SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 14a-12
NTN COMMUNICATIONS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials: ______________________
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NTN BUZZTIME, INC.
5966 La Place Court
Carlsbad, California 92008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 2006
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of NTN Buzztime, Inc. (the "Company") will be held at the
Grand Pacific Palisades Resort & Hotel located at 5805 Armada Drive, Carlsbad,
California 92008, at 8:30 a.m. local time, on June 14, 2006, for the following
purposes, as more fully described in the attached Proxy Statement:
1. To elect seven (7) directors to hold office until the 2007
annual meeting of stockholders and until their respective
successors are duly elected and qualified;
2. To ratify the appointment of Haskell & White LLP as the
Company's independent registered public accounting firm for
the fiscal year ending December 31, 2006; and
3. To consider and act upon such other matters as may properly
come before the Annual Meeting and any adjournments thereof.
The Board of Directors fixed the close of business on May 5, 2006 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting or at any adjournment thereof.
You are cordially invited to attend the Annual Meeting in person.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE PROMPTLY COMPLETE, DATE, SIGN,
AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. In addition to
voting by mail, you may vote by telephone or via the internet. You do not need
to return your proxy by mail if you have voted either by telephone or via the
internet.
VOTE VIA THE INTERNET - WWW.PROXYVOTE.COM
You may vote via the internet at www.proxyvote.com. Use the internet to
transmit your voting instructions and for electronic delivery of information up
until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy
card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
VOTE VIA TELEPHONE - 1.800.690.6903
You may vote via telephone by dialing 1.800.690.6903. Use any
touch-tone telephone to transmit your voting instructions up until 11:59 p.m.
Eastern Time the day before the meeting date. Have your proxy card in hand when
you call and then follow the instructions.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by the Company in
mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the
internet. To enroll in electronic delivery, please follow the instructions above
to vote via the internet and, when prompted, indicate that you agree to receive
or access stockholder communications electronically in future years.
The prompt return of your proxy will help to save expenses incurred in
further communication. Your proxy can be revoked as described in the Proxy
Statement and will not affect your right to vote in person should you decide to
attend the Annual Meeting.
Sincerely,
Andy Wrobel
Chief Financial Officer
and Secretary
Carlsbad, California
May 17, 2006
1
NTN BUZZTIME, INC.
5966 La Place Court
Carlsbad, California 92008
PROXY STATEMENT
Annual Meeting to be held June 14, 2006
SOLICITATION AND VOTING
GENERAL
The enclosed proxy is being solicited on behalf of the Board of
Directors of NTN Buzztime, Inc. ("NTN" or the "Company") for use at the annual
meeting of stockholders to be held at the Grand Pacific Palisades Resort &
Hotel, 5805 Armada Drive, Carlsbad, California 92008, at 8:30 a.m. local time,
on June 14, 2006, and at any adjournment or postponement thereof (the "Annual
Meeting"), for purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. We are first mailing this Proxy Statement,
together with the accompanying proxy solicitation materials, to stockholders,
and posting it on our corporate website at www.ntnbuzztime.com, on or about May
17, 2006.
VOTING SECURITIES; RECORD DATE
We have one class of voting stock outstanding, designated common stock,
$.005 par value ("Common Stock"). Each share of our Common Stock is entitled to
one vote for each director to be elected and for each other matter to be voted
on at the Annual Meeting. Only holders of record of Common Stock at the close of
business on May 5, 2006 are entitled to notice of and to vote at the Annual
Meeting. There were 54,154,594 shares of Common Stock outstanding as of the
record date. The presence, in person or by proxy, at the Annual Meeting, of
stockholders entitled to cast at least a majority of the votes entitled to be
cast by all stockholders will constitute a quorum for the transaction of
business at the Annual Meeting. For purposes of determining a quorum, shares
held by brokers or nominees will be treated as present even if the broker or
nominee does not have discretionary power to vote on a particular matter or if
instructions were never received from the beneficial owner. These shares are
called "broker non-votes." Abstentions will be counted as present for quorum
purposes and for the purpose of determining the outcome of any matter submitted
to the stockholders for a vote. However, abstentions do not constitute a vote
"for" or "against" any matter and will be disregarded in the calculation of the
plurality. The inspector of election appointed for the Annual Meeting will
tabulate all votes including separate tabulation of the affirmative and negative
votes and abstentions.
The proxy holders will vote all shares of Common Stock represented by a
properly completed proxy received in time for the Annual Meeting as directed in
the proxy. If no direction is given in the proxy, it will be voted "FOR"
Proposal 1, the election as directors of each of the nominees named in this
Proxy Statement, and "FOR" Proposal 2, ratification of the appointment of
Haskell & White LLP as our registered public accounting firm for the fiscal year
ending December 31, 2006. Broker non-votes will not affect the outcome of either
proposal. With respect to any other item of business that may properly come
before the Annual Meeting, the proxy holders will vote the proxy in accordance
with their best judgment.
REVOCABILITY OF PROXIES
You may revoke a proxy at any time before it has been exercised by
giving written notice of revocation to our Secretary, by executing and
delivering to the Secretary a proxy dated as of a later date than the
accompanying proxy, or by attending the Annual Meeting and voting in person. If,
however, your shares of record are held by a broker, bank or other nominee and
you wish to vote in person at the Annual Meeting, YOU MUST OBTAIN FROM THAT
RECORD HOLDER A PROXY ISSUED IN YOUR NAME. Attendance at the Annual Meeting, by
itself, will not serve to revoke a proxy.
SOLICITATION
We will bear the cost of soliciting proxies. This Proxy Statement and
the accompanying proxy solicitation materials, in addition to being mailed
directly to stockholders, will be distributed through brokers, custodians and
other nominees to beneficial owners of shares of Common Stock. We may reimburse
such parties for their reasonable expenses in forwarding solicitation materials
to beneficial owners. Our directors, officers or regular employees may follow up
the mailing to stockholders by telephone, electronic mail or personal
solicitations, but no special or additional compensation will be paid to those
directors, officers or employees for doing so.
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING
Stockholder proposals intended to be included in our proxy materials
for the 2007 annual meeting of stockholders must be received by January 10,
2007. Such proposals should be addressed to our Secretary.
2
With respect to any stockholder proposals to be presented at the 2007
annual meeting which are not included in the 2007 proxy materials, such proposal
shall be considered untimely, unless the proponent notifies us of such proposal
by not later than March 26, 2007. Pursuant to Rule 14a-4(c)(1) of the Securities
Exchange Act, the Company will have discretionary authority to vote upon such
untimely proposals. Any proposal must comply with the federal securities laws.
SELECTION OF DIRECTOR NOMINEES
The Nominating and Governance Committee will consider candidates for
Board membership suggested by other Board members, as well as by management and
stockholders. As a stockholder, you may recommend any qualified person for
consideration as a nominee for director by writing to the Nominating and
Governance Committee of the Board of Directors, c/o NTN Buzztime, Inc., 5966 La
Place Court, Carlsbad, California 92008. Recommendations must be received by
January 10, 2007 to be considered for the 2007 annual meeting of stockholders,
and must comply with the requirements in our bylaws. Recommendations must
include the name and address of the stockholder making the recommendation, a
representation that the stockholder is a holder of record of Common Stock,
biographical information about the individual recommended, the individual's
signed consent to serve as a director if elected and to be named in the
Company's proxy statement as a nominee and any other information the stockholder
believes would be helpful to the Nominating and Governance Committee in
evaluating the individual recommended. The procedures for considering candidates
recommended by a stockholder for Board membership will be no different than the
procedures for candidates recommended by members of the Board or by management.
CORPORATE GOVERNANCE
We are committed to integrity, reliability and transparency in our
disclosures to the public. We have established corporate governance practices to
ensure that our business is operated in the best interests of our stockholders
and in full compliance with our legal obligations including the corporate
governance listing standards of the American Stock Exchange and regulations of
the Securities and Exchange Commission (the "SEC").
Our Corporate Governance Guidelines, Committee Charters, the Code of
Values, the Code of Ethics for Senior Financial Officers and other corporate
governance materials and related information are posted in the Corporate
Governance section of our website at www.ntnbuzztime.com. You may request copies
of these documents, without charge, by writing to us at: NTN Buzztime, Inc.,
5966 La Place Court, Carlsbad, California 92008, Attention: Investor Relations.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Our bylaws provide that the Board of Directors is to consist of not
less than five or more than thirteen directors, with the exact number of
directors within such range to be specified by the Board. The Board of Directors
currently consists of seven members. Our articles provide for the annual
election of directors. Vacancies on the Board of Directors (including vacancies
created by an increase in the authorized number of directors) may be filled by
the Board of Directors. A director appointed by the Board of Directors to fill a
vacancy would serve for the remainder of the one-year term and until his or her
successor is elected and qualified.
The Board of Directors has selected the following nominees for election
as directors at the Annual Meeting. Each such nominee is currently serving as a
director of the Company. If elected, the following nominees will hold office
until the annual meeting of stockholders in 2007 and until their respective
successors are duly elected and qualified.
NAME AGE DIRECTOR SINCE
--------------------- --- --------------
Gary Arlen........... 61 1999
Kendra Berger........ 39 2005
Barry Bergsman....... 69 1998
Robert Clasen........ 61 2001
Michael Fleming...... 52 2001
Neal Fondren......... 47 2003
Stanley B. Kinsey.... 52 1997
3
GARY H. ARLEN has been president of Arlen Communications, Inc., a
research and consulting firm specializing in interactive information,
transactions, telecommunications and entertainment, since 1980. Arlen
Communications provides research and analytical services to domestic and
international organizations in entertainment, media, telecommunications and
internet industries. Mr. Arlen was a founder and board member of several
interactive media trade associations. He is a member of the Academy of Digital
TV Pioneers and the Cable TV Pioneers.
KENDRA BERGER is currently the Executive Director of Finance and
Controller of Stressgen Biotechnologies, Inc. and formerly was the Vice
President, Finance and Controller of Discovery Partners International, Inc. Both
Stressgen Biotechnologies, Inc. and Discovery Partners International, Inc. are
publicly traded companies. Prior to joining Discovery Partners International,
Inc. in 2001, Ms. Berger was the Chief Financial Officer of the Company. She is
a licensed CPA.
BARRY BERGSMAN was appointed lead director in August, 2004. He is
president of Baron Enterprises, Inc., a privately owned consulting company
established in 1965. As president of Intertel Communications, Inc., from 1985 to
1998, Mr. Bergsman pioneered the use of the telephone and interactive technology
for promotion, entertainment and information. Prior to 1985, Mr. Bergsman was
engaged in television production and syndication and was an executive with CBS.
He currently serves as a director and member of the management team of
Photogenesis, Inc., a private medical device and biotechnology company.
ROBERT B. CLASEN is President and CEO for Starz Entertainment Media
Group, the largest provider of premium movie services in the United States
providing thirteen channels of movies to multi-channel television homes. He was
appointed to this position in December 2004, having previously served as
President of Sales and Marketing since September 2003 and President and COO
since May 2004. For most of the past ten years, Mr. Clasen has been President
and CEO of Clasen Associates, an advisor to a broad range of technology and
service companies who operate in the broadband, wireless and satellite sectors.
Prior to 1997, Mr. Clasen held positions as President of each of Comcast
International Holdings, the international division of Comcast Cable
Communications, and Comcast Cable Communications, one of the country's five
largest cable television companies.
MICHAEL FLEMING has also served as Chairman of the Board of our
Buzztime Entertainment, Inc. subsidiary since 2002. Mr. Fleming is currently
Chairman and Chief Executive Officer of the Fleming Media Group, advising a
broad range of content and technology companies on interactive television,
broadband, wireless and other convergent technology opportunities. He is the
founder and recent past-President of the Game Show Network, a satellite
delivered television programming service dedicated to the world of games and
game play. Mr. Fleming has held senior executive positions at Playboy
Entertainment Group, ESPN, Turner Broadcasting and Warner Amex Satellite
Entertainment Company. He was inducted into the Cable TV Pioneers in 1999.
NEAL FONDREN was appointed director upon consummation of the investment
in NTN by Media General. Mr. Fondren has served as Vice President of Media
General and President of Media General's Interactive Media Division since
January 2001. Prior to joining Media General, Mr. Fondren was a 20-year veteran
of E.W. Scripps Co., where he was vice president of new media from 1997 to 2000.
Before that, he held a succession of executive-level positions in Scripps' cable
television division from 1982 to 1997.
STANLEY B. KINSEY has served as Chairman and Chief Executive Officer of
NTN since October 1998 and has been a member of its board since November 1997.
From 1976 to 1978, Mr. Kinsey was an analyst in the consulting division of
Arthur Anderson & Co. (now Accenture). From 1980 to 1985, he was a senior
executive with The Walt Disney Company. In 1985, Mr. Kinsey left his position as
senior vice president of operations and finance for The Walt Disney Studios to
co-found IWERKS Entertainment, a high-technology entertainment company. Mr.
Kinsey was chairman and chief executive officer at IWERKS from its inception
until 1995. Mr. Kinsey holds a bachelors degree from DePauw University and an
MBA from Stanford University.
MEETINGS AND COMMITTEES
Our business affairs are managed by and under the direction of the
Board of Directors. During the fiscal year ended December 31, 2005, the Board of
Directors met on ten occasions. During 2005, each director attended at least 75%
of the meetings of the Board of Directors and of each committee of the Board of
Directors on which he or she served. The schedule for regular meetings of the
Board for each year is submitted and approved by the Board in advance. We have
adopted a policy with regard to board members' attendance at annual meetings.
All members of the board attended last year's annual meeting.
Each committee of the Board of Directors meets as frequently and for
such length of time as may be required to carry out its assigned duties and
responsibilities. In addition, the chairman of a committee may call a special
meeting at any time if deemed advisable. We have three standing committees: the
Audit, Compensation and Nominating and Governance Committees. The committees'
respective duties are outlined in their charters. The Board reviews the
committees' duties from time to time and may form new committees, revise a
committee's structure, or disband committees, depending on the circumstances.
4
INDEPENDENT LEAD DIRECTOR AND EXECUTIVE SESSIONS OF THE BOARD
In August 2004, the Board of Directors appointed Mr. Bergsman to serve
as lead director to act as a liaison between the non-management directors and
the Company's management; to organize the Board's evaluation of our chairman and
chief executive officer, providing continuous ongoing feedback; to consult with
the chairman and chief executive officer on agendas for Board meetings; and
other matters pertinent to the Company and the Board. Our independent
non-management directors meet at regularly scheduled intervals without the
presence of the Company's management and chief executive officer. Mr. Bergsman
presides over each of these executive sessions. Our Board members have complete
access to management and to information regarding the Company's operations. In
addition, our Board supports our chief executive officer's practice of inviting
managers into Board meetings to provide additional insight regarding issues in
their respective areas of expertise.
SELECTION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The chairman of our Board is elected by our Board of Directors. Our
Board is free to choose its chairman in any way it deems best for the Company
and our stockholders. Our chief executive officer is also designated by our
Board of Directors. The chief executive officer has general authority over the
Company's business and affairs, subject to oversight by the Board of Directors,
and ensures the Board's directives are carried out. Our chief executive officer,
Stanley B. Kinsey, also serves as Chairman of the Board.
COMMITTEE COMPOSITION
AUDIT COMMITTEE COMPENSATION COMMITTEE NOMINATING & GOVERNANCE COMMITTEE
--------------- ---------------------- ---------------------------------
Gary Arlen Barry Bergsman Barry Bergsman
Kendra Berger*+ Gary Arlen* Michael Fleming*
Neal Fondren
*Chairperson
+Financial Expert
AUDIT COMMITTEE
We have a separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended. The role of the Audit Committee of the Board of Directors is to assist
the Board in its oversight of our financial reporting process. The primary
functions of the Audit Committee are to periodically review our accounting and
financial reporting and internal control policies and procedures, to recommend
to the Board of Directors the firm of certified public accountants to be
retained as our independent auditors, to review our policies and procedures
relating to business conduct and conflicts of interest and to review
management's specific disclosures contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of our periodic and
annual financial reports to the SEC, and also to review our annual audited and
quarterly financial statements. The Audit Committee is currently comprised of
three non-employee directors: Ms. Berger, Mr. Fondren and Mr. Arlen. Ms. Berger,
Mr. Fondren and Mr. Arlen are each independent under the listing standards of
the American Stock Exchange and the Securities Exchange Act. The Audit Committee
met on ten occasions in 2005.
AUDIT COMMITTEE FINANCIAL EXPERT
We have determined that Kendra Berger is an "audit committee financial
expert" within the meaning of the final rules implementing Section 406 and 407
of the Sarbanes-Oxley Act and independent as defined in Item 7(d)(3)(iv) of
Schedule 14A of the Securities Exchange Act.
COMPENSATION COMMITTEE
The primary functions of the Compensation Committee, which consists
solely of independent, non-employee directors, are to review and advise the
Board of Directors on salaries, bonuses and awards of stock options to our
employees and other compensation matters. The Board has delegated authority to
the Compensation Committee to approve compensation for executive officers, as
well as incentive compensation and equity-based plans. The Compensation
Committee consists of two non-employee directors: Mr. Arlen and Mr. Bergsman.
The Compensation Committee met on nine occasions in 2005.
5
NOMINATING AND GOVERNANCE COMMITTEE
The primary functions of the Nominating and Governance Committee, which
consists solely of non-employee independent directors, are to identify
individuals qualified to become members of the Board; to select, or to recommend
that the Board select, the director nominees for the next annual meeting of
stockholders; and to develop and implement policies and procedures that are
intended to ensure that the Board will be appropriately constituted and
organized to meet its fiduciary obligations to the Company and our stockholders.
The Nominating and Governance Committee operates in accordance with an adopted
charter as posted on the Corporate Governance section of our website at
www.ntnbuzztime.com. The Nominating and Governance Committee consists of two
non-employee directors: Mr. Fleming and Mr. Bergsman each of whom satisfies the
independence standards of the American Stock Exchange and the Securities
Exchange Act. The Nominating and Governance Committee met on one occasion in
2005.
Our Nominating and Governance Committee acts in considering new
candidates for Board membership suggested by Board members, management and
stockholders. All director nominees shall have been approved by a majority of
the independent directors. The Nominating and Governance Committee has
established qualifications for directors, including the ability to apply fair
and independent judgment in a business situation and the ability to represent
the interests of all our stockholders and constituencies. A director also must
be free of any conflicts of interest that would interfere with his or her
loyalty to the Company or our stockholders. In evaluating Board candidates, the
Nominating and Governance Committee considers these qualifications as well as
several other factors. Our Nominating and Governance Committee believes
candidates meeting these criteria can contribute diverse, useful perspectives:
o demonstrated maturity and experience;
o expertise in business areas directly relevant to NTN and its
subsidiaries; and
o background in broadcasting, media or interactive television.
The Nominating and Governance Committee will consider director
recommendations by stockholders that are made in writing, addressed to the
Nominating and Governance Committee, and include the name and address of the
stockholder making the recommendation, a representation that the stockholder is
a holder of record of Common Stock, biographical information about the
individual recommended, the individual's signed consent to serve as a director
if elected and to be named in the Company's proxy statement as a nominee and any
other information the stockholder believes would be helpful to the Nominating
and Governance Committee in evaluating the individual recommended. The
procedures for considering candidates recommended by a stockholder for Board
membership will be no different than the procedures for candidates recommended
by members of the Board or by management.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal
executive officer, principal financial officer and controller that was filed on
March 31, 2003 as an exhibit to our annual report for the year ended December
31, 2002. The text of our code of ethics can be found on the Internet at
http://www.ntn.com. We will voluntarily provide electronic or paper copies of
our code of ethics free of charge. You may request copies by sending a written
request to 5966 La Place Court, Carlsbad, California 92008.
DIRECTOR COMPENSATION
Effective July 1, 2005, directors are entitled to receive an annual
cash retainer in the amount of $22,000 for their services as directors. In
addition, directors are entitled to participation fees for meeting attendance.
In accordance with the director compensation program, each director shall be
entitled to $1,200 per meeting for personal attendance, $400 per meeting for
attendance via telephone and no fee shall be payable for meetings not attended.
Prior to July 2005, directors received $28,800 cash compensation annually with
no per meeting attendance fees.
Directors receive additional compensation for committee service. Those
directors who serve on the Audit Committee receive an additional $3,000 annually
for such service, with the Audit Committee chairperson and financial expert
earning $13,000 for such service. Those directors serving on our Nominating and
Governance Committee each receive an additional $1,000 annually for their
service; the Nominating and Governance Committee chairperson receives $3,000
annually. Those directors who serve on the Compensation Committee are each
entitled to receive an additional $2,000 annually for such service, with the
Compensation Committee chairperson earning $3,000 for such service. Our
independent lead director receives an additional $10,000 per year for his
service. In 2005, Mr. Bergsman, our independent lead director, received a
one-time additional compensation payment of $10,000 in consideration for
out-of-scope efforts and time commitment.
6
Directors are also eligible for the grant of options to purchase common
stock for services in their capacity as directors. Upon the date of commencement
of a new director's term of service, we grant to each director options to
purchase 20,000 shares of our common stock. These options are priced at the
closing market price of the common stock on the date of grant. As of the date of
grant, 10,000 options are fully vested and exercisable; thereafter, the
remaining 10,000 options vest and become exercisable in equal installments each
month immediately subsequent to the date of grant and up to the date of the next
annual meeting of shareholders. Further, a director who is re-elected for an
additional term of service will be granted options to purchase 20,000 shares of
common stock, priced at the closing market price of the common stock on the date
of our annual meeting of shareholders, subject to monthly vesting and continued
service. Finally, all options granted to directors as compensation for service
on the Board of Directors shall expire on the earlier of ten years from the date
of grant or two years from the date the director ceases to serve on the Board of
Directors. The options provide for immediate vesting in full upon the occurrence
of a change of control event.
The director compensation program is subject to Board review and
renewal annually on or around the date of our annual meeting of shareholders.
REQUIRED VOTE
Nominees receiving the highest number of affirmative votes cast at the
Annual Meeting, up to the number of directors to be elected, will be elected as
directors. Proxies may not be voted for a greater number of persons than the
number of nominees named herein.
The nominees have each indicated a willingness to serve as directors.
If any of them should decline or be unable to act as a director, however, the
proxy holders will vote for the election of another person as the Board of
Directors recommends.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE NOMINEES NAMED. PROXIES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES
NAMED IF NO DIRECTION IS GIVEN IN THE PROXIES.
PROPOSAL 2
RATIFICATION OF APPOINTMENT
OF HASKELL & WHITE LLP AS
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Our independent registered public accounting firm for the fiscal year
ended December 31, 2005 was Haskell & White LLP. The Audit Committee of our
Board of Directors has reappointed Haskell & White LLP to continue as our
independent registered public accounting firm for the year ending December 31,
2006. Our bylaws do not require that our stockholders ratify the selection of
Haskell & White LLP as our independent registered public accounting firm.
However, we are submitting the selection of Haskell & White LLP to our
stockholders for ratification as a matter of good corporate practice. If the
stockholders do not ratify the selection, the Audit Committee will reconsider
whether or not to retain Haskell & White LLP. Even if the selection is ratified,
the Audit Committee in their discretion may change the appointment at any time
during the year if we determine that such a change would be in the best
interests of NTN and our stockholders.
Representatives of Haskell & White LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
REQUIRED VOTE
A majority of the shares present at the meeting, either in person or by
proxy, must be voted in favor of Proposal 2 to ratify the appointment of Haskell
& White LLP as our independent registered public accounting firm.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF HASKELL & WHITE LLP TO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM. PROXIES WILL BE VOTED "FOR" THE RATIFICATION OF THE APPOINTMENT
OF HASKELL & WHITE LLP IF NO DIRECTION IS GIVEN IN THE PROXIES.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding our executive
officers:
NAME AGE (1) POSITION(S) HELD
--------------------- ------- -------------------------------------------------
Stanley B. Kinsey.... 52 Chief Executive Officer and Chairman of the Board
V. Tyrone Lam........ 44 President, Buzztime Entertainment, Inc.
Andy Wrobel.......... 54 Chief Financial Officer
----------
(1) As of May 5, 2006.
See "Election of Directors" for Mr. Kinsey's biography. The following
biographical information is furnished with respect to our other executive
officers:
V. TYRONE LAM was appointed President and Chief Operating Officer of
Buzztime Entertainment, Inc. in December 1999, upon incorporation of the
subsidiary. Prior to his current appointment, Mr. Lam served as executive vice
president of NTN, responsible for sales, marketing and operations of the NTN
Network. Before joining NTN in 1994, he managed the development of iTV game and
sports applications for EON Corporation, formerly known as TV Answer, a pioneer
in the interactive television industry, from April 1992 until December 1994.
Additionally, Mr. Lam has served in sales and marketing management positions
within the PC software industry, is past chairman of the Interactive Services
Association's Interactive Television Council and is an author of articles on
interactive television and sales and marketing strategies.
ANDY WROBEL was appointed Chief Financial Officer and Secretary of NTN
in June 2005. Mr. Wrobel has held senior executive positions over the past 20
years. He was CEO/CFO of Intecam, Inc., a video streaming software company, from
June 2002 to 2004 and CEO of technology company Microelectronic
Packaging/Meltronix from 1997 to 2001. Mr. Wrobel founded Gigatek Memory
Systems, Inc. in 1989 and sold it to a Samsung affiliate in the mid 1990's.
Previously, he held managerial positions with Texas Instruments, BASF and
Carlisle MPG. He holds a graduate degree from MIT with courses from MIT Sloan
School of Management.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows the compensation paid or
accrued as of each of the last three fiscal years to all individuals who served
as our Chief Executive Officer during 2005, the two other most highly
compensated executive officers who were serving as executive officers at the end
of 2005 and the two most highly compensated executive officers for whom
disclosure hereunder would have been required but for the fact that the
individuals were not serving as executive officers at the end of 2005, whose
salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers"):
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
SECURITIES UNDERLYING
----------------------------
DEFERRED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1)($) BONUS($) OPTIONS(#) STOCK UNITS(#) COMPENSATION
--------------------------- ---- ------------ ----------- ---------- ------------- ------------
Stanley B. Kinsey(2)............. 2005 $ 389,000 $ 15,000(3) 250,000 -- --
Chief Executive Officer 2004 367,000 50,000 300,000 50,000 --
and Chairman of the Board 2003 340,000 15,000 400,000 -- --
V. Tyrone Lam.................... 2005 $ 283,000 $ 15,000(3) 50,000 -- --
President and Chief Operating Officer 2004 271,000 50,000 100,000 20,000 --
Buzztime Entertainment, Inc. 2003 250,000 15,000 100,000 -- --
Andy Wrobel(4)................... 2005 $ 130,000 $ 20,000(5) 440,000 -- --
Chief Financial Officer 2004 -- -- -- -- --
2003 -- -- -- -- --
Mark deGorter(6)................. 2005 $ 249,000 $ 15,000(3) 50,000 -- $ 60,000(7)
President and Chief Operating Officer, 2004 271,000 15,000 40,000 20,000 --
NTN Hospitality Technologies 2003 250,000 50,000 100,000 -- --
James B. Frakes(8)............... 2005 $ 119,000 $ 15,000(3) 40,000 -- $109,000(7)
Chief Financial Officer 2004 206,000 50,000 40,000 20,000 --
2003 189,000 15,000 -- -- --
_______________
(1) Includes amounts, if any, deferred under NTN's 401(k) Plan.
(2) Mr. Kinsey waived compensation for serving as a director of NTN. Mr.
Kinsey received perquisites and personal benefits that did not exceed
the lesser of $50,000 or 10% of his annual salary and bonus.
(3) Represents cash bonus paid out in accordance with the performance-based
bonus program as established by the Compensation Committee of the Board
of Directors. Includes amounts deferred under NTN's 401(k) Plan.
(4) Mr. Wrobel was appointed Chief Financial Officer in June 2005.
(5) Represents a one time cash bonus paid out per the Compensation
Committee of the Board of Directors.
(6) Mr. deGorter served as President and Chief Operating Officer of the
Company's Hospitality Technologies Division until October, 2005.
(7) Amounts paid for severance.
(8) Mr. Frakes served as Chief Financial Officer until June 2005.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning individual grants of
stock options made during 2005 to each of the Named Executive Officers:
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PRICE DATE VALUE(1)
---------------------- ------- ------------ ---------- ----------- ----------
Stanley B. Kinsey..... 250,000(2) 16.0% $1.88 06/26/15 $1.21
V. Tyrone Lam......... 50,000(3) 3.3 1.88 06/26/15 1.21
Andy Wrobel........... 440,000(4) 29.0 1.85 06/19/15 1.20
Mark deGorter......... 50,000(5) 3.3 1.88 10/02/07 1.21
James B. Frakes....... 40,000(5) 2.6 2.03 06/17/06 0.49
_____________
*less than 1%
8
(1) The present value of grant on the grant date was estimated using the Black
Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0%, risk-free interest rate of 3.73%,
expected volatility of 75.67%, and expected option life of 4.8 years.
(2) Represents options granted under the NTN Communications, Inc. 2004
Performance Incentive Plan, which become fully vested and exercisable as of
July 31, 2006. The options were granted to Mr. Kinsey in consideration of
Mr. Kinsey's agreement to extend the term of his employment agreement
through February 28, 2006. The options were priced at $1.88 per share in
accordance with the terms of Mr. Kinsey's employment agreement dated June
28, 2005. Such options vest in twelve (12) equal monthly installments.
(3) Represents options granted under the NTN Communications, Inc. 2004
Performance Incentive Plan. Such options vest and become exercisable as to
1/12 of the total shares on the last day of each of the twelve (12)
calendar months immediately following the grant date.
(4) Represents options granted under the NTN Communications, Inc. 2004
Performance Incentive Plan. Such options vest and become exercisable as to
25% of the total shares on the first anniversary of the date of grant and
will become exercisable as to an additional 1/36 of the remaining shares on
the last day of each of the thirty-six (36) calendar months immediately
following the first anniversary of the grant date.
(5) Options vested in full upon termination of employment.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table contains information concerning aggregated option
exercises and fiscal year-end value of stock options which were unexercised at
the end of 2005 with respect to each of the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ----------- ----------- ------------- ------------- ------------- -------------
Stanley B. Kinsey.... -- -- 3,225,000 125,000 $1,655,500 --
V. Tyrone Lam........ -- -- 754,584 95,416 376,530 12,895
Andy Wrobel.......... -- -- -- 440,000 -- --
Mark deGorter........ -- -- 610,000 -- 414,800 --
James B. Frakes...... 139,700 173,000 285,300 -- 147,823 --
______________
(1) Represents the amount by which the aggregate market price on December 31,
2005 of the shares of our common stock subject to such options exceeded the
respective exercise prices of such options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 5, 2006, the number and
percentage ownership of common stock by (i) all persons known to us to own
beneficially more than 5% of the outstanding shares of common stock based on
reports filed by each such person with the Securities and Exchange Commission;
(ii) each of our directors; (iii) each of the Named Executive Officers; and (iv)
all of the Named Executive Officers and directors as a group. Beneficial
ownership includes any shares which a person has the right to acquire within 60
days of March 1, 2006. Except as otherwise indicated and subject to applicable
community property and similar laws, each of the persons named has sole voting
and investment power with respect to the shares of common stock shown. Except as
otherwise indicated, the address for each person is c/o NTN Buzztime, Inc., 5966
La Place Court, Carlsbad, California 92008.
NUMBER OF SHARES PERCENT OF
BENEFICIALLY COMMON
NAME OWNED STOCK(1)
--------------------------------------------- ---------------- ------------
Gary Arlen(2)................................ 197,110 *
Kendra Berger(3)............................. 18,333 *
Barry Bergsman(4)............................ 307,667 1%
Robert B. Clasen(5).......................... 116,667 *
Michael Fleming(6)........................... 96,667 *
Neal Fondren(7).............................. 1,320 *
Stanley B. Kinsey(8)......................... 3,408,666 6%
Andy Wrobel.................................. --- *
V. Tyrone Lam(9)............................. 782,917 1%
Media General, Inc.(10)...................... 3,287,810 6%
Fidelity National Financial, Inc.(11)........ 6,644,611 12%
----------- ----
All executive officers and directors of
NTN as a Group (9 persons)(12).............. 4,929,347 9%
----------- ----
____________
* less than 1%
9
(1) Included as outstanding for purposes of this calculation are 53,951,302
shares of common stock (the amount outstanding as of March 1, 2006) plus,
in the case of each particular holder, the shares of common stock subject
to currently exercisable options, warrants, or other instruments
exercisable for or convertible into shares of common stock (including such
instruments exercisable within 60 days after March 1, 2006) held by that
person, which instruments are specified by footnote. Shares issuable as
part or upon exercise of outstanding options, warrants, or other
instruments other than as described in the preceding sentence are not
deemed to be outstanding for purposes of this calculation.
(2) Includes 196,667 shares subject to currently exercisable options held by
Mr. Arlen.
(3) Includes 18,333 shares subject to currently exercisable options held by Ms.
Berger.
(4) Includes 196,667 shares subject to currently exercisable options held by
Mr. Bergsman.
(5) Includes 96,667 shares subject to currently exercisable options held by Mr.
Clasen. Includes 20,000 owned by the Clasen Family Trust, of which Mr.
Clasen is co-trustee with members of his immediate family. As co-trustee,
Mr. Clasen shares voting and investment power with respect to the shares.
(6) Includes 96,667 shares subject to currently exercisable options held by Mr.
Fleming.
(7) Includes 500 shares owned by Mr. Fondren as custodian for his son. Excludes
shares subject to options issued to Media General for Mr. Fondren's service
as director.
(8) Includes 3,308,333 shares subject to currently exercisable options and
50,000 deferred stock units held by Mr. Kinsey.
(9) Represents shares subject to currently exercisable options and deferred
stock units held by Mr. Lam.
(10) Includes 564,000 shares acquired January 20, 2004 in a registered public
offering; 2,000,000 shares acquired pursuant to the Purchase Agreement
dated May 5, 2003; 666,667 shares acquired pursuant to the Licensing
Agreement dated May 7, 2003; and 56,667 shares subject to currently
exercisable options issued for Mr. Fondren's service as director. The
address of the principal business office of Media General, Inc. is 333 E.
Franklin Street, Richmond, Virginia 23219.
(11) As disclosed in Form 3 Statement of Beneficial Ownership filed with the
Securities and Exchange Commission by Fidelity National Financial, Inc.
(FNF) on November 21, 2005, includes 1,222,030 shares owned by Security
Union Title Insurance Company (Security Union); 1,170,679 shares owned by
Alamo Title Insurance Company (Alamo); 1,222,702 shares owned by Chicago
Title Insurance Company (CTIC); 1,237,000 shares owned by Ticor Title
Insurance Company (TTIC); 613,400 shares owned by Fidelity National
Financial, Inc.; and 1,178,800 shares owned by Fidelity National Title
Insurance Company (FNT). Fidelity Title Insurance Company of New York
merged into Fidelity National Title Insurance Company in July 2004. Alamo
Title Insurance Company is a wholly-owned subsidiary of Alamo Title Holding
Company. Security Union Title Insurance Company, Chicago Title Insurance
Company, Alamo Title Holding Company, Ticor Title Insurance Company and
Fidelity National Title Insurance Company are wholly-owned subsidiaries of
Chicago Title and Trust Company, which is in turn a wholly-owned subsidiary
of Fidelity National Title Group, Inc., which is in turn a majority-owned
subsidiary of Fidelity National Financial, Inc. The address of the
principal business office of FNF is 601 Riverside Avenue, Jacksonville,
Florida 32204. The address of the principal business office of each of
Security Union and TTIC is 4050 Calle Real, Santa Barbara, California
93110. The address of the principal business office of CTIC is 171 N. Clark
Street, Chicago, Illinois 60601. The address of the principal business
office of FNT is 17911 Von Karman, Suite 300, Irvine, California 92614. The
address of the principal business office of Alamo is 10010 San Pedro, Suite
700, San Antonio, Texas 78216.
(12) Includes 4,752,918 shares subject to currently exercisable options and
deferred stock units held by executive officers and directors, including
those described in notes (2) through (12) above.
10
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth as of December 31, 2005 our compensation
plans authorizing us to issue equity securities and the number of
securities issuable thereunder.
(c)
(a) (b) NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
BE ISSUED UPON EXERCISE EXERCISE PRICE OF UNDER EQUITY COMPENSATION PLANS,
PLAN CATEGORY OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EXCLUDING SECURITIES REFLECTED
WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (a)
------------------- ------------------- -------------
EQUITY COMPENSATION
PLANS APPROVED BY
SECURITY HOLDERS 11,058,000(1) $1.49 807,000(2)
EQUITY COMPENSATION
PLANS NOT APPROVED BY
SECURITY HOLDERS 1,344,000(4) $2.16 --
-------------- -----------
TOTAL 12,402,000(3) 807,000
============== ===========
____________
(1) Includes 10,558,000 shares issuable upon exercise of options and rights
granted pursuant to the NTN Buzztime, Inc. 2004 Performance Incentive Plan
and 500,000 shares issuable upon exercise of options granted pursuant to
the NTN Communications, Inc. 1996 Special Stock Option Plan.
(2) Remaining available for grant under the NTN Buzztime, Inc. 2004 Performance
Incentive Plan. No additional securities are authorized and available for
grant under the NTN Communications, Inc. 1996 Special Stock Option Plan.
(3) Does not include 300,000 shares of Buzztime Entertainment, Inc. common
stock available for grant under the Buzztime Entertainment, Inc. 2001
Incentive Stock Option Plan. To date, no options have been granted under
the plan.
(4) The 1,344,000 shares issuable that are not pursuant to equity compensation
plans approved by security holders are all pursuant to warrants granted in
connection with consulting agreements with non-employees or were warrants
associated with equity financings. Warrants to purchase 237,000 shares were
granted in 2004, 500,000 shares were granted in 2003 and 607,000 shares
were granted in 2002 or earlier. As of December 31, 2005, the range of
exercise prices and the weighted-average remaining contractual life of
outstanding warrants were $1.00 to $3.91 and 2 years, respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors administers our
executive compensation program and establishes the salaries of our executive
officers. The Compensation Committee consists of only independent, non-employee
Directors, who are appointed by the Board.
The Compensation Committee's executive compensation policy is intended
to enhance shareholder value, including annual compensation consisting of salary
and bonus awards, and long-term compensation consisting of stock options and
other equity-based compensation. Therefore, the Compensation Committee designs
compensation plans and incentives to link the financial interests of our
executive officers to the interests of our stockholders, to encourage support of
our long-term goals, to tie executive compensation to the Company's performance
and to attract and retain talented leadership.
In making decisions affecting executive compensation, the Compensation
Committee reviews the nature and scope of the executive officer's
responsibilities as well as his or her effectiveness in supporting the Company's
long term goals. Salary is fixed at a competitive level to attract and retain
qualified candidates. Bonuses are tied specifically to the performance of NTN
and/or individual contributions. Stock options are awarded in amounts the
Compensation Committee believes necessary to provide incentives for future
performance, taking into account individual performance and length of service
with NTN. The Compensation Committee also considers the compensation practices
of comparable corporations in the San Diego area. Based upon these and other
factors which it considers relevant, the Compensation Committee has considered
it appropriate, and in the best interest of the stockholders, to set overall
executive compensation on par with the average of companies in the comparison
group to enable us to attract, retain and motivate the highest level of
executive personnel. Our policies apply equally to all of our executive
officers.
11
A summary of our executive compensation policy is described below:
Short-term cash compensation to executives for 2005 consisted primarily
of salaries, subject to any written employment agreement between us and any
executive, and performance bonuses intended to link officers' compensation to
the Company's performance the prior year. In 2004, our executive incentive bonus
program provided for the payment of cash bonuses based on the Company's
performance in relation to predetermined objectives compared with earnings and
EBITDA targets. Prior to the beginning of the fiscal year, the Compensation
Committee established objectives related to these measures. Based on the
Company's performance during 2004 against these objectives, each of Messrs.
Kinsey, Frakes and Lam and Mark deGorter, who served as President and Chief
Operating Officer of the Company's Hospitality Technologies Division until
October 2005, was paid, in 2005, a cash bonus in the amount of $15,000. In
addition in 2005, Mr. Wrobel was paid a performance bonus of $20,000.
We have established a 401(k) plan. We may, at the Board of Director's
discretion, make annual contributions to the 401(k) plan on behalf of our
employees, including the executive officers, subject to applicable limitations,
but, to date, we have never made any such contributions.
Long-term compensation to executives for 2005 consisted of equity
compensation, in the form of stock options and deferred stock units, granted in
accordance with our equity performance incentive compensation plans.
Stockholders approved our 2004 Performance Incentive Plan in September 2004. The
Compensation Committee believes that employees should be rewarded with a
proprietary interest in the Company for continued long-term performance and to
attract, motivate and retain qualified and capable executives. The grant of
stock options and deferred stock units increases the executives' potential
equity ownership in NTN with the goal of ensuring that the interests of senior
management remain closely aligned with those of our stockholders. Accordingly
during 2005, the Board of Directors granted 250,000 options to Mr. Kinsey,
440,000 to Mr. Wrobel, 50,000 options to each of Messrs. deGorter and Lam, and
40,000 options to Mr. Frakes.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Kinsey's compensation is consistent with the objectives and
criteria described above and with the Compensation Committee's evaluation of his
overall leadership and management of NTN. NTN made significant progress in 2005.
NTN experienced significant increases earnings and in cash flows from operations
during the third and fourth quarters of 2005. Our North America NTN iTV Network
2005 site count grew by 359 sites, the highest single-year increase in eight
years, and the year-end count exceeded 4,000 sites for the first time in our
history. We launched our iTV hospitality network in the United Kingdom as the
"Buzztime Network" to pubs and restaurants. Additionally, we continued our
distribution of games to emerging interactive game platforms, adding a retail
product and broadening its presence on cable television, satellite television
and mobile phones. We also achieved flagship installations for some of our
software products in 2005, including flagship installations of our ProHost Table
Management System at flagship Hard Rock Cafe restaurants in New York's Times
Square and in Orlando, Florida. Mr. Kinsey has continued to provide strategic
direction to NTN and build the organization. Mr. Kinsey's salary for fiscal 2005
was $389,000. His bonus and grants of stock options and deferred stock units are
outlined above.
INTERNAL REVENUE CODE SECTION 162(m)
Compensation to our executive officers is subject to a $1,000,000
compensation deduction cap pursuant to Section 162(m) of the Internal Revenue
Code, as amended. In 2004, no executive officer received aggregate compensation
of $1,000,000 or more. However, the Board is aware that the grant of stock
options and deferred stock units to the executive officers may subject us to the
deduction cap in subsequent years. With respect to incentive stock options, the
Board of Directors does not anticipate NTN taking a deduction in the absence of
a disqualifying disposition by an executive officer. With respect to
nonqualified options and deferred stock units, the Board of Directors is aware
that any deduction that we may have at the time of exercise or election will be
subject to the $1,000,000 cap. The Board of Directors does not anticipate that
the compensation deduction cap will significantly affect our executive
compensation policies.
THE FOREGOING REPORT ON EXECUTIVE COMPENSATION IS PROVIDED BY THE
COMPENSATION COMMITTEE: GARY ARLEN AND BARRY BERGSMAN. NOTWITHSTANDING ANYTHING
TO THE CONTRARY SET FORTH IN ANY OF OUR FILINGS AND OTHER DOCUMENTS THAT MIGHT
INCORPORATE BY REFERENCE THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE
FOREGOING REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS OR DOCUMENTS.
12
CHANGE IN CONTROL AGREEMENTS
We have negotiated change of control employment agreements with certain
of our executive officers. The agreements shall provide that, if the executive
is terminated other than for cause within one year after a change of control of
the Company, then the executive may be entitled to receive a lump sum severance
payment of as much as one year's base salary.
We have entered into a change of control employment agreement with
Stanley B. Kinsey, our Chief Executive Officer and Chairman of the Board. In the
event Mr. Kinsey is terminated upon a change of control of NTN, in addition to
one year's base salary, he shall receive a pro rata portion of his bonus and
continuation of employment benefits for one year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All compensation determinations for 2005 for our executive officers
were made by the Board of Directors as a whole upon the recommendation of the
Compensation Committee or by the Compensation Committee under authority granted
to them by the Board. During 2005, Mr. Arlen and Mr. Bergsman served on the
Compensation Committee. None of our directors or executive officers has served
on the board of directors or the compensation committee of any other company or
entity, any of whose officers served either on our Board of Directors or on our
Compensation Committee.
On January 30, 2004, Media General, Inc. purchased $2 million of our
Common Stock as part of a group of institutional investors that invested $14
million into our Company. Media General invested on the same terms as the other
investors. In connection with the investment by Media General, Inc., we agreed
to increase the size of our Board of Directors and appoint Neal F. Fondren, Vice
President of Media General and President of Media General's Interactive Media
Division to fill the board seat. Media General's ability to maintain that seat
on our Board of Directors is subject to Media General retaining ownership of
certain percentages of the shares they purchased. Media General also received
preemptive rights to purchase on a pro rata basis any new securities that NTN or
Buzztime may subsequently offer. The preemptive rights also are dependent upon
Media General maintaining ownership of certain percentages of the shares they
purchased.
PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total returns for
NTN, the American Stock Exchange Index, the Russell 2000 Index and an index
consisting of companies sharing the Standard Industrial Classification Code
("SIC Code") 7389 - Business Services. We have added the Russell 2000 Index
to provide and additional comparative reference.
[PERFORMANCE GRAPH APPEARS HERE]
Cumulative Total Return
Cumulative Total Return
----------- ---------- ----------- ----------- ----------- -----------
12/00 12/01 12/02 12/03 12/04 12/05
NTN BUZZTIME INC 100.00 144.00 192.00 592.00 510.40 238.40
AMEX MARKET VALUE (U.S. & FOREIGN) 100.00 95.39 91.58 124.66 142.75 157.43
RUSSELL 2000 100.00 102.49 81.49 120.00 142.00 148.46
PEER GROUP 100.00 77.05 55.06 79.86 85.46 86.18
The Peer Group is comprised of companies sharing SIC Code 7389- Business
Services, as follows:
A Consulting Team Inc. Eroom System Technologies Inc. Opti Inc
Access Worldwide Communication Evolving Systems Inc. Paperfree Medical Solutions Inc
Advance Communication Technologies Inc Fair Isaac Corp. Paradign Holdings Inc.
Anacomp Inc Frontier Energy Corp. Parts Inc
Answers Corp. Go Online Networks Corp. Phase III Medical Inc
AXS-One Inc Gtech Holdings Corp. Primal Solutions Inc
Axtive Corp. Halo Technology Holdings Inc Purchasepro Com Inc
Bearingpoint Inc Health Systems Solutions Inc Raining Data Corp.
Biometrics 2000 Corp. Healthaxis Inc Raser Technologies Inc
BMC Software Inc I-Many Inc Realnetworks Inc
Bottomline Technology Inc Impart Media Group Inc Redback Networks Inc
Broadvision Inc Incall Systems Inc Roomlinx Inc
Cam Commerce Solutions Inc Innofone.com Inc Salesrepcentral Inc
Chell Group Corp. International Microcomputer Software Inc Sequiam Corp.
China Technology Development Group Corp. Kanbay International Inc Sharp Holdings Corp.
Chinawe.com Inc Keane Inc Smart Video Technologies
Chordiant Software Inc MAI Systems Corp. SPSS Inc
Computer Horizons Corp. Marchex Inc Staktek Holdings Inc
Computer Sciences Corp. Mastec Inc Stellar Technologies Inc
Computer Task Group Inc MDU Communications International Sumtotal Systems Inc
Cordia Corp. Mediamax Technology Corp. Syntel Inc.
Counterpath Solutions Inc Mercury Interactive Corp. Tangent Solutions Inc
Covansys Corp. Micros Systems Inc Ultimate Software Group
Cybernet Internet Services International MTM Technologies Inc VA Software Corp.
Dynabazaar Inc Myrient Inc Valueclick Inc
Dynamics Resources Navisite Inc Versus Technology Inc
Earthlink Inc Neomedia Technologies Inc Viewcast Inc
Edgewater Technology Inc Network-1 Security Solutions Inc Villageedocs Inc
Electronics For Imaging New Century Companies Inc Wideband Corp.
Elinear Inc Onvia Inc Wind River Systems Inc
Engage Inc Opsware Inc Zomax Inc
13
INDEMNITY AGREEMENTS
We have entered into indemnity agreements with each of our directors
and executive officers. The indemnity agreements provide that we will indemnify
these individuals under certain circumstances against certain liabilities and
expenses they may incur in their capacities as our directors or officers. We
believe that the use of such indemnity agreements is customary among
corporations and that the terms of the indemnity agreements are reasonable and
fair to us, and are in our best interests to retain experienced directors and
officers.
AUDIT COMMITTEE REPORT
The Audit Committee operates pursuant to a written Charter that was
originally adopted by the Board of Directors in June 2000 and subsequently
reviewed by the Audit Committee annually. In May 2006, the Board of Directors
adopted the form of Charter as revised and presented by the Audit Committee. A
copy of this updated Charter of the Audit Committee is included as Appendix "A"
to this Proxy Statement. As set forth in the Charter, management is responsible
for the preparation, presentation and integrity of our financial statements, our
accounting and financial reporting principles, and internal controls designed to
assure compliance with accounting standards and applicable laws and regulations.
Our independent auditors are responsible for auditing our financial statements
and expressing an opinion as to their conformity with generally accepted
accounting principles.
In the performance of its oversight function, during 2005 the Audit
Committee reviewed and discussed the audited financial statements with
management and Haskell & White LLP. Discussions between the Audit Committee and
Haskell & White LLP included the matters required by Statement on Auditing
Standards No. 61, as currently in effect. The Audit Committee received from
Haskell & White LLP written disclosures and the letter regarding its
independence as required by Independence Standards Board Standard No. 1 and has
discussed with Haskell & White LLP its independence. The Audit Committee also
considered whether the provision of audit-related services during 2005 was
compatible with maintaining the independence of Haskell & White LLP.
Management's Report on Internal Controls over Financial Reporting in item 9a of
our Form 10-K for the year ended December 31, 2005 addresses our internal
controls. Based on these discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in our
Annual Report on Form 10-K for the year ended December 31, 2005 as filed with
the Securities and Exchange Commission.
14
THE FOREGOING REPORT IS PROVIDED BY THE AUDIT COMMITTEE: KENDRA BERGER,
NEAL FONDREN AND GARY ARLEN. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH
IN ANY OUR FILINGS AND OTHER DOCUMENTS THAT MIGHT INCORPORATE BY REFERENCE THIS
PROXY STATEMENT, IN WHOLE OR IN PART, THE FOREGOING REPORT OF THE AUDIT
COMMITTEE SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS OR
DOCUMENTS.
PRINCIPAL ACCOUNTING FIRM FEES
The Audit Committee has reviewed the advisability and acceptability of
utilizing our external auditor, Haskell & White LLP, for non-audit services. In
reviewing this area, the Committee focused on the ability of the external
auditor to maintain independence. Based on input from management and a review of
procedures established within the external audit firm, the Committee finds that
it is both advisable and acceptable to employ the external auditor for certain
limited non-audit services, from time to time. The Audit Committee reviews and
approves all services to be provided by Haskell & White LLP before the firm is
retained. The Audit Committee pre-approved the estimated audit fees for the
fiscal year 2005 and related quarterly reviews prior to commencement of the
audit services.
Audit Fees
We incurred fees for the fiscal year 2005 audit and quarterly reviews
in an aggregate amount of $405,000 to Haskell & White LLP, of which $90,000 was
paid as of December 31, 2005.
We incurred and paid fees for the fiscal year 2004 audit and quarterly
reviews in an aggregate amount of $264,000 to Haskell & White LLP. In addition,
we paid expense reimbursements of $14,000 to Haskell & White LLP.
We incurred and paid fees for fiscal year 2004 quarterly reviews
conducted, and consents provided, by our former external auditor, KPMG LLP, in
an aggregate amount of $100,750.
Audit-Related Fees
Aggregate fees billed by Haskell & White, LLP for other audit related
services for fiscal year 2005 and 2004 were $17,000 and $0, respectively.
Tax Fees
There were no aggregate fees billed and paid for tax services for
fiscal years 2005 and 2004 to Haskell & White LLP. Aggregate fees billed and
paid to KPMG LLP for tax services for fiscal years 2005 and 2004 were $0 and
$1,000, respectively.
All Other Fees
Aggregate fees billed and paid to Haskell & White LLP for other
services for fiscal years 2005 and 2004 were $10,000 and $0, respectively.
CERTAIN RELATIONSHIPS
See "Compensation Committee Interlocks and Insider Participation."
RELATED TRANSACTIONS
On February 4, 2005, we entered into an Asset Purchase Agreement with
Intura Solutions LP (Intura), a Texas limited partnership, pursuant to which we
sold the point-of-sale software products developed and maintained by our
Software Solutions segment. Gary Peek, vice president and general manager of our
Software Solutions segment, is a member of Intura Management, LLC, general
partner of Intura Solutions LP. In accordance with the asset purchase
transaction, Gary Peek terminated his position as vice president and general
manager of our Software Solutions segment and immediately thereafter commenced
his position with Intura to oversee business operations. We received a
non-dilutable 10% partnership interest in Intura in the transaction.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, our directors and officers and any
persons holding more than 10% of our common stock are required to report their
beneficial ownership of our common stock and any changes in that ownership to
the Securities and Exchange Commission. We believe that, based on the written
representations of our directors and officers and copies of reports filed with
the Commission in 2005, our directors, officers and holders of more than 10% of
our common stock complied with the requirements of Section 16(a) with the
exception of Fidelity National Financial, Inc. ("FNF").
On November 21, 2005, FNF filed a Form 3 Initial Statement of
Beneficial Ownership of Securities to report ownership, by six of its wholly-
and majority-owned subsidiaries, of an aggregate 5,307,911 shares of common
stock as of December 2, 2004. Subsequently, FNF filed a Schedule 13G to report
that FNF became the beneficial owner of more than 5% of the common stock on
August 8, 2003 and that additional purchases were made from time to time from
that date through September 2005. On FNF's most recent 13G filing on February
14, 2006, FNF reported that it was the direct beneficial owner of 613,400 shares
of common stock, and its reporting subsidiaries, in the aggregate, were the
direct beneficial owners of an additional 6,031,211 shares; beneficial ownership
of which the subsidiaries may be deemed to share with FNF.
15
COMMUNICATIONS WITH DIRECTORS
Stockholders may communicate directly with the Board of Directors or
individual members of the Board of Directors in writing by sending a letter to
the Board at: NTN Buzztime, Inc. Board of Directors, 5966 La Place Court,
Carlsbad, California 92008. All communications directed to the Board of
Directors will be transmitted to the Chairman of the Board of Directors or other
director identified in the communication without any editing or screening.
OTHER MATTERS
Accompanying this Proxy Statement is a letter to stockholders from Mr.
Kinsey, our Chairman and Chief Executive Officer, together with our Annual
Report for the fiscal year ended December 31, 2005.
We will furnish, without charge, to each person to whom this Proxy
Statement is being sent a complete copy of our Form 10-K (other than exhibits)
for fiscal 2005. We will furnish any exhibit to our Form 10-K upon the payment
of a fee to cover our reasonable expenses in furnishing such exhibit. Written
requests for the Form 10-K should be directed to Mr. Andy Wrobel, Corporate
Secretary, at our corporate offices located at 5966 La Place Court, Carlsbad,
California 92008. Telephone requests may be directed to Mr. Wrobel at (760)
438-7400.
We do not know of any matter to be acted upon at the Annual Meeting
other than the matters described above. If any other matter properly comes
before the Annual Meeting, however, the proxy holders will vote the proxies
thereon in accordance with their best judgment.
THE BOARD OF DIRECTORS
Dated: May 17, 2006
16
NTN BUZZTIME, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
1.1 PURPOSE. The purpose of the Audit Committee (the "COMMITTEE")
of the Board of Directors (the "BOARD") of NTN Buzztime, Inc.,
a Delaware corporation (the "COMPANY"), is to oversee the
accounting and financial reporting processes of the Company
and audits of the financial statements of the Company and
prepare the annual report of the Audit Committee required by
applicable Securities and Exchange Commission ("SEC")
disclosure rules. Among the matters the Committee will oversee
are (a) implementation of processes and policies to ensure (1)
the integrity of the Company's financial statements and (2)
the Company's compliance with legal and regulatory
requirements, (b) review and confirmation of the independent
auditors' qualifications and independence, and (c) evaluation
of the performance of Company's internal audit function and
independent auditors.
1.2 LIMITATION ON DUTIES. While the Committee has the
responsibilities and powers set forth in this Charter, it is
not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and
disclosures are complete and accurate and are in accordance
with generally accepted accounting principles ("GAAP") and
applicable rules and regulations. These are the
responsibilities of management and the independent auditors.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
2.1 MEMBERSHIP. The Committee will consist of at least three
members of the Company's Board. All members of the Committee
must be directors who meet the knowledge requirements and the
independence requirements of applicable law and the rules of
the SEC and the American Stock Exchange ("AMEX") in effect
from time to time (subject to any exceptions allowed by such
rules and any waivers granted by such authorities). No Audit
Committee member shall simultaneously serve on the audit
committees of more than two other public companies.
Notwithstanding the foregoing two sentences, as permitted by
the rules of the AMEX, under exceptional and limited
circumstances, one director who does not meet certain of the
criteria for "independent director" may be appointed to the
Committee if the Board determines in its business judgment
that membership on the Committee by such person is required by
the best interests of the Corporation and its stockholders and
the Corporation discloses in the next annual proxy statement,
subsequent to the determination, the nature of such person's
relationship and the reasons for the Board's determination.
Such director will not be subject to either the independence
requirements or the limitation on other public company audit
committee service contained in this Section 2.1. Such director
may not serve for in excess of two consecutive years and may
not chair the Committee.
2.2 APPOINTMENT. The members of the Committee will be appointed by
and serve at the discretion of the Board. Unless a Chair is
elected by the Board, the members of the Committee may
designate a Chair by majority vote of the full Committee
membership.
2.3 FINANCIAL EXPERT. The Committee will determine whether one
member of the Committee qualifies as an "audit committee
financial expert" as such term is defined in Item 401(h)(2) of
Regulation S-K of the Securities and Exchange Commission. The
Company will disclose in its annual report required by Section
13(a) of the 1934 Act whether or not it has at least one
member who is an audit committee financial expert, and if so,
whether such audit committee financial expert is "independent"
(as such term is defined in Section 121A of the AMEX Company
Guide). In any event, the Committee must include at least one
member who has past employment experience in finance or
accounting, requisite professional certification in
accounting, or any other comparable experience or background
that results in the individual's financial sophistication,
such as being or having been a chief executive officer, chief
financial officer or other senior officer with financial
oversight responsibilities.
17
2.4 EXECUTIVE SESSIONS. The Committee shall meet with each of the
independent auditor, internal auditors (or other personnel
responsible for the Company's internal audit function) and
management in separate executive sessions regularly (with such
frequency as the Committee determines is appropriate) to
discuss any matters that the Committee or these groups believe
should be discussed privately.
2.5 OTHER MEETINGS. The Committee shall meet at least quarterly.
Other meetings of the Committee will be with such frequency,
and at such times, as its Chairperson, or a majority of the
Committee, determines. Special meetings of the Committee may
be called by the Chairperson or upon the request of any two
Committee members. The agenda of each meeting will be prepared
by the Chairperson and circulated, if practicable, to each
member prior to the meeting date. Unless the Committee or the
Board adopts other procedures, the provisions of the Company's
By-Laws applicable to meetings of Board committees will govern
meetings of the Committee.
2.6 MINUTES. Minutes of each meeting will be kept.
2.7 SUBCOMMITTEES. The Committee has the power to appoint and
delegate matters to subcommittees, but no subcommittee will
have any final decision-making authority on behalf of the
Board or the Committee (except as permitted pursuant to
Section 3.1(g) below).
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
The Board delegates to the Committee the express responsibility and
authority to do the following:
3.1 INDEPENDENT AUDITORS
(a) SELECTION. Be solely and directly responsible for the
appointment, compensation, retention, evaluation, and
oversight of the work of the independent auditors
(including resolution of disagreements between
management and the independent auditors regarding
financial reporting) for the purpose of preparing or
issuing an audit report or performing other audit,
review or attest services for the Company and, where
appropriate, the termination and replacement of such
firm. Such independent auditors shall report directly
to and be ultimately accountable to the Committee.
(b) FEES. The Committee has the ultimate authority to
approve all audit engagement fees and terms and
review all payments made to the audit firm,
regardless of nature, on an annual basis.
(c) ROTATION OF INDEPENDENT AUDITOR. Consider whether
there should be regular rotation of different public
accounting firms serving as the independent auditors
of the Company.
(d) AUDIT TEAM. Review the experience and qualifications
of the senior members of the independent auditors'
team.
(e) SCOPE OF AUDIT. Review, evaluate and approve the
annual engagement proposal of the independent
auditors (including the proposed scope and approach
of the annual audit).
(f) LEAD AUDIT PARTNER REVIEW, EVALUATION AND ROTATION.
Review and evaluate the lead partner of the
independent auditors. Ensure that the lead audit
partner having primary responsibility for the audit
and the reviewing audit partner of the independent
auditor are rotated at least every five years and
that other audit partners (as defined by the SEC) are
rotated at least every seven years.
18
(g) PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES.
Pre-approve all auditing services and all non-audit
services to be performed by the independent auditors,
other than with respect to DE MINIMIS exceptions
permitted by law or regulation. Such pre-approval may
be given as part of the Committee's approval of the
scope of the engagement of the independent auditors
or on an engagement-by-engagement basis or pursuant
to pre-established policies. In addition, the
authority to pre-approve non-audit services may be
delegated by the Committee to one or more of its
members, but such decision must be presented to the
full Committee at the next regularly scheduled
Committee meeting. The Company shall disclose in its
Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q if any non-audit services have been
pre-approved during the period covered by the report
if such non-audit services are required to be
disclosed in the Company's periodic reports filed
pursuant to Section 13 of the 1934 Act.
(h) AUDITOR INDEPENDENCE.
(i) Obtain Written Statement. At least annually,
obtain and review a formal written statement
from the independent auditors delineating
all relationships between the independent
auditors and the Company, consistent with
Independence Standards Board Standard No. 1.
(ii) Engage in Active Dialogue. Actively engage
in a dialogue with the independent auditors
with respect to any disclosed relationships
or services that may impact the objectivity
and independence of the independent auditors
and take, or recommend that the Board take,
appropriate action to oversee the
independence of the outside auditors.
(i) HIRING POLICIES. Set clear hiring policies for
employees and former employees of the independent
auditor.
(j) REVIEW PROBLEMS. Review with the independent auditor
any audit problems or difficulties the independent
auditor may have encountered in the course of its
audit work, and management's responses, including:
(i) any restrictions on the scope of activities or
access to requested information and (ii) any
significant disagreements with management.
(k) RELATED PARTY TRANSACTIONS. Conduct an appropriate
review of all proposed related-party transactions
(which term refers to transactions that would be
required to be disclosed pursuant to SEC Regulation
S-K, Item 404). Management shall not cause the
Company to enter into any new related party
transaction unless the Committee approves such
transaction.
(l) MATERIAL COMMUNICATIONS. Discuss with the independent
auditors any material communications between the
audit team and the independent auditors' national
office regarding auditing or accounting issues
presented during the independent auditor's
engagement.
(m) ACCOUNTING ADJUSTMENTS. Discuss with the independent
auditors any accounting adjustments that were noted
or proposed by the independent auditors but were
passed on.
(n) INTERNAL AUDIT FUNCTION. Discuss with the independent
auditor the responsibilities, budget and staffing of
the Company's internal audit function.
(o) MANAGEMENT OR INTERNAL CONTROL LETTERS. Discuss with
the independent auditor any "management" or "internal
control" letter issued, or proposed to be issued, by
the independent auditor to the Company.
19
3.2 FINANCIAL REPORTING
(a) ANNUAL FINANCIALS. Review and discuss with management
and the independent auditor the Company's annual
audited financial statements, (including the
Company's disclosures under "Management's Discussion
and Analysis of Financial Condition and Results of
Operations"), any unusual or non-recurring items, the
nature and substance of significant reserves, the
adequacy of internal controls and other matters that
the Committee deems material, prior to the public
release of such information. Obtain from the
independent auditor assurance that the audit was
conducted in a manner consistent with Section 10A of
the 1934 Act. Recommend to the Board whether the
annual audited financial statements should be
included in the Company's Annual Report on Form 10-K.
(b) QUARTERLY FINANCIALS. Review and discuss with
management and the independent auditors the Company's
quarterly financial statements (including the Company
disclosure under "Management's Discussion and
Analysis of Financial Condition and Results of
Operations"), the results of the independent
auditors' non-audit review of the quarterly financial
statements, and other matters that the Committee
deems material, prior to the public release of such
information.
(c) ACCOUNTING PRINCIPLES. Review with management and the
independent auditors material accounting principles
applied in financial reporting, including any
material changes from principles followed in prior
years and any items required to be communicated by
the independent auditors in accordance with AICPA
Statement of Auditing Standards ("SAS") 61, as
amended from time to time. By way of example, on the
date this Charter was adopted, the items required to
be communicated under SAS 61 include: (a) the
auditor's responsibility under Generally Accepted
Auditing Standards ("GAAS"); (b) significant
accounting policies; (c) management judgments and
accounting estimates; (d) significant audit
adjustments; (e) other information in documents
containing audited financial statements; (f)
disagreements with management, including accounting
principles, scope of audit and disclosures; (g)
consultation with other accountants by management;
(h) major issues discussed with management prior to
retention; (i) difficulties encountered in performing
the audit; and (j) the auditor's judgments about the
quality of the Company's accounting principles.
(d) JUDGMENTS. Review reports prepared by management or
by the independent auditor relating to significant
financial reporting issues and judgments made in
connection with the preparation of the Company's
financial statements, including an analysis of the
effect of alternative GAAP methods on the Company's
financial statements and a description of any
transaction as to which management obtained a SAS 50
letter.
(e) PRESS RELEASES. Discuss earnings press releases with
management (including the type and presentation of
information to be included in earnings press
releases), as well as financial information and
earnings guidance provided to analysts and rating
agencies.
(f) REGULATORY AND ACCOUNTING DEVELOPMENTS. Review with
management and the independent auditor the effect of
regulatory and accounting initiatives, as well as
off-balance sheet structures, on the Company's
financial statements.
3.3 INTERNAL AUDIT AND RISK MANAGEMENT
(a) INTERNAL AUDIT. Review the budget, qualifications,
activities, effectiveness and organizational
structure of the internal audit function and the
performance, appointment and replacement of the lead
internal auditor, and review summaries of material
internal audit reports and management's responses.
20
(b) RISK ASSESSMENT AND RISK MANAGEMENT. Discuss policies
with respect to risk assessment and risk management
periodically with management, internal auditors, and
the independent auditors, and the Company's plans or
processes to monitor, control and minimize such risks
and exposures.
3.4 FINANCIAL REPORTING PROCESSES; CEO AND CFO CERTIFICATIONS
(a) INTERNAL AND EXTERNAL CONTROLS. In consultation with
the independent auditors, internal auditors and the
Company's financial and accounting personnel, review
the integrity, adequacy and effectiveness of the
Company's accounting and financial controls, both
internal and external, and elicit any recommendations
for the improvement of such internal control
procedures or particular areas where new or more
detailed controls or procedures are desirable.
(b) INTERNAL CONTROLS DISCUSSION. Review major issues
regarding the Company's accounting principles and
financial statement presentations, including any
significant change in the Company's selection or
application of accounting principles, and review
major issues as to the adequacy of the Company's
internal controls and any special audit steps adopted
in light of material control deficiencies.
(c) REPORTING SYSTEMS. Establish regular and separate
systems of reporting to the Committee by each of (i)
management, (ii) the independent auditors and (iii)
the internal auditors regarding any significant
judgments made in management's preparation of the
financial statements and the view of each as to
appropriateness of such judgments.
(d) REPORTS FROM INDEPENDENT AUDITORS. Obtain and review
timely reports from the independent auditors
regarding:
(i) all critical accounting policies and
practices to be used by the Company;
(ii) all alternative treatments of financial
information within GAAP that have been
discussed with management, ramifications of
the use of such alternative disclosures and
treatments, and the treatment preferred by
the independent auditors; and
(iii) all other material written communications
between the independent auditors and
management, including any management letter
or schedule of unadjusted differences.
Such reports may be oral or in writing, but must be
provided to the Committee before any auditor's report
is filed with the SEC.
(e) CEO AND CFO CERTIFICATIONS. Discuss with the Chief
Executive Officer and the Chief Financial Officer of
the Company (i) the processes involved in, and any
material changes or disclosures required as a result
of, the 10-K and 10-Q certification process and (ii)
any deficiencies in design or operation of internal
controls or any fraud involving management or
employees with a significant role in the Company's
internal controls.
3.5 LEGAL AND REGULATORY COMPLIANCE
(a) SEC REPORT. Prepare the annual report of the
Committee included in the Company's proxy statement
as required by the proxy rules under the 1934 Act.
(b) REPORTS FROM OTHERS. Obtain such reports from
management, auditors, the general counsel, tax
advisors or any regulatory agency as the Committee
deems necessary regarding regulatory compliance,
transactions with affiliates, and other legal matters
that may have a material effect on the Company's
financial statements. Consider whether the reported
matters were properly taken into consideration in the
preparation of the financial statements.
21
(c) COMPLAINTS. Establish procedures for (i) the receipt,
retention and treatment of complaints received by the
Company regarding accounting, internal accounting
controls, or auditing matters, and (ii) the
confidential, anonymous submission by Company
employees of concerns regarding questionable
accounting or auditing matters.
3.6 ANNUAL EVALUATION OF COMMITTEE AND CHARTER; REPORTS TO BOARD
(a) EVALUATION OF COMMITTEE. Annually evaluate the
performance of the Committee.
(b) REVIEW AND PUBLICATION OF CHARTER. Review and
reassess the adequacy of this Charter at least
annually and recommend any proposed changes to the
Board, as appropriate, and publish this Charter as
required by applicable law.
(c) RECOMMENDATIONS; REPORTS TO BOARD. Regularly report
to the Board on the Committee's activities and its
conclusions and make appropriate recommendations to
the Board.
IV. ADVISORS AND COUNSEL; RELIANCE; INVESTIGATIONS; COOPERATION
4.1 RETENTION OF ADVISORS AND COUNSEL. The Committee has the
power, in its sole discretion, to obtain advice and assistance
from, and to retain at the Company's expense, such independent
or outside legal counsel, accounting or other advisors and
experts as it determines necessary or appropriate to carry out
its duties, and in connection therewith to receive appropriate
funding, as determined by the Committee, from the Company.
4.2 DETERMINE ADMINISTRATIVE EXPENSES. Determine the level and
cost of separate administrative support necessary or
appropriate in carrying out the Committee's duties, with such
costs to be borne by the Company.
4.3 RELIANCE PERMITTED. The Committee will act in reliance on
management, the Committee's independent auditor, internal
auditors, and other advisors and experts, as the Committee
deems necessary or appropriate.
4.4 INVESTIGATIONS. The Committee has the power, in its
discretion, to conduct any investigation it deems necessary or
appropriate to enable it to carry out its duties.
4.5 REQUIRED PARTICIPATION OF EMPLOYEES. The Committee shall have
unrestricted access to the Company's employees, the
independent auditors, the internal auditors, internal and
outside counsel, and may require any employee of the Company
or representative of the Company's outside counsel or
independent auditors to attend meetings of the Committee or to
meet with any members of the Committee or representative of
the Committee's counsel, advisors or experts.
V. MISCELLANEOUS
5.1 RULES AND PROCEDURES. Except as expressly set forth in this
Charter or the Company's By-Laws, or as otherwise provided by
law or the rules of AMEX, the Committee shall establish its
own rules and procedures.
22
BUZZTIME LOGO VOTE BY INTERNET -WWW.PROXYVOTE.COM
5966 LA PLACE COURT Use the Internet to transmit your voting
SUITE 100 instructions and for electronic delivery of
CARLSBAD, CA 92008 information up until 11:59 P.M.Eastern Time
the day before the cut-off date or meeting
date. Have your proxy card in hand when you
access the web site and follow their
instructions to obtain your records and to
create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER
COMMUNICATIONS
If you would like to reduce the costs
incurred by NTN Buzztime, Inc. in mailing
proxy materials, you can consent to receiving
all future proxy statements, proxy cards and
annual reports electronically via e-mail or
the Internet. To sign up for electronic
delivery, please follow the instructions
above to vote using the Internet and, when
prompted, indicate that you agree to receive
or access stockholder communications
electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M.
Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand
when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope we
have provided or return it to NTN Buzztime,
Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY
11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: NTNBZ1 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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NTN BUZZTIME, INC.
VOTE ON DIRECTORS
1. To elect as Directors of NTN Buzztime, Inc.
the nominees listed below: FOR WITHHELD FOR ALL To withhold authority to vote for any
NOMINEES: ALL ALL EXCEPT individual nominee. mark "For All Except"
01) Stanley Kinsey and write the nominee's name on the line
02) Gary Arlen [_] [_] [_] below.
03) Kendra Berger -------------------------------------------
04) Barry Bergsman -------------------------------------------
05) Robert B. Clasen -------------------------------------------
06) Michael Fleming
07) Neal Fondren
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of Haskell & White, LLP as Independent Registered
Public Accounting Firm. [_] [_] [_]
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1 AND 2
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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NTN BUZZTIME, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
JUNE 14, 2006
The stockholder(s) hereby appoint(s) Andy Wrobel and Dennis Klahn, or either of
them, as proxies, each with power to appoint his substitute, and hereby
authorize(s) them to represent and to vote, as designated on the reverse side of
this ballot, all of the shares of Common Stock of NTN Buzztime, Inc. that the
stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to
be held at 8:30 a.m., Pacific Time, on June 14, 2006 at the Grand Pacific
Palisades Resort & Hotel, 5805 Armada Dr. Carlsbad, CA, and any adjournment or
postponement thereof.
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