(a)(iv) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause all Shares covered by such registration or qualification statement to be registered with or approved by such other governmental authorities, agencies or instrumentalities as may be necessary to enable such Rightsholder to consummate the disposition of such Rightsholder's Shares in accordance with applicable law; (vi) furnish to such Rightsholder a signed counterpart, addressed to the Rightsholder (and the underwriters, if any) of: (A) an opinion of counsel for the Corporation, dated the effective date of such registration or qualification statement (or, if such registration or qualification relates to an underwritten offering, dated the date of 7 the closing under the underwriting agreement), reasonably satisfactory in form and substance to such Rightsholder, and (B) a "comfort letter," dated the effective date of such registration statement (and, if such registration or qualification relates to an underwritten offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Corporation's financial statement included in such registration statement, such opinion and "comfort letter" to cover substantially the same matters with respect to such registration or qualification statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities and, in the case of the legal opinion, such other legal matters, and, in the case of the accountants' letter, such other financial matters, as such Rightsholder (or the underwriters, if any) may reasonably request; (vii) notify all Rightsholders at any time when a prospectus relating to the Rightsholder's Shares is required to be delivered under the Act, upon discovery that, or upon the occurrence of any event as a result of which, the prospectus included in such registration or qualification statement, as then in effect, included an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of such Rightsholder promptly prepare and furnish to such Rightsholder a reasonable number of copies of an amendment of or a supplement to such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (viii) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and furnish to such Rightsholder at least one business day prior to the filing thereof a copy of any amendment or supplement to such registration or qualification statement or prospectus and shall not file any thereof to which such Rightsholder shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Act or the rules or regulations thereunder; and 8 (ix) provide and cause to be maintained a transfer agent and registrar for all Shares covered by such registration statement from and after a date not later than the effective date of such registration or qualification statement. (b) The Corporation may require each holder of Shares as to which any registration or qualification is being effected to furnish to the Corporation such information regarding such holder and the distribution of such securities as the Corporation may from time to time reasonably request in writing. (c) Each Rightsholder hereby agrees and covenants that upon receipt of any notice from the Corporation of the occurrence of an event of the kind specified in Subparagraph 3(a)(viii) above, such Rightsholder will forthwith discontinue such Rightsholder's disposition of the Shares pursuant to the registration or qualification statement relating to such Shares until receipt of the copies of the supplemented or amended prospectus contemplated by such Subparagraph 3(a)(vii), and, if so directed by the Corporation, will deliver to the Corporation (at the Corporation's expense) all copies, other than permanent file copies, then in such Rightsholder's possession, of the prospectus relating to such notice. 4. Prospectus and Expenses. Whenever the Corporation is required by the provisions of Sections 1 or 2 above to use its best efforts to effect a registration or qualification of any Shares, all expenses incurred by the Corporation in connection therewith, including registration or filing fees, Blue Sky fees and expenses (except as provided in Subparagraph 3(a)(iv)), printing expenses and fees, compensation of regular employees and counsel and independent accountants for the Corporation and disbursements of counsel and of independent accountants of the Corporation, shall be borne by the Corporation. 5. Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration or qualification statement under the Act pursuant to this Agreement, the Corporation shall allow a Rightsholder, its or his underwriters, if any, and their respective counsel and accountants, at such Rightsholder's sole cost, the opportunity to participate in the preparation of such registration or qualification statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and shall give each of them such access to its books and records and such opportunities to discuss the business and affairs of the Corporation with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such Rightsholder's and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Act. 9 6. Indemnification. In the event that the Corporation shall be obligated to use its best efforts to effect any registration or qualification pursuant to this Agreement, the following shall apply: (a) Indemnification by the Corporation. The Corporation shall indemnify and hold harmless each Rightsholder, its directors and officers, if any, each other person who participates as an underwriter in the offering or sale of such Shares and each other person, if any, who controls such Rightsholder or any such underwriter within the meaning of the Act, against any losses, liabilities, obligations, claims or damages, joint or several, which such Rightsholder or any such director, officer, underwriter or controlling person may suffer or incur, or to which any of them may become subject, under the Act or otherwise, incidental to any suit, action, investigation or other proceeding, insofar as such losses, liabilities, obligations, claims or damages arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement under which Shares are registered under the Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Corporation shall pay such Rightsholder and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with defending any such loss, liability, obligation, claim or damage; provided that the Corporation shall not be liable in any such case to the extent that any such loss, liability, obligation, claim, damage or expense arises out of or is based upon an untrue statement or alleged untrue statement in, or omission or alleged omission from, such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement made in reliance upon and in conformity with written information furnished to the Corporation by such Rightsholder for use in the preparation of such registration or qualification statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; and provided further that the Corporation shall not be liable to any person who participates as an underwriter in the offering or sale of Shares or any other person, if any, who controls such underwriter within the meaning 10 of the Act, in any such case to the extent that any such loss, liability, obligation, claim, damage or expense arises out of or is based upon such person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Shares to such person if such statement or omission was corrected in such final prospectus. Such indemnification shall remain in full force and effect regardless of any investigation made by or on behalf of such Rightsholder or any such director, officer, underwriter or controlling person and shall survive the transfer of shares by such Rightsholder. (b) Indemnification by Shareholders. The Corporation may require, as a condition to including any Shares in any registration statement or qualification document filed pursuant to this Agreement, that it shall have received an undertaking satisfactory to it from each and every Rightsholder whose Shares are to be included in such registration statement or qualification document to indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 6) the Corporation, its directors and officers, and each other person, if any, who controls the Corporation within the meaning of the Act, with respect to any statement or alleged statement in, or omission or alleged omission from, such registration or qualification statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Corporation by such Rightsholder for use in the preparation of such registration or qualification statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnification shall remain in full force and effect, regardless of any investigation made by or on behalf of the Corporation or any such director, officer or controlling person and shall survive the transfer of Warrant Shares by such Rightsholder. (c) Procedures. Promptly after notice to an indemnified party of the commencement of any suit, action, investigation or other proceeding involving any loss, liability, obligation, claim or damages referred to in Paragraphs 6(a) or (b), such indemnified party shall, if a claim for indemnification in respect thereof is to be made against an indemnifying party, give written notice to the latter of the 11 commencement of such proceeding, setting forth in reasonable detail the nature of such suit, action, investigation or other proceeding and the basis upon which such party seeks indemnification hereunder; provided that the failure of any indemnified party to give such notice shall not relieve the indemnifying party of its obligations under such Paragraphs, except to the extent that the indemnifying party is actually prejudiced by the failure to give such notice. In case any such proceeding is brought against an indemnified party, and provided that proper notice is duly given, the indemnifying party shall assume the defense thereof insofar as such proceeding involves any loss, liability, obligation, claim or damages in respect of which indemnification may be sought hereunder, with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its assumption of the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof (but the indemnified party shall have the right, but not the obligation, to participate, at its own cost and expense, in such defense by counsel of its own choice) or for any amounts paid or foregone by the latter as a result of the settlement or compromise thereof (without the written consent of the indemnifying party), except that, if both the indemnifying party and the indemnified party are named as parties or subject to such proceeding and either such party determines with the advise of counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the other party or that a material conflict of interest between such parties may exist in respect of such proceeding, the indemnifying party may decline to assume the defense on behalf of the indemnified party or the indemnified party may retain the defense on its own behalf, and, in such case, after notice to such effect is duly given hereunder to the other party, the indemnifying party shall be relieved of its obligation to assume the defense on behalf of the indemnified party, but shall be required to pay any legal or other expenses, including, without limitation, reasonable attorneys' fees and disbursements incurred by the indemnified party in such defense; provided, however, that the indemnifying party shall not be liable for such expenses on account of more than one separate firm of attorneys (and, if necessary, local counsel) at any time representing such indemnified party or parties in connection with any proceeding or separate proceedings in the same jurisdiction arising out of or based upon substantially the same allegations or circumstances. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement or compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or proceeding. 12 Provided that proper notice is duly given, if the indemnifying party shall fail promptly and diligently to respond to, contest or defend against such suit, action, investigation or other proceeding, the indemnified party may assume the defense thereof and may make any compromise or settlement with respect thereto, and may recover the entire cost and expense thereof, including, without limitation, reasonable attorneys' fees, disbursements and all amounts paid or foregone as a result of such suit, action, investigation or other proceeding, or the settlement or compromise thereof, from the indemnifying party. (d) Other Indemnification. Indemnification similar to that specified in this Section 6 shall be given by the Corporation and the Rightsholders with respect to any registration or other qualification of securities required under any federal or state statute or rule or regulation of any governmental authority, agency or instrumentality, other than the Act. (e) Indemnification Payments. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills or invoices are received or loss, liability, obligation, damage or expense is actually suffered or incurred. 7. Transfer. This Agreement and the rights granted hereunder may not be transferred or assigned by either or both of the Rightsholders without the prior written consent of the Corporation. 8. Notices. Any notice or demand required or permitted to be given or made to or upon any party hereto pursuant to any of the provisions of this Agreement shall be deemed to have been duly given or made for all purposes if: (a) in writing and delivered by hand against receipt, or sent by certified or registered mail, postage prepaid, return receipt requested, or (b) sent by telegram, telex, facsimile or other electronic means and followed by a copy delivered or sent in the manner provided in (a) above, to such party at the following address: 13 To the Corporation: 14 Meteor Drive Etobicoke, Ontario M9W 1A4 Attn.: President Facsimile: (416) 675-8838 with a copy to: Mintz & Fraade, P.C. 488 Madison Avenue - 11 Floor New York, New York 10022 Facsimile: (212) 496-0701 To each of the Rightsholders: 49 Ennisclare Drive East Oakville, Ontario L6J 4N3 Attn.: President Facsimile: (905) 827-1154 with a copy to: Jackson L. Chercover, Q.C. 111 Avenue Road - Suite 805 Toronto, Ontario M5R 3J8 Facsimile: (416) 925-6811 or such other address as any such party may at any time, or from time to time, direct by notice given to the other parties in accordance with this Section 8. The date of giving or making of any such notice or demand shall be, if sent in accordance with (a) above, the earlier of the date of actual receipt or five business days after such notice or demand is sent, or, if sent in accordance with (b) above, the business day next following the day such notice or demand is actually transmitted. 9. Amendments. Except as otherwise provided herein, no amendment or termination of this Agreement shall be valid or effective, unless in writing and signed by or on behalf of the parties hereto. 10. Waiver. No course of dealing or omission or delay on the part of any party hereto in asserting or exercising any right hereunder shall constitute or operate as a waiver of any such right. No waiver of any provision hereof shall be effective, unless in writing and signed by or on behalf of the party to be charged therewith. No waiver shall be deemed a continuing waiver or waiver in respect of any other or subsequent breach or default, unless expressly so stated in writing. 14 11. Applicable Law. This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within that State. 12. Jurisdiction. Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the State of New York and of any federal court located therein in connection with any suit, action or other proceeding arising out of or relating to this Agreement or the transactions contemplated thereby. 13. Remedies. The parties hereto acknowledge and agree that, in the event of an actual or prospective breach or default by any party hereto, the other party may not have an adequate remedy at law. Accordingly, in the event of any such actual or prospective breach or default by any party, the other parties shall be entitled to such equitable relief, including remedies in the nature of injunction and specific performance, as may be available to restrain any person from causing or participating in any such actual or prospective breach or default. All remedies hereunder are cumulative and not exclusive, and nothing herein shall be deemed to prohibit or limit any party from pursuing any other remedy or relief available at law or in equity for such actual or prospective breach or default, including the recovery of damages. 14. Binding Effect. This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of, and be binding upon, the parties hereto and their respective legal representatives, successors and (subject to the provisions of Section 7 hereof) assigns. 15. Severability. In the event that any provision of this Agreement shall be deemed invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions shall not be affected, but shall, subject to the discretion of such court, remain in full force and effect, and any invalid or unenforceable provision shall be deemed, without further action on the part of the parties hereto, amended and limited to the extent necessary to render the same valid and enforceable. 15 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and which together shall constitute one and the same instrument. 17. Further Assurances. Each party hereto covenants and agrees promptly to execute, deliver, file and/or record such agreements, instruments, certificates and other documents and to do and perform such other and further acts and things as any other party hereto may reasonably request or as may otherwise be necessary or proper to consummate and perfect the transactions contemplated hereby. 18. Captions. The headings or captions of the Sections and Paragraphs of this Agreement are for convenience and reference only and do not in any way define or interpret the intent of the parties or modify or otherwise affect any of the provisions hereof. 19. Entire Agreement. This Agreement embodies the entire agreement of the parties hereto with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. NTN CANADA, INC. By: /s/ Peter Rona ------------------------ Peter Rona, President ATTEST: /s/ David Auger - - ------------------------ David Auger, Secretary 16 CONNOLLY-DAW HOLDINGS INC. By: /s/ Wendy Connolly ---------------------------- Wendy Connolly, President ATTEST: /s/ Douglas Connolly - - --------------------------- Douglas Connolly, Secretary 1199846 ONTARIO LTD. By: /s/ Douglas Connolly ---------------------------- Douglas Connolly, President ATTEST: /s/ Wendy Connolly - - ----------------------- Wendy Connolly, Secretary- Treasurer Schedule I to Registration Rights Agreement Rightsholder Number of Shares Subject to this Agreement Connolly-Daw Holdings Inc. 110,469 1199846 Ontario Ltd. 85,918 ------- TOTAL: 196,387 ======= EX-10 8 EXHIBIT 10.7 Exhibit 10.7 SHARE PURCHASE AGREEMENT ------------------------ THIS AGREEMENT made the 1st day of October, 1996, B E T W E E N: TELESAT CANADA, a corporation --------------- incorporated pursuant to the laws of Canada, (hereinafter referred to as the "Vendor"), OF THE FIRST PART; -and- NTN INTERACTIVE NETWORK INC., a ----------------------------- corporation amalgamated pursuant to the laws of Canada, (hereinafter referred to as the "Purchaser"), OF THE SECOND PART. WHEREAS the Vendor beneficially owns and controls all of the issued and outstanding Class A special shares in the capital of Magic Lantern Communications Ltd., a corporation amalgamated pursuant to the laws of Canada (hereinafter referred to as the "Company"); AND WHEREAS the Vendor desires to sell and the Purchaser desires to purchase the said issued and outstanding shares in the capital of the Company owned by the Vendor, all upon and subject to the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the premises and the mutual agreements and covenants herein contained (the adequacy of which consideration as to each of the parties hereto is hereby mutually admitted), the parties hereto hereby covenant and agree as follows: 2 ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION 1.1 Definitions. Whenever used in this Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and terms shall have the respective meanings ascribed to them as follows: (a) "Agreement" means this Share Purchase Agreement and all instruments supplemental hereto or in amendment or confirmation hereof; (b) "Business Day" means a day other than a Saturday, Sunday or any day on which the principal commercial banks located at Toronto, Ontario are not open for business during normal banking hours; (c) "Closing" means the completion of the sale to and purchase by the Purchaser of the Purchased Shares hereunder by the transfer and delivery of documents of title thereto and the payment of the purchase price therefor as contemplated herein; (d) "Closing Date" means the 1st day of October, 1996, or such other date as the Parties may agree as the date upon which the Closing shall take place; (e) "Closing Time" means 10:00 o'clock a.m. Toronto time, on the Closing Date or such other time on such date as the Parties may agree as the time at which the Closing shall take place; (f) "Parties" means the Vendor and the Purchaser, collectively, and "Party" means any one of them; (g) "Person" means any individual, corporation, partnership, trustee or trust or unincorporated association, and pronouns have a similarly extended meaning; (h) "Purchaser's Counsel" means Messrs. Walker, Head, Barristers and Solicitors, of Pickering, Ontario; (i) "Purchase Price" means the purchase price to be paid by the Purchaser to the Vendor for the Purchased Shares as provided in Article 2 hereof; 3 (j) "Purchased Shares" means the 1,000 issued and outstanding Class A special shares in the capital of the Company; and (k) "Vendor's Counsel" means Jennifer E. Perkins, Secretary and General Counsel of the Vendor. Terms defined in the preamble to this Agreement shall have the same meanings herein as are ascribed thereto in the preamble. 1.2 Gender and Number - Words importing the singular include the plural and vice versa; words importing gender include all genders. 1.3 Entire Agreement - This Agreement, including the Schedules hereto, together with the agreements and other documents to be delivered pursuant hereto, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supercede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties and there are no warranties, representations or other agreements between the Parties in connection with the subject matter hereof except as specifically set forth herein and therein. 1.4 Waivers, etc. - No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Agreement, in whole or in part, shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 1.5 Other Words and Phrases - In this Agreement, unless otherwise expressly provided, (i) the words "hereof", "herein", "hereto" and "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection, paragraph or other subdivision, and (ii) all references to designated "Articles", "Sections", "Subsections", "paragraphs" or other subdivisions are to the designated Articles, Sections, Subsections, paragraphs and other subdivisions of this Agreement. 1.6 Headings - The Article and Section headings contained herein are included solely for convenience of reference, are not intended to be full or accurate descriptions of the content thereof and shall not be considered part of this Agreement. 1.7 Applicable Law - This Agreement and the rights, obligations and relations of the Parties shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and the courts of Ontario shall have exclusive jurisdiction to entertain any action in connection with this Agreement. 4 1.8 Currency - Unless otherwise specified, all references to currency herein are deemed to mean lawful money of Canada, and all amounts to be paid or calculated pursuant to this Agreement are to be paid or calculated in lawful money of Canada. 1.9 Schedules - the following are the schedules attached to and incorporated in this Agreement by reference and deemed to be an integral part hereof: Schedule "A" -- Release Schedule "B" -- Mutual Release ARTICLE 2 PURCHASE AND SALE 2.1 Purchase Price - At the Closing Time, the Vendor shall sell and the Purchaser shall purchase the Purchased Shares for an aggregate purchase price of $250,000.00 2.2 Action by Vendor and Purchaser at the Closing Time - (a) Delivery of Certificates, etc. - The Vendor shall transfer and deliver to the Purchaser at the Closing share certificates representing the Purchased Shares duly endorsed in blank for transfer. The Vendor shall take such steps as shall be necessary to cause the Company to enter the Purchaser or its nominee upon the books of the Company as the holder of the Purchased Shares and to issue share certificates to the Purchaser or its nominee representing the Purchased Shares; (b) Payment to the Vendor - The Purchase Price specified in Section 2.1 shall be paid and satisfied by the delivery by the Purchaser to the Vendor at the Closing of a certified cheque or bank draft payable to or to the order of the Vendor in the amount of $250,000.00. 2.3 Place of Closing - The Closing shall take place at the Closing Time at the offices of the Purchaser's Counsel or at such other place as may be agreed upon by the Vendor and the Purchaser. 2.4 Tender - Any tender of documents or money hereunder may be made upon the Parties or their respective counsel, and money may be tendered by official bank draft drawn upon a Canadian chartered bank or by negotiable cheque payable in Canadian funds and certified by a Canadian chartered bank or trust company. 5 ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Vendor - The Vendor hereby represents and warrants to the Purchaser as follows and acknowledges that the Purchaser is relying on such representations and warranties in connection with the transactions contemplated by this Agreement: (a) Organization and Valid Existence - The Vendor is a corporation duly incorporated and organized and is validly existing under the laws of Canada and the Vendor has all necessary corporate power, authority and capacity to own and dispose of the Purchased Shares. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder have been duly authorized by all necessary corporate action on the part of the Vendor. (b) Enforceability of Obligations - This Agreement constitutes a valid and binding obligation of the Vendor enforceable against it in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. (c) Right to sell - The Vendor: (i) is the sole beneficial owner of the Purchased Shares, which shares constitute all the issued and outstanding Class A special shares in the capital of the Company; (ii) has the exclusive right to dispose of the Purchased Shares as herein provided and such disposition will not violate, contravene, breach or offend against or result in any default under any indenture, mortgage, lease, agreement, instrument, charter or by-law provision, statute, regulation, order, judgment, decree or law to which the Vendor is a party or subject or by which the Vendor is bound or affected; and (iii) is the holder of record of all the Purchased Shares, free and clear of any liens, charges, encumbrances or rights of others (other than the rights of the Purchaser hereunder) and no Person (other than the Purchaser hereunder) has any agreement, option or any rights capable of becoming an agreement or option for the acquisition of the Purchased Shares; 6 (d) Residence of the Vendor - The Vendor is not a non-resident of Canada for the purposes of the Income Tax Act (Canada); (e) Third Party Approvals - There are no approvals, consents or waivers required to be obtained or applications required to be filed from or with governmental authorities in Canada or from any other Person whatsoever, including pursuant to any contracts containing prohibitions to the within transactions, in order to permit the transactions contemplated herein; (f) Full Disclosure - None of the foregoing representations, warranties and statements of fact contains any untrue statement of material fact or omits to state any material fact necessary to make any such statement or representation not misleading to a prospective purchaser of the Purchased Shares. 3.2 Representations and Warranties of the Purchaser - The Purchaser hereby represents and warrants to the Vendor as follows and acknowledges that the Vendor is relying on such representations and warranties in connection with the transactions contemplated by this Agreement. (a) Organization and Valid Existence - The Purchaser is a corporation duly amalgamated and organized and is validly existing under the laws of Canada and has all necessary corporate power, authority and capacity to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder have been duly authorized by all necessary corporate action on the part of the Purchaser; (b) Enforceability of Obligations - This Agreement constitutes a valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy or similar proceedings and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought; (c) Residence of the Purchaser - The Purchaser is not a non-Canadian within the meaning of the Investment Canada Act. 3.3 No Broker - Each of the Parties represents and warrants to the others that all negotiations relating to this Agreement and the transactions contemplated hereby have been carried on between them directly and without the intervention of any other party in such manner as to give rise to any valid claims against any of the Parties for a brokerage commission, finder's fee or other like payment. 7 3.4 Non-Waiver - No investigations made by or on behalf of the Purchaser at any time shall have the effect of waiving, diminishing the scope of or otherwise affecting any representation or warranty made by the Vendor herein or pursuant hereto. 3.5 Nature and Survival of Representations, Warranties and Covenants - All statements contained in any certificate or other instrument delivered by or on behalf of a Party pursuant to or in connection with the transactions contemplated by this Agreement shall be deemed to be made by such Party hereunder. All representations, warranties, covenants and agreements herein contained on the part of each of the Parties shall survive the Closing, the execution and delivery hereunder of share or security transfer instruments and other documents of title to the Purchased Shares and the payment of the consideration therefor, provided that the representations and warranties contained in Section 3.1, Section 3.2 and Section 3.3 shall only survive for a period of three (3) years from the Closing Time (such time hereinafter called the "Warranty Expiry Time"). If no claim has been made against a Party hereto with respect to any incorrectness or misrepresentation in any such representation or warranty prior to the Warranty Expiry Time, such Party shall have no further liability hereunder with respect to such representation and warranty. ARTICLE 4 CONDITIONS PRECEDENT TO THE PERFORMANCE BY THE PURCHASER AND THE VENDOR OF THEIR OBLIGATIONS UNDER THIS AGREEMENT 4.1 Purchaser's Conditions - The obligation of the Purchaser to complete the purchase of the Purchased Shares hereunder shall be subject to the satisfaction of, or compliance with, in all materials respects, at or before the Closing Time, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of the Purchaser and may be waived by it in whole or in part): (a) Truth and Accuracy of Representations of Vendor at the Closing Time - All of the representations and warranties of the Vendor made in or pursuant to this Agreement, including, without limitation, the representations and warranties made by the Vendor and set forth in Sections 3.1 and 3.3 hereof, shall be true and correct as at the Closing Time, and the Purchaser shall have received a certificate from a duly authorized senior officer of 8 the Vendor confirming the truth and correctness of the representations and warranties of the Vendor contained herein; (b) Performance of Obligations - The Vendor shall have performed or complied with, in all respects, all of its obligations, covenants and agreements hereunder; (c) Receipt of Closing Documentation - All documentation relating to the due authorization and completion of the sale and purchase hereunder of the Purchased Shares and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Vendor of its obligations under this Agreement shall be satisfactory to the Purchaser and Purchaser's Counsel and the Purchaser shall have received copies of all such documentation or other evidence as it may reasonably request in order to establish the consummation of the transactions contemplated hereby and the taking of all corporate proceedings in connection therewith in compliance with these conditions, in form (as to certification and otherwise) and substance satisfactory to the Purchaser and Purchaser's Counsel; (d) Release - The Vendor shall have executed and delivered to the Purchaser a release in the form of the unexecuted release annexed hereto as Schedule "A"; (e) Mutual Release - The Vendor shall have executed and delivered to the Purchaser a mutual release in regard to an agreement between the Vendor, the Company and Canadian Satellite Learning Services Inc. dated October 13, 1995, in the form of the unexecuted mutual release annexed hereto as Schedule "B". 4.2 Vendor's Conditions - The obligations of the Vendor to complete the sale of the Purchased Shares hereunder shall be subject to the satisfaction of or compliance with, at or before the Closing Time, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of the Vendor and may be waived by it in whole or in part): (a) Truth and Accuracy of Representations of Purchaser at Closing Time - All of the representations and warranties of the Purchaser made in or pursuant to this Agreement, including, without limitation, the representations and warranties made by the Purchaser and set forth in Sections 3.2 and 3.3 hereof, shall be true and correct as at the Closing Time and with the same effect 9 as if made at and as of the Closing Time and the Vendor shall have received a certificate from a duly authorized senior officer of the Purchaser confirming the truth and correctness of the representations and warranties of the Purchaser contained herein; (b) Performance of Obligations - The Purchaser shall have performed or complied with, in all respects, all of its obligations, covenants and agreements hereunder; (c) Receipt of Closing Documentation - All documentation relating to the due authorization and completion of the sale and purchase hereunder of the Purchased Shares and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Purchaser of its obligations under this Agreement shall be satisfactory to the Vendor and Vendor's Counsel and the Vendor shall have received copies of all such documentation or other evidence as it may reasonably request in order to establish the consummation of the transactions contemplated hereby and the taking of all corporate proceedings in connection therewith in compliance with these conditions, in form (as to certification and otherwise) and substance satisfactory to the Vendor and Vendor's Counsel; (d) The Purchaser shall have arranged for the execution and delivery to the Vendor of a mutual release in regard to an agreement between the Vendor, the Company and Canadian Satellite Learning Services Inc. dated October 13, 1995, in the form of the unexecuted mutual release annexed hereto as Schedule "B". ARTICLE 5 INDEMNIFICATION 5.1 Mutual Indemnifications for Breaches of Warranty, etc. - The Vendor hereby covenants and agrees with the Purchaser, and the Purchaser hereby covenants and agrees with the Vendor (the Party so covenanting and agreeing to indemnify another Party being hereinafter in this Section 5.1 referred to as the "Indemnifying Party" and the party so to be indemnified being hereinafter referred to as the "Indemnified Party") to indemnify and save harmless the Indemnified Party, effective as and from the Closing Time, from and against any claims, demands, actions, causes of action, damage, loss, costs, liability or expense (hereinafter in this Article 5 called "Claims") which may be brought against the Indemnified Party and/or which it may suffer or incur as a result of, in respect of, or arising out of any material non-fulfillment of any 10 covenant or agreement on the part of the Indemnifying Party under this Agreement or any incorrectness in or breach of any representation or warranty of the Indemnifying Party contained herein or in any certificate or other document furnished by the Indemnifying Party pursuant hereto. The foregoing obligation of indemnification in respect of such Claims shall be subject to the limitation mentioned in Section 3.5 hereof respecting the survival of the representations and warranties of the Parties. ARTICLE 6 GENERAL 6.1 Public Notices - Except for disclosures required by law, all public notices to third parties and all other publicity concerning the transactions contemplated by this Agreement shall be jointly planned and co-ordinated by the Vendor and the Purchaser and no Party shall act unilaterally in this regard without the prior approval of the other of them, such approval not to be unreasonably withheld. 6.2 Expenses - All costs and expenses (including without limitation, the fees and disbursements of legal counsel) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such expenses. 6.3 Time - Time shall be of the essence hereof. 6.4 Notices - Any notice, direction or other document required or permitted to be given hereunder or for the purposes hereof (hereinafter in this Section 6.4 called a "notice") to any Party shall be in writing and shall be sufficiently given if delivered personally, or if sent by prepaid registered mail or if transmitted by facsimile to such Party: (a) in the case of a notice to Vendor at: 1601 Telesat Court Gloucester, Ontario K1B 5P4 Facsimile No.: 613-748-8712 Attention: Jennifer E. Perkins Secretary and General Counsel (b) in the case of a notice to the Purchaser at: 11 14 Meteor Drive Etobicoke, Ontario M9W 1A4 Facsimile No.: 416-675-8838 Attention: President with a copy to Purchaser's Counsel at Walker, Head Barristers & Solicitors Suite 200, 1305 Pickering Parkway Pickering, Ontario L1V 3P2 Facsimile No. 905-420-1073 Attention: Mr. Victor A. Sgro or at such other address as the Party to whom such writing is to be given shall have last notified the Party giving the same in the manner provided in this section. any notice delivered to the Party to whom it is addressed as hereinbefore provided shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day then the notice shall be deemed to have been given and received on the first Business Day next following such day. Any notice mailed as aforesaid shall be deemed to have been given and received on the third Business Day following the date of its mailing. Any notice transmitted by facsimile shall be deemed given and received on the first Business Day after its transmission. Failure to transmit timely or adequate notice to Vendor's Counsel or to Purchaser's Counsel, as the case may be, shall not invalidate, nullify or otherwise detrimentally affect the provision of same to a Party. 6.5 Assignment - Neither this Agreement nor any rights or obligations hereunder shall be assignable by any Party without the prior written consent of the other Party hereto. Subject thereto, this Agreement shall enure to the benefit of and be binding upon the Parties and other respective successors (including any successor by reason of amalgamation of the Purchaser or the Vendor) and permitted assigns. 6.6 Further Assurances - The Parties hereto shall with reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby, and each Party shall provide such further documents or instruments required by any other Party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions, whether before or after the Closing. 12 6.7 Severability - If any covenant or provision of this Agreement is prohibited in whole or in part in any jurisdiction, such covenant or provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining covenants and provisions hereof and shall, as to such jurisdiction, be deemed to be severed from this Agreement to the extent of such prohibition. 6.8 Counterparts - This Agreement may be executed by the Parties in separate counterparts each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement. TELESAT CANADA Per: /s/ L. J. Boisvert ----------------------------------------- L. J. Boisvert, President & C.E.O. Per: /s/ J. E. Perkins ----------------------------------------- J. E. Perkins, Secretary NTN INTERACTIVE NETWORK INC. Per: /s/ Peter Rona ----------------------------------------- President - Peter Rona SCHEDULE "A" RELEASE TO: Magic Lantern Communications Ltd. (herein called the "Release") KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of Canada now paid by the Releasee to the undersigned (herein called the "Releasor"), the receipt and sufficiency of which is hereby acknowledged, the Releasor hereby remises, releases and forever discharges the Releasee, of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands whatsoever which against the Releasee, the Releasor, as a shareholder of the Releasee, ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of any cause, matter or thing whatsoever existing up to the present time relating to, or arising directly or indirectly by reason of or as a consequence of, the Releasor; having been a shareholder of the Releasee. AND in consideration of the foregoing, the Releasor covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the Releasee, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors and assigns of the Releasee and shall be binding upon and enforceable against the successors of the Releasor. IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: ______________________________ Per: ______________________________ SCHEDULE "B" MUTUAL RELEASE The undersigned hereby acknowledge and agree that the agreement between the undersigned and Canadian Satellite Learning Services Inc. dated October 13, 1995 (the "Agreement") is hereby terminated and cancelled and of no further force and effect, and the undersigned further hereby remise, release and forever discharge each other of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands which against each other, each of them ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of the Agreement. AND in consideration of the foregoing, each of the undersigned covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the other of them, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors of the undersigned and shall be binding upon and enforceable against the successors of the undersigned. IN WITNESS WHEREOF the undersigned has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: ______________________________ Per: ______________________________ MAGIC LANTERN COMMUNICATIONS LTD. Per: ______________________________ Per: ______________________________ RELEASE TO: Magic Lantern Communications Ltd. (herein called the "Releasee") KNOW ALL MEN BY THESE PRESENTS that, in consideration of other good and valuable consideration and the sum of ONE DOLLAR ($1.00) of lawful money of Canada now paid by the Releasee to the undersigned (herein called the "Releasor"), the receipt and sufficiency of which is hereby acknowledged, the Releasor hereby remises, releases and forever discharges the Releasee, of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands whatsoever which against the Releasee, the Releasor, as a shareholder of the Releasee, ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of any cause, matter or thing whatsoever existing up to the present time relating to, or arising directly or indirectly by reason of or as a consequence of, the Releasor having been a shareholder of the Releasee. AND in consideration of the foregoing, the Releasor covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the Releasee, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors and assigns of the Releasee and shall be binding upon and enforceable against the successors of the Releasor. IN WITNESS WHEREOF the Releasor has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: /s/ L. J. Boisvert ----------------------------------- L. J. Boisvert, President & C.E.O. Per: /s/ J. E. Perkins, ----------------------------------- J. E. Perkins, Secretary MUTUAL RELEASE The undersigned hereby acknowledge and agree that the agreement between the undersigned and Canadian Satellite Learning Services Inc. dated October 13, 1995 (the "Agreement") is hereby terminated and cancelled and of no further force and effect, and the undersigned further hereby remise, release and forever discharge each other of and from all manner of actions, causes of action, suits, debts, dues, duties, accounts, bonds, covenants, contracts, claims and demands which against each other, each of them ever had, now has or hereafter can, shall or may have for or by reason of or in any way arising out of the Agreement. AND in consideration of the foregoing, each of the undersigned covenants and agrees not to make any claims or take any proceedings against any corporation, firm or person which could claim contribution and/or indemnity against the other of them, pursuant to the provisions of any statute or otherwise with respect to any of the aforesaid matters. AND the provisions hereof shall enure to the benefit of and be enforceable by the successors of the undersigned and shall be binding upon and enforceable against the successors of the undersigned. IN WITNESS WHEREOF the undersigned has duly executed this Release the 1st day of October, 1996. TELESAT CANADA Per: /s/ L. J. Boisvert ----------------------------------- L. J. Boisvert, President & C.E.O. Per: /s/ J. E. Perkins, ----------------------------------- J. E. Perkins, Secretary MAGIC LANTERN COMMUNICATIONS LTD. Per: /s/ Douglas Connolly ----------------------------------- President, Douglas Connolly Per: /s/ Jackson L. Chercover ----------------------------------- Secretary, Jackson L. Chercover -----END PRIVACY-ENHANCED MESSAGE-----