1999 Annual NTN Shareholders Meeting

As reported by Kevin and Rick with questions from Darren. These reports were first posted on the Yahoo NTN message board.

Note: Both Kevin and Rick are former employees of NTN which gives them additional insight but also may include certain biases. In reading these reports, I think both men have tried to be fair in their criticisms while, at the same time, congratulating NTN management for certain accomplishments.

If you attended the 1999 NTN Shareholders Meeting and have additional information or a different point of view, please send it to Don Denton. If appropriate, your report will be included here. Thanks in advance for any submissions.

Kevin's report:

I just returned after attending NTN's 1999 Annual Meeting of Shareholders. A few random thoughts:

1. Stan conducted the meeting with aplomb and candor, a refreshing turnaround from last year's meeting when BoyGerald lied about the pricing of his options. In spite of a hostile shareholder proposal seeking his ouster, Stan lent a sense of calm credibility to the discussion.

2. My concerns about the IWN receivable being washed in the recent sale appear to have been unwarranted. Stan volunteered without being asked that the Australians had paid the receivable prior to the sale. I guess it's in the approx. $1 million of other revenue shown on the P&L for the six months ended 6/30/99.

BTW, you think they don't follow this board closely?

3. Ran into Jim Claspill. Jim was gracious and gentlemanly, in spite of the fact that I've occasionally taken him to task (all in good fun) from time to time. Semper fi, Top. We may not always see eye to eye on NTN but you're definitely my kind of folks.

4. The shareholder proposal advising the board to sell at the earliest opportunity failed. Of the approx. 7 million votes cast on the proposal, 3.5 million voted against and 2.5 million voted in favor. Stan indicated that he had heard the message.

5. Short term debt is the only financing under present consideration. Stan indicated that shareholder value would have to be increased before he thought about further dilution.

6. Of the current top brass, only one has been there in an executive position over a year.

7. Stan indicated he faced a mini-palace revolt when he decided to scrap BoyGerald's plan to raise $10 million in highly dilutive capital to pay for the DITV rollout. Stan appears to have been correct in his judgment that the sites should shoulder some/all of the expense of moving to DITV. To date approx. 28% of the hospitality sites have been converted or are awaiting installation. This is exactly the kind of judgment and strength of conviction that was so sorely lacking under BoyGerald's tenure. Bravo, Stan.

8. Stan seemed to go out of his way to compliment BoyGerald for "righting the ship." I see a little of Marc Antony's praise of Brutus during Caesar's eulogy, but Stan may genuinely feel this way. Oh well, even bright folks like Stan are wrong sometimes. In all modesty, I still feel he was mistaken in axing me in favor of BoyGerald.

9. The business plan definitely focuses on Internet distribution to the non-bar world in the future, although great value is perceived in the hospitality network. Lam indicated that discussions are ongoing with AOL, who is apparently now less interested in tying NTN to another exclusive deal. I wonder if the CFO (so-called) of AOL's international division is involved in the discussions? He and Lam are bosom buds. That may explain Stan's comments about his rightly-disgraced predecessor.

10. I still don't get Stan's claim of value in the trivia questions, but the guy's a hell of a lot smarter than me so I'll wait to see how this develops.

11. Gary Arlen was introduced as an Internet consultant/guru who's regularly quoted in the mainstream business press (WSJ,etc.). It sounds to me like he's a great addition to the Board.

Kevin

Comment from Darren:

Thanks, Kevin for the recap. It sounds like I missed the first ever shareholders meeting that had some substance to it. Damn.

Most of the items you mentioned were certainly positive signs -- more so now than any time since I started following this circus. First, the couple negatives:

I'm shocked that so many shares voted in favor of the "bail out at any cost" proposal. Hopefully Stan really did get the message that shareholders are desperately unhappy with the way the company has been run.

I'm also really disappointed to hear that Stan is flogging the trivia database as a significant corporate asset. Someone really ought to explain to him that anyone with a few hundred thousand dollars and a few months could do exactly what NTN did to jump-start their own trivia database (recruit college students and professionals to write questions for a pittance), and with much better content and quality control. They're in a good position right now because they're the only player willing to license their content to others, but if they think they're going to get millions for it they're sadly mistaken.

Finally, I think Gary Arlen (not Arlan, by the way) is a great addition to the board. He's a serious Big Brain in the areas of interactive TV and Internet-based entertainment, and can really help out with the "vision thing." They've still got the major hurdle of finding money and talent for R&D to develop whatever direction they decide on, though, so I'm not going out on any limbs and predicting great things in their future just yet. Regardless, it's encouraging to know they finally have someone attached to the company that knows something about their nominal business.

-Darren

Rick's report:

Yes, I met Jim at the meeting. I came in late and he nodded to me. After the meeting he came up to me and shook my hand. We spoke some kind words but did not have time to have a lengthy discussion about NTN. As we were talking, Ty Lam came up to greet me. I think Jim was listening as I got on my soapbox about NTN. I congratulated him on NTN finally understanding the intent and direction NTN for which NTN was originally created.

It is so unfortunate that NTN is arriving today at a portal of opportunity without the resources they need. In 1993 NTN had over 17 million dollars, relatively few customers and a golden opportunity to create what they are now only achieving. Ancient history now, but the last six years was so wasted.

Stan Kinsey noted on several occasions that he was not a founder of this company, only the latest caretaker. Stan, I hope your vision is correct and NTN someday becomes financially successful. When that day comes, I would like to see some acknowledgement for the vision, creativity and very substantial sacrifices that were made by Pat and Dan Downs. I didn't note any pictures of them in the offices. I can understand why Sokol took them down, but you seem to be a finer man than that. Give them their due.

Kevin's recap of the meeting jives with mine. Very interesting comments and questions from disgruntled shareholders that I believe Kinsey handled well. And yes, Kevin did endorse Stan. A very gentlemanly and sincere gesture.

To Kevin: I wanted to talk to you but got hung up with others. When I was free, I guess you had left already. Catch up with you soon.

Rick

Follow-up from Rick:

There were many questions asked during the meeting. Many were your common shareholder meeting questions about visions, and why don't you try this, etc.

The most interesting, from a dramatic view, were those from the two or three shareholders that had brought the Shareholder proposal to sell the company. Several questions were directed to selected directors asking them to state whether they were consultants to the company and how much did they get for their services. One asked Don Klosterman if he had voted for a certain settlement for a lawsuit and what were the terms. (His answer was yes I voted for it and I do not recall the terms right now). He asked him if was a member of the compensation committee and did he qualified to be on it. He answered yes to both.

Another severally criticized the Preferred Offering done in October 1997 and wanted to know why it was done that way, involving interest and heavy dilution. Stan Kinsey responded honestly: I wasn't here and I don't know why, except, I think that there were few options open to NTN at the time. An honest answer, however the shareholder did not pursue his question with one of the other 3 directors still on the board who were also board members at that time. Dwight would be interested to know that Stan did say they would not being doing any (and I can't remember the adjective he used, but it was not flattering) Reg D filings.

After the proposal to sell the company was announced as having been defeated (by mail-in votes) a shareholder made a motion to replace the CEO with someone who would try to sell the company. After some discussion, a vote was taken. I'm sure this was a symbolic gesture, because surely they had to know that Management was holding the proxy rights to about 22 million shares. It was soundly defeated, 22,000,000 to 175,000. For the record, I voted against both proposals. The first, because I believe that there would be no way to maximize shareholder value with a mandate from shareholders known to the world, and the second because it was just plain dumb and moot.

The general theme of the dissatisfied shareholders was I want my money back so get it going!

The most interesting thing to me was what looked to be security people at the back of the room. There was a uniformed security man outside the building and two men dressed in very dark suits in the meeting room. Didn't look or act like employees or shareholders. Maybe they were expecting trouble. Not a bad idea, but all the shareholders were courteous in making their presentations and asking questions.

Rick

Follow-up from Kevin:

Rick has answered your question, Darren, better than I could and I agree with everything he said about the discussion.

There were no doubt private conversations between shareholders and management after the formal session disbanded. Maybe someone will share here what they said or heard in any such conversations.

One piece of good news I neglected to post in my first meeting summary: CFO Kendra Berger said that the company had previously reported that killing the system's Y2K bugs would cost about $1 million. Subsequent tests, however, reveal that the actual costs will be significantly less than the $1 million estimate.

I'd like to say a word in support of Don Klosterman. Don was asked unfair questions by a shareholder named Steve Meisel (sp?). (Actually, at one point Mr. Meisel said he owned about 67,000 shares and at another time he said he held a proxy for those shares, so I'm not sure what his actual status is.) Don responded forthrightly. One question about consulting -- Don BTW has no consulting agreement with NTN -- was akin to "Have you stopped beating your wife?".

Another question about the terms of settlement of a lawsuit (which lawsuit was not clearly identified by Mr. Meisel in his question) was the kind of esoteric that nobody should be bushwhacked with in such a forum. In my opinion, that was dirty pool. Don has had a lot to do with getting QB1 up and running and has really contributed to this company. I know from personal experience with him that Don Klosterman is one stand-up guy. IMHO Don's picture belongs right up there with the Downs brothers.

I first met Mr. Meisel through a former NTN affiliate while I was with NTN. Let's just say that given his relationship to this person, the nature of Mr. Meisel's critical questions was highly ironic. I thought there was something else going on there. 'Nuff said.

Kevin