<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2000
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 31, 2000
INTERACTIVE NETWORK, INC.
(Exact Name of Registrant as Specified in Its Charter)
CALIFORNIA
(State or Other Jurisdiction of Incorporation)
0-19579 94-3025019
(Commission file Number) (I.R.S. Employer Identification No.)
1161 OLD COUNTY ROAD, BELMONT, CA 94002
(Address of Principal Executive Offices) (Zip Code)
(650) 508-8793
(Registrant's Telephone Number, Including Area Code)
With a copy to:
Robert S. Townsend, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 31, 2000, the Registrant consummated the formation of a joint
venture company, TWIN Entertainment Inc. ("TWIN Entertainment"), to be co-
managed by the Registrant and Two Way TV Limited ("Two Way TV") under the terms
of a Joint Venture and Stock Purchase Agreement dated as of December 6, 1999.
The Registrant and Two Way TV currently expect that TWIN Entertainment will
develop, market and supply digital (as well as analog) interactive and related
services, products and technology in the Territory, which presently means the
United States and Canada. The Territory is more fully defined in the Joint
Venture License Agreement attached as an exhibit hereto.
The Registrant and Two Way TV each purchased 2,500,000 shares of TWIN
Entertainment's common stock for $500,000, the fair market value of TWIN
Entertainment's stock as determined by TWIN Entertainment's Board of Directors
(which currently consists of representatives nominated by the Registrant and Two
Way TV). The Registrant utilized its working capital to fund its purchase of
shares.
As part of the creation of the Joint Venture, the Registrant entered into
an Investor Rights Agreement, a Stockholders Agreement and a Joint Venture
License Agreement. In exchange for equity investment in TWIN Entertainment, TWIN
Entertainment, the Registrant and Two Way TV granted each other certain
governance and other rights. These rights primarily consist of (1) written
notice upon and restrictions on the sale and transfer of any shares of TWIN
Entertainment's common stock or any of its other equity securities; (2) in the
event either the Registrant or Two Way TV wishes to sell an interest in TWIN
Entertainment, the other party has the right to first purchase the shares and
the right to sell or transfer the shares pursuant to the same terms and
conditions upon that sale or transfer; (3) right to elect a certain number of
directors based on the Registrant's and Two Way TV's ownership percentage of
TWIN Entertainment's common stock; (4) the Registrant's and Two Way TV's right
to approve certain of TWIN Entertainment's major actions; (5) specified
procedures upon the occurrence of a deadlock on any matter properly before TWIN
Entertainment's board of directors; (6) subject to certain restrictions, the
right to demand TWIN Entertainment to register its securities under the
Securities Act of 1933 and the right for the Registrant's and Two Way TV's
securities to be included among the securities to be registered in any other
public offering of TWIN Entertainment's securities; and (7) access to certain of
TWIN Entertainment's financial information. Pursuant to the Joint Venture
License Agreement, the Registrant granted TWIN Entertainment a non-exclusive,
royalty-free, non-transferable license in the Territory (as that term is defined
in that agreement) for all of the Registrant's patents, trade secrets and
copyrights, excluding trademarks and service marks developed and existing prior
to the date of the Joint Venture License Agreement, and Two Way TV granted TWIN
Entertainment a license on the same terms of Two Way TV's technology and
intellectual property rights. As part of those transactions, the Registrant
also has agreed to seek the approval of its shareholders to convert its non-
exclusive licenses to TWIN Entertainment to exclusive licenses (at which time
the licenses from Two Way TV to TWIN Entertainment also will become exclusive).
The foregoing summary of the principal agreements is qualified in its entirety
by the actual agreements, which are exhibits hereto and incorporated herein by
reference.
In addition, as part of the agreements with Two Way TV to create TWIN
Entertainment, the Registrant entered into a separate worldwide exclusive
license agreement that licenses the Registrant's intellectual property in
countries other than the United States and Canada to Two Way TV under a
Termination and License Agreement, which is incorporated herein by reference and
attached hereto as an exhibit.
The consummation of these transactions was subject to approval of the
United States Bankruptcy Court for the Northern District of California, which
was received on January 7, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information.
<PAGE>
The Registrant will file pro forma financial information as required by this
item by amendment to this Form 8-K within sixty (60) days of the date of this
report.
(c) Exhibits
Exhibit No. Title
- ----------- -----
2.1 Joint Venture and Stock Purchase Agreement dated as of December
6, 1999 by and among the Registrant and Two Way TV Ltd., a
corporation organized under the laws of England and Wales.
2.2 Joint Venture License Agreement dated as of January 31, 2000 by
and among the Registrant, Two Way TV Limited, a corporation
organized under the laws of England and Wales, and TWIN
Entertainment Inc., a Delaware corporation.
2.3 Stockholders Agreement dated as of January 31, 2000 by and among
the Registrant, Two Way TV Limited, a corporation organized under
the laws of England and Wales, and TWIN Entertainment Inc., a
Delaware corporation.
2.4 Investor Rights Agreement dated as of January 31, 2000 by and
among the Registrant, Two Way TV Limited, a corporation organized
under the laws of England and Wales, and TWIN Entertainment Inc.,
a Delaware corporation.
2.5 Termination and License Agreement dated as of January 31, 2000 by
and among the Registrant and Two Way TV Limited, a corporation
organized under the laws of England and Wales.
99.1 Press Release issued by the Registrant dated December 7, 1999.
99.2 Press Release issued by the Registrant dated February 10, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 11, 2000
INTERACTIVE NETWORK, INC.
By: /s/ Bruce Bauer
-----------------------------------------
Bruce Bauer
President and Chief Executive Officer
<PAGE>
EXHIBIT 2.1
JOINT VENTURE AND
STOCK PURCHASE AGREEMENT
This Joint Venture and Stock Purchase Agreement (this "Agreement") is
entered into as of December 6, 1999 (the "Effective Date") between Interactive
Network Inc, a California corporation ("IN") and Two Way TV Ltd., a corporation
organized under the laws of England and Wales ("TW") (IN and TW are hereinafter
collectively referred to as "Purchasers" and each individually as a
"Purchaser").
RECITALS
A. IN has been, among other things, in the business of developing,
marketing and selling certain software and hardware products for interactive
television systems and other telecommunications uses, and has developed valuable
intellectual property related to such products and services.
B. TW is, among other things, in the business of designing,
developing and licensing certain technology useful for interactive television
and other telecommunications applications, and has developed valuable
intellectual property related to such technology.
C. Subject to the conditions set forth herein, IN and TW have agreed
to establish a Delaware corporation (the "Company") to develop, market and
supply digital (as well as analog) interactive and related services, products
and technology in the Territory (as defined in the Joint Venture License
Agreement in the form attached hereto as Exhibit A among the Company, IN and TW
(the "Joint Venture License Agreement")).
D. Subject to the conditions set forth herein, IN and TW have agreed
to enter into a Stockholders Agreement with the Company in the form attached
hereto as Exhibit B (the "Stockholders Agreement"), an Investor Rights Agreement
with the Company in the form attached hereto as Exhibit C (the "Investor Rights
Agreement" and, together with this Agreement and the Stockholders Agreement, the
"Corporate Documents"), and the Joint Venture License Agreement to establish and
govern the operations of the Company. Subject to the conditions set forth
herein, IN and TW also have agreed to enter into a Termination and License
Agreement in the form attached hereto as Exhibit D (the "Termination and License
Agreement") with respect to the license of certain of IN's patents directly to
TW for use outside of the Territory described above.
Now, therefore, the parties hereto agree to the following:
1. PURCHASE OF SHARES. On the Closing Date (as defined in Section 6)
------------------
and subject to the terms and conditions of this Agreement, each Purchaser shall
purchase from the Company, and the Purchasers shall cause the Company to sell to
each Purchaser, 2,500,000 shares of the Company's common stock (the "Shares") at
a purchase price of $500,000 (the
<PAGE>
"Purchase Price") or $0.20 per Share. Upon its receipt of the entire Purchase
Price, the Purchasers shall cause the Company to issue a duly executed stock
certificate evidencing the Shares registered in each Purchaser's name in
accordance with Section 14.
2. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER. Each Purchaser
------------------------------------------------
represents and warrants that:
(a) Organization. Purchaser is a corporation duly
------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, it has the corporate power and is authorized
under its charter documents to carry on its business as now conducted, and it is
qualified to transact business and is in good standing in its jurisdiction of
incorporation.
(b) Authorizations. Purchaser has performed all corporate
--------------
actions and received all corporate authorizations necessary to execute and
deliver each of the Corporate Documents and (subject to Section 6(i)) to perform
its obligations thereunder and each of the Corporate Documents is, or when
executed and delivered shall be, valid, binding and enforceable against it
(subject to applicable principles of equity and bankruptcy and insolvency laws).
(c) Governmental Licenses. Purchaser has the power and
---------------------
authority and all material governmental licenses, authorizations, consents and
approvals to be obtained within that jurisdiction of incorporation to own its
assets, carry on its business and to execute, deliver, and perform its
obligations under the Corporate Documents (but only to the extent that failure
to do so would not have a material adverse effect on the Company's business).
(d) Third Parties. Except as described in Section 6(i) or
-------------
as may be required (with respect to notices required to be made after the
Effective Date, which notices shall be filed in a timely manner) by the
Securities and Exchange Commission, the National Association of Securities
Dealers or NASDAQ, there are no (A) non-governmental third parties or (B)
governmental or regulatory entities in the United States who are entitled to any
notice of the transaction, licenses and services contemplated hereunder or whose
consent is required to be obtained by Purchaser for the consummation of the
transaction contemplated hereunder.
(e) No Claims. To the best of Purchaser's knowledge, (a) no
---------
claims have been made in respect of the Corporate Documents and no demands of
any third party have been made pertaining to them, and (b) no proceedings have
been instituted or are pending or threatened that challenge the rights of
Purchaser in respect thereof.
3. INDEMNIFICATION.
---------------
(a) TW Obligation. TW shall defend, indemnify and hold
-------------
harmless the Company, IN and their officers, shareholders, and employees from
and against all costs, expenses and losses (including reasonable attorneys' fees
and costs) incurred through claims of any third parties against the Company or
IN based on a breach by TW of any representation or warranty made in the
Corporate Documents.
(b) IN Obligation. IN shall defend, indemnify and hold
-------------
harmless the Company and TW and their officers, shareholders, and employees from
and against all costs,
2
<PAGE>
expenses and losses (including reasonable attorneys' fees and costs) incurred
through claims of third parties against the Company or TW based on a breach by
IN of any representation or warranty made in the Corporate Documents.
(c) Condition to Obligations. The indemnification
------------------------
obligations herein are contingent upon (i) the indemnified Party ("Indemnified
Party") giving prompt written notice to the Indemnifying Party(s) ("Indemnifying
Party") of any such claim, (ii) the Indemnified Party allowing the Indemnifying
Party(s) to control the defense and settlement of any such claim, and (iii) the
Indemnified Party fully assisting, at the Indemnifying Party's (or Parties')
expense, in the defense; provided, however, that without relieving the
-------- -------
Indemnifying Party of its obligations hereunder or impairing the Indemnifying
Party's right to control the defense or settlement thereof, the Indemnified
Party may elect to participate through separate counsel in the defense of any
such claim, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (a) the employment of counsel by such Indemnified
Party has been authorized in writing by the Indemnifying Party, (b) the
Indemnified Party shall have reasonably concluded that there exists a material
conflict of interest between the Indemnifying Party and such Indemnified Party
in the conduct of the defense of such claim (in which case the Indemnifying
Party shall not have the right to control the defense or settlement of such
claim on behalf of such Indemnified Party) or (c) the Indemnifying Party shall
not have employed counsel to assume the defense of such claim within a
reasonable time after notice of the commencement thereof. In each of such cases
the reasonable fees and expenses of counsel shall be at the expense of the
Indemnifying Party.
(d) Survival. Notwithstanding any other provision of this
--------
Agreement, the provisions of this Section 3 are intended to and shall survive
termination of this Agreement so as to cover all claims instituted within the
period set forth in the applicable statute of limitations.
4. RESTRICTIVE LEGENDS. Purchaser understands and agrees that the
-------------------
Company will place the legends set forth in the Stockholders Agreement, or
similar legends on any stock certificate(s) evidencing the Shares, together with
any other legends that may be required by state or federal securities laws, the
Company's Certificate of Incorporation or Bylaws, any other agreement between
Purchaser and the Company or any agreement between Purchaser and any third
party.
5. IN SHAREHOLDER APPROVAL COVENANTS. Each of TW and IN acknowledge
---------------------------------
and agree that the non-exclusive licenses to be granted by each of TW and IN
pursuant to the Joint Venture License Agreement shall each become an exclusive
license, pursuant to Section 2 of the Joint Venture License Agreement, upon the
approval by the shareholders of IN of such exclusivity (the "Shareholder
Approval"). In connection therewith, IN agrees and covenants that:
(a) IN, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
discussions or negotiations with any parties with respect to any Third Party
Action (defined below). Neither IN nor any of its affiliates shall, nor shall IN
authorize or permit any of its or their respective officers, directors,
employees, representatives or agents to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with or provide
any non-public information to any person or
3
<PAGE>
group (other than TW or any designees of TW) concerning any Third Party Action;
provided, however, that nothing herein will prevent the IN board of directors
(the "IN Board") from taking and disclosing to IN's shareholders a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), with regard to any tender or
exchange offer. IN shall promptly notify TW in the event it receives any
proposal or inquiry concerning a Third Party Action, including the terms and
conditions thereof and the identity of the party submitting such proposal; and
shall advise TW from time to time of the status and any material developments
concerning the same.
(b) The IN Board shall recommend the Shareholder Approval to the
IN shareholders. Except as set forth in this Section 5(b), the IN Board shall
not withdraw its recommendation of the Shareholder Approval or approve or
recommend, or cause IN to enter into any agreement with respect to, any Third
Party Action. Notwithstanding anything else herein, if the IN Board by a
majority vote determines in its good faith judgment, after consultation with and
based upon the advice of counsel reasonably acceptable to TW, that it is
required to do so in order to comply with its fiduciary duties, the IN Board may
withdraw its recommendation of the Shareholder Approval or approve or recommend
a Superior Proposal (defined below), but in each case only (i) after providing
reasonable written notice to TW (a "Notice of Superior Proposal"), advising TW
that the IN Board has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person making
such Superior Proposal; and (ii) if TW does not, within five (5) business days
of TW's receipt of the Notice of Superior Proposal, make an offer that the IN
Board by a majority vote determines in its good faith judgment to be at least as
favorable to IN's shareholders as such Superior Proposal; provided, however,
that IN shall not be entitled to consummate any agreement with respect to a
Superior Proposal unless and until the payments required pursuant to Section
5(d) are made. Any disclosure that the IN Board may be compelled to make with
respect to the receipt of a proposal for a Third Party Action or otherwise in
order to comply with its fiduciary duties or Rule 14d-9 or 14e-2 will not
constitute a violation of this Agreement provided that such disclosure states
that no action will be taken by the IN Board in violation of this Section 5(b).
(c) For the purposes of this Agreement, "Third Party Action"
means the occurrence of any of the following events: (i) the acquisition of IN
by merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than TW or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of any material
portion of the assets or equity interests of IN, except to the extent such
acquisition would not affect the terms of the Corporate Documents, the Joint
Venture License Agreement or the Termination and License Agreement; (iii) the
adoption by IN of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (iv) any other action of IN that would prevent the
licenses described in the first paragraph of this Section 5 from becoming
exclusive. For purposes of this Agreement, a "Superior Proposal" means any bona
fide proposal that, if consummated, would prevent the licenses described in the
first paragraph of this Section 5 from becoming exclusive and otherwise on terms
that the IN Board by a majority vote determines in its good faith judgment to be
more favorable to IN's shareholders than such licenses becoming exclusive.
4
<PAGE>
(d) Without limiting any of the restrictions set forth in
this Section 5, in the event that IN consummates any agreement with respect to a
Third Party Action, then IN shall pay to TW a fee of $150,000, plus the
reasonable out-of-pocket expenses incurred by TW in connection with this
transaction (which expenses shall not exceed $100,000), within one (1) business
day of such consummation.
(e) IN shall prepare and distribute, as promptly as
practicable, a proxy statement in connection with the Shareholder Approval
described in this Section 5. IN shall consult with TW in connection with such
proxy statement and Shareholder Approval process, and shall allow TW to review
drafts of such proxy statement and reasonably participate in IN shareholder
presentations. IN shall consider in good faith any comments made by TW with
respect to proxy statement drafts. TW shall provide all information reasonably
requested by IN in connection with the preparation of any such proxy statement.
6. CONDITIONS TO CLOSING. The obligations of each Purchaser to
---------------------
purchase the Shares at the closing (the initial purchase of the Shares which
shall take place at the offices of Orrick, Herrington & Sutcliffe LLP, counsel
to TW, 400 Sansome Street, San Francisco, California 94111, at 9:00 a.m. on such
date occurring within three (3) business days of the satisfaction of the
condition set forth in Section 6(i) below or as otherwise mutually agreed upon
by the parties (the "Closing" or "Closing Date")) are subject to the fulfillment
to its satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Company Name. The Purchasers shall in good faith have
------------
agreed upon a name for the Company.
(b) Filing of the Certificate. The Company's Certificate of
-------------------------
Incorporation in the form attached hereto as Exhibit E shall have been filed
with the Secretary of State of Delaware.
(c) Organizational Minutes. The Board of Directors of the
----------------------
Company shall have adopted its organizational minutes in a form satisfactory to
the Purchasers.
(d) Bylaws. The Board of Directors of the Company shall
------
have adopted the Company's Bylaws in the form attached hereto as Exhibit F.
(e) Joint Venture License Agreement. The Company and the
-------------------------------
Purchasers shall have executed and delivered the Joint Venture License Agreement
in the form attached hereto as Exhibit A.
(f) Stockholders Agreement. The Company and the Purchasers
-----------------------
shall have executed and delivered the Stockholders Agreement in the form
attached hereto as Exhibit B.
(g) Investor Rights Agreement. The Company and the
-------------------------
Purchasers shall have executed and delivered the Investor Rights Agreement in
the form attached hereto as Exhibit C.
5
<PAGE>
(h) Termination and License Agreement. The Purchasers shall
---------------------------------
have executed and delivered the Termination and License Agreement in the form
attached hereto as Exhibit D.
(i) Bankruptcy Court Approval. IN shall have received
-------------------------
bankruptcy court approval of a joint stipulation with regard to the Termination
and License Agreement in a form satisfactory to the Purchasers.
(j) Representations and Warranties. Each Purchaser shall
------------------------------
have delivered a certificate stating that (i) the representations and warranties
made by such Purchaser in Section 3 hereof are true and correct on the Closing
Date with the same force and effect as if they had been made on and as of that
date and (ii) the representations and warranties set forth on Exhibit G are true
and correct on the Closing Date.
IN and TW shall use their best efforts to effect the Closing, subject to the
conditions set forth herein, promptly upon the satisfaction of the condition set
forth in Section 6(i) above.
7. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and the
------------------------------------
transfer of the Shares will be subject to and conditioned upon compliance by the
Company and Purchaser with all applicable state and federal laws and regulations
and with all applicable requirements of any stock exchange or automated
quotation system on which the Company's common stock may be listed or quoted at
the time of such issuance or transfer.
8. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
----------------------
inure to the benefit of the successors and assigns of the Company and the
Purchaser's heirs, executors, administrators, successors and assigns.
9. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by
---------------------------
and construed in accordance with the laws of the State of Delaware, excluding
that body of laws pertaining to conflict of laws. If any provision of this
Agreement is determined by a court of law to be illegal or unenforceable, then
such provision will be enforced to the maximum extent possible and the other
provisions will remain fully effective and enforceable.
10. NOTICES. Any notice required or permitted hereunder will be given
-------
in writing and will be deemed effectively given upon personal delivery, six (6)
days after deposit in the United States mail by certified or registered mail
(return receipt requested), one (1) business day after its deposit with any
return receipt express courier (prepaid), or one (1) business day after
transmission by telecopier, addressed to the other party at its address (or
facsimile number, in the case of transmission by telecopier) as shown below its
signature to this Agreement, or to such other address as such party may
designate in writing from time to time to the other party.
11. FURTHER INSTRUMENTS. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
12. HEADINGS. The captions and headings of this Agreement are
--------
included for ease of reference only and will be disregarded in interpreting or
construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
6
<PAGE>
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
and understanding of the parties with respect to the subject matter of this
Agreement, and supersedes all prior understandings and agreements, whether oral
or written, between the parties hereto with respect to the specific subject
matter hereof.
14. TITLE TO SHARES. The exact spelling of the name under which each
---------------
Purchaser will take title to the Shares is that name listed on the signature
page hereto. Each Purchaser desires to take title to the Shares as a
corporation.
15. PUBLIC ANNOUNCEMENT. The Purchasers may announce the existence of
-------------------
the Purchasers' relationship and this Agreement only at a time and in a form to
be mutually determined, except for any such disclosure required by law,
governmental authorities or stock exchanges.
7
<PAGE>
IN WITNESS WHEREOF, each Purchaser has caused this Agreement to be
executed in duplicate, by its duly authorized representative, as of the
Effective Date.
Two Way TV Ltd.
By: /s/ Piers Wilson
------------------------------
Name: Piers Wilson
Title: Finance Director
Interactive Network, Inc.
By: /s/ Bruce W. Bauer
------------------------------
Name: Bruce W. Bauer
Title: President and Chief Executive Officer
8
<PAGE>
EXHIBIT 2.2
JOINT VENTURE LICENSE AGREEMENT
<PAGE>
JOINT VENTURE LICENSE AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS 1
1. DEFINITIONS........................................................... 2
2. LICENSES TO TWIN...................................................... 5
3. TRADEMARK LICENSE..................................................... 10
4. DELIVERY OBLIGATIONS.................................................. 11
5. LICENSES FROM TWIN.................................................... 13
6. SUPPORT AND TRAINING.................................................. 13
7. OTHER LICENSOR OBLIGATIONS............................................ 14
8. PAYMENTS.............................................................. 17
9. TAXATION.............................................................. 18
10. INTELLECTUAL PROPERTY RIGHTS.......................................... 19
11. CONFIDENTIALITY....................................................... 19
12. INDEMNIFICATION....................................................... 21
13. WARRANTIES............................................................ 22
14. DISCLAIMER; LIMITATION OF LIABILITY................................... 25
15. TERM AND TERMINATION.................................................. 26
16. MISCELLANEOUS......................................................... 28
</TABLE>
EXHIBIT A - DESCRIPTION OF THE IN PATENTS
EXHIBIT B - TWIN BUSINESS
EXHIBIT C - PERFORMANCE CRITERIA
EXHIBIT D - DESCRIPTION OF CURRENT TW TECHNOLOGY
EXHIBIT E - THIRD-PARTY LICENSES
EXHIBIT F - SUPPORT SERVICES
EXHIBIT G - LITIGATION
<PAGE>
JOINT VENTURE LICENSE AGREEMENT
This Joint Venture License Agreement ("Agreement"), dated as of January 31,
2000 ("Effective Date"), is among Two Way TV Limited ("TW"), a corporation
organized under the laws of England and Wales, having its principal office at
Beaumont House, Kensington Village, Avonmore Road, London, England W148TS,
Interactive Network, Inc. ("IN"), a California corporation having its principal
office at 1161 Old County Road, Belmont, California 94002 U.S.A. (each a
"Licensor" and together "Licensors") and TWIN Entertainment Inc. ("TWIN"), a
Delaware corporation having its principal office at 50 Francisco Street, Suite
490, San Francisco, California 94111 U.S.A. (hereinafter collectively referred
to as the "Parties" and individually as a "Party").
RECITALS
A. IN and TW have entered into a Joint Venture and Stock Purchase
Agreement dated as of December 6, 1999 and contemporaneously with the execution
of this Agreement are entering into a Stockholders Agreement and Investors
Rights Agreement to establish TWIN to develop, market and supply digital (as
well as analog) interactive and related services, products and technology in the
Territory (as defined below).
B. TW is, among other things, in the business of developing, marketing,
and selling certain software and hardware products for interactive television
systems and other telecommunications uses, and has developed valuable
intellectual property related to such products, services and technology.
C. IN is, among other things, in the business of designing, developing
and licensing certain technology useful for interactive television and other
telecommunications applications, and has developed valuable intellectual
property related to such products, services and technology.
D. TWIN desires Licensors to grant to TWIN, and Licensors are each
willing to grant to TWIN, a license to use certain of their respective
intellectual property rights for developing, marketing and supplying certain
digital and analog interactive services, products and technology, in the
Territory and subject to the terms and conditions as hereinafter set forth.
E. Licensors have determined, through mutual agreement prior to the
Effective Date, which of each Licensor's technology and intellectual property
rights related to TWIN's business and existing as of the Effective Date will
initially be licensed to TWIN.
F. TWIN desires to receive from TW, and TW is willing to supply to TWIN,
certain relevant technical training, maintenance and support services.
G. Licensors desire TWIN to grant to Licensors, and TWIN is willing to
grant to Licensors, a right of first refusal to license for use outside the
Territory certain of TWIN's technology and associated intellectual property
rights that may be developed in the future, subject to the terms and conditions
as hereinafter set forth.
<PAGE>
ACCORDINGLY, in consideration of the mutual covenants and promises
contained herein, the Parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Applicable Law" shall mean, as to any person, any statute, law,
rule, regulation, directive, treaty, judgment, order, decree or injunction of
any Governmental Authority that is applicable to or binding upon such person or
any of its properties.
1.2 "Approval Date" shall mean the date on which IN has received the
requisite vote by IN's shareholders approving the grant to TWIN of an exclusive
license under the Licensed Patents on the terms and conditions contained herein,
which date shall occur before the six (6) month anniversary of the Effective
Date.
1.3 "Associated Agreements" shall mean the Joint Venture and Stock
Purchase Agreement among the Parties dated as of December 6, 1999, and the
Stockholders Agreement and Investors Rights Agreement among the Parties and TWIN
of even date herewith.
1.4 "Confidential Information" shall mean information or materials
disclosed to a Party by another Party that are marked as "Confidential" or
"Proprietary" or, if disclosed orally, identified as such at the time of
disclosure and reduced by the disclosing Party to written form marked
"Confidential" or "Proprietary" within twenty (20) days after oral disclosure.
"Confidential Information" shall include, whether or not marked "Confidential"
or "Proprietary," all source code of any Party.
1.5 "Current TW Technology" shall mean all of the TW Technology and TW's
Proprietary Rights developed, reduced to practice and/or existing prior to the
Effective Date. A summary listing of certain key items of Current TW Technology
is set for th in Exhibit D.
---------
1.6 "Customer" shall mean a Person having a valid business or residential
mailing address in the Territory (which is not a post office box number unless
there is another valid mailing address in the Territory) who receives TWIN
services or products in the Territory. Customers may include, without
limitation, telecommunications service, equipment and content providers;
Internet service providers; cable television service, equipment and content
providers; satellite television service, equipment and content providers; and
end user consumers in the Territory.
1.7 "Derivative Work" shall mean a "derivative work" or "compilation"
within the meaning of such terms under the U.S. Copyright Act (17 U.S.C. (S) 101
et seq.), which meaning is as follows: a "derivative work" is a work based upon
one or more preexisting works, such as a translation, abridgment, condensation,
or any other form in which a work may be recast, transformed, or adapted, or a
work consisting of editorial revisions, annotations, elaborations, or other
modifications which, as a whole, represent an original work of authorship; and a
"compilation" is a work formed by the collection and assembling of preexisting
materials or of data that are selected, coordinated, or arranged in such a way
that the resulting work as a whole constitutes an original work of authorship,
and including collective works.
2
<PAGE>
1.8 "Effective Date" shall mean the date of this Agreement as set forth
in the preamble.
1.9 "Gannett Rights" shall mean the right of Gannett Co., Inc. to
participate in opportunities related to real-time electronic news services on a
national basis as described in the Stock Purchase Agreement listed in Exhibit E.
---------
1.10 "Governmental Authority" shall mean any domestic or foreign
government, governmental authority, court, tribunal, agency or other regulatory,
administrative or judicial agency, commission or organization, and any
subdivision, branch or department of any of the foregoing.
1.11 "Gross Revenues" shall mean the total revenues derived from the sale,
licensing, provision and distribution of products, services and technology and
intellectual property rights by TWIN and its Subsidiaries, without duplication,
less any sales, excise and consumption taxes and customs duties levied in
respect of such transactions, accepted returns of the pertinent items, bona fide
price adjustments (including distributor price adjustments), commissions, and
any packing, shipping, transportation and insurance costs related to the sale of
such items which costs are passed through to (i.e., the actual costs incurred
are billed on to) a customer or other Person.
1.12 "Handset Technology," as used herein, shall mean the subset of TW
Technology comprising inventions, whether patented or not, software, hardware
and knowhow that enable the transmission of data between a handheld transmitting
device (e.g., a set-top box remote control device) and a receiving device (e.g.,
a set-top box) or between a set-top box to a handheld or other "slave" device.
1.13 "IN Patents" shall mean the specific patents set forth in Exhibit A
---------
and the initial patents, if any, issuing on the applications set forth in
Exhibit A and, in either case, any continuations, divisionals, continued
- ---------
prosecution applications, reissues, and reexaminations thereof (but excluding
any continuations in part and new inventions).
1.14 "IN Technology" shall mean all of IN's future content, interactive
content, software (in source code, object code, byte code, script, or other
form), software documentation, technologies, inventions, know-how, trade
secrets, market and test data, technical data, techniques, methods, processes,
and other technological materials or information that are wholly owned by IN.
1.15 "Licensed Marks" shall mean all trademarks, service marks, trade
names, logos and marks now owned or hereafter developed, acquired or used by TW
in connection with the TW Technology Related to TWIN Business.
1.16 "Localization" shall mean the adaptation of the TW Technology for
purposes of developing the TWIN services and products and conducting the TWIN
Business, including the conversion of art and other materials (including logos,
if any) to American English for use in connection with the TWIN services and
products. Any modification of the Licensed Marks shall be mutually agreed upon
by the Parties in writing.
3
<PAGE>
1.17 "Performance Criteria" shall mean the performance milestones and
schedule set forth in Exhibit C, as may be amended by the Licensors from time to
---------
time hereafter in a writing signed by the Licensors.
1.18 "Person" shall mean a natural individual, Governmental Authority,
legal entity, partnership, firm, corporation and other association.
1.19 "Proprietary Rights" shall mean, collectively, Patents, Trade
Secrets, Copyrights, Moral Rights, rights in trade dress, design and maskwork
rights, any rights analogous to those set forth in the preceding clauses, and
all other intellectual property rights and proprietary rights, excluding
trademarks and service marks, whether arising under the laws of the United
States or any other state, country or jurisdiction in each case now existing or
hereafter developed or coming into existence during the term of this Agreement.
For purposes of this Agreement: (a) "Patents" shall mean all patent rights and
all right, title and interest in all letters patent or equivalent rights and
applications, including any reissue, extension, division, continuation, or
continuation-in-part applications throughout the world; (b) "Trade Secrets"
shall mean all right, title and interest in all trade secrets and trade secret
rights arising under common law, state law, federal law or laws of foreign
countries; (c) "Copyrights" shall mean all copyrights, and all right, title and
interest in all copyrights, copyright registrations and applications for
copyright registration, certificates of copyright and copyrighted interests
throughout the world, and all right, title and interest in related applications
and registrations throughout the world; and (d) "Moral Rights" shall mean any
right to claim authorship, to prevent modification or other derogatory action in
relation to the subject work, to withdraw from or control distribution, and any
similar rights, existing under the law of any country or under any treaty,
regardless of whether such right is referred to as a "moral right."
1.20 "Related to TWIN Business" shall mean useful to, relevant to or
capable of being used in connection with the TWIN Business, as broadly
interpreted and as determined by vote in accordance with Section 2.6 with
respect to TW's Proprietary Rights and TW Technology that are developed or
reduced to practice or that come into existence on or after the Effective Date.
1.21 "Subsidiary," with respect to a Party, shall mean any corporation,
partnership or other entity, more than fifty percent (50%) of whose shares or
ownership interests entitled to vote for the election of directors (other than
any shares whose voting rights are subject to restriction) or, in the case of a
noncorporate entity, the equivalent interests, are owned or controlled by such
party, directly or indirectly, now or hereafter, but such corporation,
partnership or other entity shall be deemed to be a Subsidiary only for so long
as such ownership or control exists.
1.22 "Territory" shall mean (a) the United States of America and all its
territories, and Canada, and (b) such additional countries and jurisdictions as
the Licensors may hereafter mutually agree in writing to include in the
definition of "Territory."
1.23 "TW Technology" shall mean all of TW's existing and future: content,
interactive content, software (in source code, object code, byte code, script,
or other form), software documentation, technologies, inventions, know-how,
trade secrets, Handset Technology, circuit diagrams, schematics, logic-flow
diagrams, market and test data, technical data, techniques, methods, processes,
and other technological materials and information that are wholly owned by
4
<PAGE>
TW or as to which, and only to the extent and subject to the conditions under
which, TW has the right, as of the Effective Date or thereafter during the term
of this Agreement, to grant licenses or sublicenses of the scope granted herein,
without such grant resulting in the payment of royalties or other consideration
to third parties (unless and until TW is reimbursed for any payments so made, in
which case such information shall be included within TW Technology for any
license or sublicense to TWIN) except for payments to a Subsidiary of TW, if
any, or payments to third parties for TW Technology developed or created by such
third parties while employed by TW or any Subsidiary thereof. TW Technology
includes all of the foregoing and any improvements, enhancements and upgrades
thereto hereafter developed or acquired by TW.
1.24 "TWIN Business" shall mean the business activities expected to be
conducted by TWIN as described in Exhibit B, and any additional business
---------
activities contained in any future business plan of TWIN or amendment thereto,
which additional activities have been approved by the Board of Directors of TWIN
and by both TW and IN.
1.25 "TWIN Derivative Works" shall mean Derivative Works based on the TW
Technology licensed to TWIN hereunder which are developed solely by (or under
contract for) TWIN, and includes without limitation Localizations of the TW
Technology and Licensed Marks.
1.26 "TWIN Technology" shall mean all of TWIN's content, interactive
content, software (in source code, object code, byte code, script, or other
form), technologies, inventions, know-how, trade secrets, market and test data,
technical data, techniques, methods, processes, and other technological
materials or information that is wholly owned by TWIN (excluding all of the TW
Technology and IN Patents, and associated Proprietary Rights thereto, that are
licensed to TWIN hereunder).
2. LICENSES TO TWIN.
2.1 TW License. Subject to all the terms and conditions of this
----------
Agreement, TW hereby grants to TWIN a non-exclusive, royalty-free, perpetual
(subject to termination under Section 16 ("Term and Termination")), non-
transferable license under all of TW's Proprietary Rights (exclusive of the
Licensed Marks), in the Territory, to:
(a) Reproduce, publicly perform, publicly display, modify,
distribute and otherwise use the Current TW Technology, the TW Technology
Related to TWIN Business, and any TWIN Derivative Works thereof, including
without limitation the rights to perform Localization and to create TWIN
Derivative Works;
(b) Reproduce and otherwise use the Current TW Technology, the TW
Technology Related to TWIN Business, and TWIN Derivative Works for back-up,
archival, maintenance, and technical support purposes;
(c) Make, have made (which terms shall include the acts of
assembling and/or testing), use, sell, offer for sale, import, lease and
otherwise dispose of products and services in the Territory; and
5
<PAGE>
(d) Effective as of the Approval Date and only during the periods
when the license granted in this Section 2.1 ("TW License") is exclusive,
sublicense any of the foregoing rights in the Territory on a non-exclusive
basis, provided that the other terms and conditions of any such sublicense are
substantially similar to the terms and conditions of this Agreement, provided
further that any such sublicense (or amendment or extension thereof) shall be
subject to the prior written approval of TW, which approval shall not be
unreasonably withheld, provided further that TWIN shall provide written notice
to Licensors of the name and address of each sublicensee promptly upon entering
any such sublicense, and provided further that such right to sublicense shall
terminate immediately and automatically upon any conversion of the license grant
in this Section 2.2 ("IN License") from exclusive to non-exclusive in accordance
with the terms hereof. This right to sublicense shall not include the right of
any sublicensee to grant further sublicenses.
The foregoing license shall become exclusive (even as against TW), effective as
---------
of the Approval Date, subject to Section 2.4 ("Performance Criteria"), Section
7.3(b) ("Casco Agreement") and Section 8.3 ("Termination of Support Fees").
2.2 IN License. Subject to all the terms and conditions of this
----------
Agreement and the Gannett Rights, IN hereby grants to TWIN a non-exclusive
royalty-free, non-transferable license, under the IN Patents, for the life of
such IN Patents (subject to termination under Section 16 ("Term and
Termination")) in the Territory, to:
(a) Make, have made (which terms shall include the acts of
assembling and/or testing), use, sell, offer for sale, lease or otherwise
dispose of products and services embodying the inventions described in the IN
Patents; and
(b) Effective as of the Approval Date and only during the periods
when the license granted in this Section 2.2 ("IN License") is exclusive,
sublicense any of the foregoing rights in the Territory on a non-exclusive
basis, provided that the other terms and conditions of any such sublicense are
substantially similar to the terms and conditions of this Agreement, provided
further that TWIN shall provide written notice to Licensors of the name and
address of each sublicensee promptly upon entering any such sublicense, provided
further that any such sublicense (or amendment or extension thereof) shall be
subject to the prior written approval of IN, which approval shall not be
unreasonably withheld, and provided further that such right to sublicense shall
terminate immediately and automatically upon any conversion of the license grant
in this Section 2.2 ("IN License") from exclusive to non-exclusive in accordance
with the terms hereof. This right to sublicense shall not include the right of
any sublicensee to grant further sublicenses.
The foregoing license shall become exclusive (even as against IN), effective as
---------
of the Approval Date, subject to Section 2.4 ("Performance Criteria") and to the
third-party rights and licenses under the IN Patents existing as of the
Effective Date as set forth in Exhibit E. No other rights to the IN Patents or
---------
any other Proprietary Rights of IN are granted by IN.
2.3 Territorial Considerations. The foregoing licenses in Section 2.1
--------------------------
("TW License") and 2.2 ("IN License") include the following:
6
<PAGE>
(a) The incidental use of TWIN products and services by Customers
while outside of the Territory, but TWIN shall not promote such access;
(b) The incidental access to portions of TWIN products and services
from outside the Territory via any and all telephonic, broadcast and electronic
gateways and distribution channels, including without limitation telephone,
television, Internet, satellite and other wireless broadcast, and cable
networks, by third parties other than Customers by virtue of the accessibility
of TWIN products and services through the Internet and wireless transmission
media and methods, but TWIN shall not promote such access;
(c) The caching in the Territory of content, software, and other
portions of the TW Technology and TWIN Derivative Works by Internet Service
Providers and other third parties providing network and infrastructure services
for electronic and other gateways and distribution channels; and
(d) Other ancillary and limited uses of or access to the TW
Technology and TWIN Derivative Works by third parties other than Customers
reasonably related to TWIN's implementation and delivery of TWIN products and
services in the Territory.
Notwithstanding the provisions of this Section 2.3 ("Territorial
Considerations"), TWIN shall make its best commercial efforts to discourage
third parties' and Customers' access to or use of TWIN's products and services
outside the Territory and shall make reasonable efforts, if commercially
feasible and practical, to prevent access to or use of TWIN's products and
services outside the Territory.
2.4 Performance Criteria. The following provisions of Section 2.4
--------------------
("Performance Criteria") shall become effective on the Approval Date and shall
remain in effect thereafter only for so long as the license granted in Section
2.1 ("TW License") and/or the license granted in Section 2.2 ("IN License") are
exclusive:
In the event that TWIN does not meet any of the Performance Criteria in
accordance with the schedule set forth in Exhibit C, each Licensor shall
---------
have the option, exercisable by delivering written notice ("Conversion
Notice") simultaneously to TWIN and the other Licensor within sixty (60)
days after the date such particular Performance Criteria was not met, to
convert to non-exclusive all of its license grants to TWIN set forth in
-------------
Sections 2.1, 2.2 and 2.3, as applicable, which conversion shall become
effective thirty (30) days after receipt by both such Parties of the
Conversion Notice and/or (b) terminate its non-compete obligations set
forth in Section 7.1 (a) ("Non-compete During Exclusivity"), effective
thirty (30) days after receipt by both such Parties of such written notice.
Notwithstanding the foregoing, if a Licensor, whether through its
representative(s) on the Board of Directors of TWIN and whether by acting
or failing to act, unreasonably (i.e., without justification reasonable
under the circumstances) prevents TWIN from meeting any (or all) of the
Performance Criteria, such Licensor shall have no right under this Section
2.4 to convert its license grants hereunder to non-exclusive licenses or to
terminate its non-compete obligations in Section 7.1(a) ("Non-compete
During Exclusivity"). In the event of such "prevention" by a Licensor
("Preventing Licensor") the other Licensor ("Non-Preventing Licensor")
shall have the option,
7
<PAGE>
exercisable by delivering written notice simultaneously to TWIN and the
Preventing Licensor within sixty (60) days after the later of the date the
Non-Preventing Licensor first becomes aware of such prevention or the date
the Performance Criteria was not met, to: (a) convert to non-exclusive all
-------------
of its license grants to TWIN set forth in Sections 2.1, 2.2 and 2.3, as
applicable, which conversion shall become effective thirty (30) days after
receipt by TWIN and the Preventing Party of such written notice, and/or (b)
terminate its non-compete obligations set forth in Section 7.1 (a) ("Non-
compete During Exclusivity"), effective thirty (30) days after receipt by
both such Parties of such written notice; provided, however, that the Non-
Preventing Licensor shall not have such right if the Preventing Party cures
such breach within thirty (30) days of receipt of such written notice such
that the applicable Performance Criteria is met within such thirty (30) day
cure period. Any such license conversion or termination of non-compete
obligations by the Non-Preventing Party shall not modify, terminate or
otherwise affect the exclusivity of the license grants by or the non-
compete obligations of the Preventing Party, which shall remain unchanged.
2.5 Reservation of Rights.
---------------------
(a) TW Reservation of Rights. The Parties agree that TW shall have
------------------------
no obligation to license to TWIN, or provide support to TWIN for, TW Technology
or TW's Proprietary Rights independently developed by TW after the Effective
Date or coming into existence after the Effective Date which are entirely new
and not Related to TWIN Business, but any such TW Technology and TW's
Proprietary Rights shall nevertheless be offered to TWIN on a right of first
refusal basis in accordance with Section 2.7 (i.e. only if TW wishes to make it
available to any third party in the Territory).
(b) IN Reservation of Rights. The Parties agree that IN shall have
------------------------
no obligation to license any IN Technology or any of IN's Proprietary Rights
(other than the IN Patents licensed hereunder), but any such IN Technology and
IN's Proprietary Rights developed by IN or coming into existence after the
Effective Date shall nevertheless be offered to TWIN on a right of first refusal
basis in accordance with Section 2.7 (i.e. only if IN wishes to make it
available to any third party in the Territory).
2.6 Determination of "Related to TWIN Business." If TW intends or
--------------------------------------------
desires at any time to exclude any TW Technology or any of TW's Proprietary
Rights, other than the Current TW Technology, from TW's license grants to TWIN
hereunder, based on TW's good faith belief that such TW Technology and/or TW's
Proprietary Rights are not Related to TWIN Business, TW shall notify IN and TWIN
prior to licensing or otherwise making such TW Technology and/or TW's
Proprietary Rights available to any third party, and at least five (5) business
days prior to a meeting of the TWIN Board of Directors ("Board"), that TW wishes
to present such TW Technology and anticipated applications thereof to the Board
at such meeting. TW shall thereafter make such presentation to the Board,
providing appropriately detailed information and responding to Board member
questions, and the Licensors' respective representatives on the Board ("Licensor
Directors"), if any, shall vote on whether the TW Technology and/or TW's
Proprietary Rights are not Related to TWIN Business. For purposes of such
presentation and vote, TW shall have the right to call a special meeting of the
Board upon not less than ten (10) business days' notice. The effects of the vote
shall be as follows:
8
<PAGE>
(a) Unanimous "Not Related" Vote. If the Licensor Directors agree
---------------------------- -----
unanimously that the TW Technology and/or TW's Proprietary Rights at issue is
- -----------
not Related to TWIN Business (so as not to be subject to TW's license and
- ---
delivery obligations hereunder), then the TW Technology and/or TW's Proprietary
Rights shall be deemed not Related to TWIN Business and, effective as of the
---
date of the vote, such TW Technology and/or TW's Proprietary Rights shall not be
incorporated into this Agreement as TW Technology Related to TWIN Business. Such
unanimous vote of the Licensor Directors shall be binding on TW and TWIN.
(b) Other Vote. If the Licensor Directors vote in any other way
----------
than as set forth in the immediately preceding subsection (a), then the TW
Technology and/or TW's Proprietary Rights shall be deemed Related to TWIN
Business and, effective as of the date occurring ten (10) business days after
the date of such vote, such TW Technology and/or TW's Proprietary Rights shall
be incorporated into this Agreement as TW Technology Related to TWIN Business
(and/or, as applicable, as TW's Proprietary Rights under which the licenses are
granted in Section 2.1 ("TW License")).
(c) Dispute Resolution. Notwithstanding the foregoing, if either
------------------
Licensor believes any final vote, other than a unanimous vote pursuant to
subsection (a) above where such Licensor was represented by a Licensor Director
on the Board, was unreasonable, such Licensor may, by providing written notice
thereof to the other Parties within ten (10) business days of such vote, invoke
the dispute resolution procedure set forth in Section 16.5 ("Arbitration") and,
until such time as such dispute resolution procedure determines the issue, the
TW Technology and/or TW's Proprietary Rights at issue (a) shall not be deemed
incorporated into this Agreement as TW Technology Related to TWIN Business and
(b) shall not be used, licensed, disposed of or otherwise exploited by any
Person in the Territory (including without limitation by any of the Parties or
any of their successors, Subsidiaries, affiliates or licensees).
(d) Non-representation During Vote. If at any time a Licensor is
------------------------------
not represented by a Licensor Director on the Board, such Licensor may invoke
the dispute resolution procedure in accordance with Section 2.6 (c) ("Dispute
Resolution") above if it believes any final vote was unreasonable. If neither
Licensor has a Licensor Director on the Board, then the entire Board shall vote
on whether any TW Technology and/or TW's Proprietary Rights is not Related to
TWIN Business in place of the Licensor Directors in accordance with the
procedures set forth in this Section 2.6, and, unless such vote is unanimous in
accordance with Section 2.6 (a) ("Unanimous "Not Related" Vote"), either
Licensor who believes such final vote was unreasonable may invoke the dispute
resolution procedure in accordance with Section 2.6 (c) ("Dispute Resolution").
2.7 TWIN Right of First Refusal to License Other Technology of the
--------------------------------------------------------------
Licensors. If IN develops after the Effective Date any IN Technology that is
- ----------
Related to TWIN Business or TW develops after the Effective Date TW Technology
that is not Related to TWIN Business, and such Licensor proposes to disclose,
---
license or otherwise make such technology, and/or any associated Proprietary
Rights, available to any third party in the Territory, then such Licensor shall
promptly give written notice ("Notice") simultaneously to the other Parties,
describing in reasonable detail such technology, its potential applications and
the terms and conditions under which such Licensor is willing to license such
technology and/or associated Proprietary Rights to TWIN. For a period of thirty
(30) days following TWIN's receipt of the Notice, TWIN shall
9
<PAGE>
have the right to accept, or (if Licensor is willing to negotiate) negotiate,
finalize and accept, the terms and conditions offered. If TWIN does not deliver
written notice of unconditional acceptance of the offered terms (or of the
mutually agreed upon negotiated terms) to the relevant Licensor within such
thirty (30) day period following its receipt of the Notice, then such Licensor
shall have the right to license such technology to third parties in the
Territory on terms and conditions no more favorable than those offered to TWIN.
3. TRADEMARK LICENSE.
3.1 License Grant. Subject to all the terms and conditions of this
-------------
Agreement, TW hereby grants to TWIN a non-exclusive, non-transferable, royalty-
free license to (i) utilize the Licensed Marks solely in connection with the
marketing, promotion and supply of TWIN products and services incorporating any
TW Technology Related to TWIN Business in the Territory and (ii) modify the
Licensed Marks to include references to the United States or Canada (as
applicable) and perform other Localizations of the Licensed Marks subject to
TW's prior written consent (not to be unreasonably withheld), provided that the
use of all such modified Licensed Marks shall be subject to the terms and
conditions of this Agreement. The foregoing license shall become exclusive
---------
(even as against TW) effective as of the Approval Date, subject to Section 2.4
("Performance Criteria"), Section 8.3 ("Termination of Support Fees") and the
right of TW to grant licenses to the Licensed Marks in conjunction with its
license of Handset Technology to Casco Products International Inc. as permitted
by Section 7.3 (b) ("Casco Agreement"). No other rights to use the Licensed
Marks are granted by TW. TW shall have the right to terminate the license in
any Licensed Mark that is, or that TW reasonably believes may become, the
subject of an infringement claim.
3.2 Quality Standards. TW shall establish reasonable quality standards
-----------------
for the TWIN services and products provided under the Licensed Marks for the
purpose of protecting the Licensed Marks as provided herein, and TWIN will
comply with such standards. In addition, TWIN shall use best efforts to meet
TW's quality standards generally applicable to its licensees. TWIN shall comply
with such general quality standards as they may be amended from time to time by
TW in its sole discretion, provided that any such amendment is generally
applicable to TW's licensees offering similar services or products. TW will
provide reasonable written notice of any such amendment to TWIN and TWIN may use
previously complying materials until its stock runs out or for a period of six
(6) months after receipt of such notice, whichever is sooner.
3.3 Use Guidelines. TWIN will display the notice of trademark status
--------------
provided by TW with use of the Licensed Marks in each piece of advertising or
printed materials in which such Licensed Mark appears. Any co-branding or
private labeling shall be subject to TW's prior written approval (not to be
unreasonably withheld). TWIN acknowledges TW's ownership of the Licensed Marks,
and agrees that it will do nothing inconsistent with such ownership. All uses of
the Licensed Marks by TWIN shall inure to the benefit of and be on behalf of TW.
TW shall be solely responsible, at its own cost and expense, for filing
trademark applications in the Territory of the Licensed Marks, and shall,
promptly after the Effective Date, seek to register the trademark "Two Way TV"
or such substitute or other marks as the Licensors may agree upon in the United
States and Canada. After the Effective Date, TW shall apply to register such
other Licensed Marks in the Territory as TWIN may reasonably request from time
to time, which subsequent applications shall be at the cost and expense of TWIN
if made during the period the
10
<PAGE>
license under Section 2.1 ("TW License") is exclusive. TWIN agrees to supply TW
with specimens of TWIN's uses of the Licensed Marks upon request.
4. DELIVERY OBLIGATIONS.
4.1 TW Delivery.
(a) TW Technology Delivery. TW shall use its best efforts to provide
----------------------
the Current TW Technology (including, without limitation, all source code) in
tangible form to TWIN as soon as reasonably practicable after the Effective
Date. TW shall also, on an on-going basis (subject to Section 8.3), promptly
upon the earlier of such item's availability, its distribution to any third
party, or the earliest practicable time in its development but in any event no
later than a beta version or, to the extent such item is used for internal
purposes, when available in a commercially useful, deliverable form, provide to
TWIN, in tangible form, all new TW Technology and TW's Proprietary Rights that
are Related to the TWIN Business (including without limitation, all source
code), and a reasonable number of samples of tangible embodiments based on or
incorporating such TW Technology and/or TW's Proprietary Rights, such as
circuits, hardware, semiconductor chips, devices, apparatus and tangible
products such as set-top boxes, keyboards and handsets, and improvements,
enhancements and upgrades to the TW Technology as well as know-how, in each case
only if Related to TWIN Business. Any improvement, enhancement, upgrade or
Derivative Work of or to Current TW Technology or TW Technology (including,
without limitation, bug fixes, new features and new products) already determined
to be Related to TWIN Business in accordance with the terms of this Agreement
shall be automatically deemed to be Related to TWIN Business and shall not be
subject to the provisions of Section 2.6 ("Determination of `Related to TWIN
Business'"). As part of its delivery obligation under this Section 4.1, TW shall
(subject to Section 8.3), on an ongoing basis, deliver to TWIN all relevant
market and test data derived from the U.K. rollout (e.g., if available and
relevant, test market data, churn rates, quality control numbers and reports,
content changes and developments, customer satisfaction reports, advertising
data and revenue data, set top box configurations, security codes and other
platform designs and configurations) and any other non-U.S. markets exploited
directly by TW or indirectly through its licensees and Subsidiaries, as
permitted by relevant agreements with third parties or Subsidiaries, as
appropriate. TW shall use its reasonable commercial efforts to include in any
and all relevant future agreements with third parties and Subsidiaries
provisions allowing TWIN access to and use of relevant market and test data
derived from such market rollouts.
(b) Source Code. TWIN agrees that TWIN will not modify the source
-----------
code of TW delivered in accordance with Section 4.1(a) ("TW Technology
Delivery") (hereinafter "TW Source Code") except in accordance with the
provisions of this Section 4.1(b) ("Source Code"). Except for urgent maintenance
purposes as described below, prior to modifying any TW Source Code TWIN shall
provide written notice of its proposed modification(s) to both Licensors and
obtain Board (as defined in Section 2.6) approval for such modification(s). For
purposes of obtaining the Board's prior approval of modifications to TW Source
Code, TWIN may call a special meeting of the Board upon not less than ten (10)
business days' prior notice to Licensors. At the Board meeting, TW shall make a
presentation to the Board, explaining the likely impact of the proposed
modification(s) on TW's support obligations and why it supports or,
alternatively, does not support such modification(s). The Board shall then
determine, by
11
<PAGE>
majority vote, whether TWIN may so modify the TW Source Code. The effects of the
vote shall be as follows:
(i) if the Board determines not to permit such modification of
---
the TW Source Code as proposed, no such modification will be made to the TW
Source Code by TWIN nor to the terms of this Agreement;
(ii) if the Board determines to permit such modification of the
TW Source Code, then TWIN may so modify the TW Source Code, provided
however that (x) if TW did not support such modification(s), then TW shall
---
have no obligation to provide technical support for the particular modified
source code (or any module containing the modified source code) to the
extent such modification(s) make it impractical to do so in the regular
course of business or preclude TW from providing support on commercially
reasonable terms; or (y) if TW did support such modification(s), then TWIN
shall, when such modification is complete, deliver a copy of the
modification(s) ("Source Code Derivative Work") to TW; TWIN shall grant to
TW a non-exclusive, royalty-free, nontransferable (except that TW may
assign this Source Code Derivative Work license in connection with a merger
or sale of substantially all of its assets subject to IN's prior written
consent, not to be unreasonably withheld) license, on an as-is basis,
outside the Territory: (a) to internally use the source code version of the
Source Code Derivative Work solely for back-up, archival, maintenance, and
technical support purposes and (b) to reproduce, publicly perform, publicly
display, modify, distribute and otherwise use the object code version of
the Source Code Derivative Work, with a right to grant sublicenses only to
the object code version of the Source Code Derivative Work; TW shall
provide technical support to TWIN for such Source Code Derivative Work on
the same terms as TW supports TW Technology Related to TWIN Business; and
any modification(s) TW makes to such Source Code Derivative Work shall be
deemed TW Technology Related to TWIN Business, subject to the license and
delivery obligations of TW herein.
Notwithstanding the foregoing, TWIN shall have the right to modify the TW
Source Code without Board approval or notice to Licensors in the event TWIN in
good faith believes such modification(s) are necessary for urgent maintenance
purposes (e.g., to perform emergency fixes for a customer). In such event, TWIN
shall notify TW of the modification(s) it made as soon as reasonably practicable
thereafter, and, at the next regularly scheduled meeting of the Board, the Board
will be notified of such modification(s) and will have the right to require TWIN
to replace such urgent modification(s) with modification(s) that it determines
are preferable. If the Board does require replacement of such modification(s),
subsection (y) of Section 4.1(b)(ii) above (except for the condition that TW
supported such modification(s)) shall apply to such replacement modification(s).
If the Board does not require replacement of such modification(s), TW shall in
good faith determine whether it is practical to provide technical support in the
regular course of business for such modification(s), and, if not, whether to
offer to provide support on other terms. TWIN shall have no obligation to
deliver or license such Source Code Derivative Work to TW unless TW agrees to
provide such technical support on the same terms as TW supports TW Technology
Related to TWIN Business.
12
<PAGE>
4.2 IN Delivery. IN shall provide to TWIN access to any readily available
-----------
historical market or test data Related to TWIN Business existing as of the
Effective Date. IN shall deliver to TWIN, as soon as reasonably practicable
after the Effective Date, a copy of each IN Patent, and records related to
filings and approvals thereof. IN shall deliver to TWIN, as soon as reasonably
practicable after the Approval Date, such documents and other information
necessary, in IN's reasonable determination, to enable TWIN to perform its
obligations, if any, under Sections 12.4 ("Enforcement in the Territory") and
7.2 ("NTN Transactions"), which documents and information shall be deemed the
Confidential Information of IN except to the extent such information is excluded
from the definition of Confidential Information pursuant to Section 11.1 ("Non-
disclosure; Non-use").
5. LICENSES FROM TWIN.
5.1 Right of First Refusal to License TWIN Technology. At the written
-------------------------------------------------
request of one or both Licensors to license certain TWIN Technology (and
associated Proprietary Rights) outside the Territory, which request shall be
sent simultaneously to the other Parties, TWIN shall license such TWIN
Technology to the interested Licensor(s) for exploitation outside the Territory
on such terms and conditions as are negotiated between TWIN and the interested
Licensor(s) on an arm's length basis, in accordance with the provisions set
forth below. The following provisions shall not apply to any Source Code
Derivative Works licensed to TW in accordance with Section 4.1(b) ("Source
Code"). In any country where only one Licensor already actively markets products
or services, that Licensor shall have the right of first refusal to enter into
an exclusive license in such country. If both Licensors actively market products
or services in a particular country, each Licensor shall have the opportunity to
enter into a (non-exclusive) license in that country on substantially the same
terms and conditions as provided to the other Licensor (unless otherwise agreed
by the Parties), but TWIN shall not make such TWIN Technology (or associated
Proprietary Rights) available to any third party in that country. In a country
where neither Licensor actively markets products or services, both Licensors are
free to negotiate for an exclusive or non-exclusive license from TWIN for the
TWIN Technology after receipt of the notice described in the first sentence of
this Section 5.1. Prior to licensing the TWIN Technology (or TWIN Proprietary
Rights) in a particular country to a third party, TWIN shall provide the
Licensors with thirty (30) days' prior written notice of its intent to license
such TWIN Technology and/or Proprietary Rights to a third party. If either
Licensor delivers written notice to TWIN within such period stating that it
desires to enter into a license with respect to such TWIN Technology and/or
Proprietary Rights in such country ("Request to License"), TWIN shall negotiate
exclusively and in good faith with such Licensor (or both Licensors, if both
deliver such notice) for a period of sixty (60) days after such thirty (30) day
notice period, and if no agreement is reached within such sixty (60) day period,
TWIN shall have no further obligation to Licensors and may proceed to license to
third parties, provided, however, that any such license to a third party shall
be on no better terms to such third party than those that were last proposed by
TWIN to the applicable Licensor(s) pursuant to the negotiations described in
this sentence. If neither Licensor delivers a Request to License to TWIN within
such thirty (30) day period, TWIN shall have no further obligation to Licensors
and may proceed to license to third parties.
13
<PAGE>
5.2 Notice of TWIN Technology. TWIN agrees that it will, within a
-------------------------
reasonable time after the development thereof, inform Licensors of any
significant TWIN Derivative Works, other than Localizations.
6. SUPPORT AND TRAINING.
6.1 TW Support. TW shall provide to TWIN initial transition services and
----------
on-going technical training and support services as described in more detail in
Exhibit F (collectively, "Support") in connection with the TW Technology
- ----------
licensed to TWIN hereunder. Such Support shall be provided in accordance with a
schedule to be mutually agreed upon by TWIN and TW. "Support" shall include
TW's obligation to provide future TW Technology and associated Proprietary
Rights to TWIN in accordance with Section 4.1 ("Technology Delivery"). TW shall
have no obligation to provide technical support of any TWIN modifications to TW
Source Code under this Section 6.1 ("TW Support"), except as provided in Section
4.1(b) ("Source Code"). IN shall have no training, maintenance or support
obligations under this Agreement.
6.2 Other Services. From time to time, TWIN may request and TW shall,
--------------
where reasonably possible, provide additional services other than those
described in Section 6.1 ("TW Support") upon terms and conditions as agreed
between TW and TWIN and negotiated on an arm's-length basis. If, in the future,
TWIN intends to develop new software functionality based on any TW software
licensed to TWIN hereunder, TWIN may notify TW of such intention and, if TW is
already developing such functionality, TW will provide such functionality to
TWIN at no charge as soon as available and if TW is not developing such
functionality, TW and TWIN may enter into good faith negotiations on an arm's-
length basis to enter into a development services and/or support agreement
whereby TWIN would hire TW to develop such functionality for TWIN and/or provide
technical support for such functionality. The Parties agree and acknowledge that
TWIN shall have no obligation to hire TW for development projects or special
support services.
6.3 Visits to TWIN Facility. Each Licensor shall be permitted to have a
-----------------------
limited number of engineers and technical personnel visit or temporarily work at
TWIN's facilities at such Party's own cost (subject to Section 6.2 ("Other
Services")) in order to assist TWIN and to enhance information exchange between
TWIN and Licensors. The number of engineers and technical personnel, and
length of their visits, shall be subject to TWIN's prior reasonable approval.
7. OTHER LICENSOR OBLIGATIONS.
7.1 Non-compete Obligations.
-----------------------
(a) Non-compete During Exclusivity. The following provisions of
------------------------------
Section 7.1(a) ("Non-compete During Exclusivity") shall become effective on the
Approval Date and shall remain in effect thereafter, with respect to a
particular Licensor, only for so long as the license granted by such Licensor in
Section 2.1 ("TW License") or Section 2.2 ("IN License"), as applicable, is
exclusive, and subject to termination pursuant to Section 8.3 ("Termination of
- ---------
Exclusivity and Support Fees"):
14
<PAGE>
Licensor agrees not to compete directly or indirectly (except as
provided in Section 7.1(c) below) with TWIN in the Territory for so
long as any of such Licensor's license grants to TWIN set forth in
Section 2 ("Licenses to TWIN") remains in effect and has not been
transferred or assigned by TWIN to any third party.
(b) Non-compete During Non-exclusivity. The following provisions of
----------------------------------
Section 7.1(b) ("Non-compete During Non-exclusivity") shall become effective on
the Effective Date and shall remain in effect thereafter, with respect to a
particular Licensor, only for so long as the license granted by such Licensor in
Section 2.1 ("TW License") or Section 2.2 ("IN License"), as applicable, is non-
----
exclusive (including without limitation, during such periods after the Approval
- ---------
Date when such Licensor's licenses have been converted from exclusive to non-
exclusive in accordance with the terms herein):
Licensor agrees not to compete directly with TWIN in the Territory for
so long as any of such Licensor's license grants to TWIN set forth in
Section 2 ("Licenses to TWIN") remains in effect and has not been
transferred or assigned by TWIN to any third party, but Licensor shall
have the right to grant sublicenses to such Licensor's technology and
Proprietary Rights to unaffiliated Persons in the Territory.
(c) IN Right to Conduct Business. Notwithstanding any provision
----------------------------
herein or in any Associated Agreement to the contrary, IN shall, in any event,
have the right to create or develop a business and engage in business activities
within or outside the scope of the TWIN Business, provided that such business
activities do not directly compete with the then-current primary business
activities of TWIN. By way of example but not limitation, in any event, IN shall
have the right to perform content production services for TWIN or for any third
party in the Territory.
7.2 NTN Transactions.
----------------
(a) Assignment of NTN Licenses. TW acknowledges that it has had an
--------------------------
opportunity to review a copy of the Patent License Agreement between IN and NTN
Communications, Inc. ("NTN") and the subsequent amendment thereto listed in
Exhibit E ("NTN Licenses"), which agreements shall be deemed the Confidential
- ---------
Information of IN disclosed to TW for use only for the purposes set forth in
this Section 7.2(a). TW shall have a period of sixty (60) days following the
Effective Date to determine, and notify the other Parties in writing as to,
whether it believes it is in the best interests of TWIN for IN to assign the NTN
Licenses to TWIN. If TW provides such notice that such agreements should not be
assigned to TWIN, then this Section 7.2 shall be deemed removed from this
Agreement and shall have no further force and effect. Such election not to
---
assign shall not modify or alter any other TW obligation in this Agreement,
including without limitation those set forth in Section 7.3 ("Handset
Technology"). In any other event, IN will, as soon as practicable following the
Approval Date, assign to TWIN the NTN Licenses.
(b) Management of Litigation. This Section 7.2 (b) shall take effect
------------------------
only if IN assigns the NTN Licenses to TWIN in accordance with Section 7.1(a).
IN will assign to TWIN
15
<PAGE>
the right to manage the actual NTN-related litigation listed on Exhibit G as
---------
well as the right to enforce the IN Patents against NTN in the Territory in the
future and to sue NTN for damages in the future. From the proceeds of any
settlement, award or license resulting from the actual litigation listed on
Exhibit G, TWIN will reimburse IN for any and all expenses incurred by IN in
- ---------
connection with such litigation, licenses and associated settlement efforts,
whether incurred prior to or after the date TWIN took over management of such
litigation and including all such expenses incurred by IN in cooperating with
TWIN in such litigation, settlement and licensing. If required by applicable
law, IN agrees to be joined as a party (whether as plaintiff or as defendant) in
any future patent infringement litigation proceedings (in which TWIN is a party)
arising out of or in connection with any of the IN Patents instituted by or
against NTN. The final outcome of such litigation and/or settlement as it
pertains to the IN Patents in the Territory will be binding on TWIN and IN and
the benefit of any license including future royalties (except for the use of
proceeds from the license to reimburse IN for its associated expenses, as
described above) will accrue to TWIN. Any and all recoverable damages, costs,
awards, judgments, or settlement funds derived from existing litigation for past
acts by NTN will go directly to IN. Notwithstanding the foregoing, any
settlement terms with NTN must be approved in writing by IN. TWIN agrees to
execute such documents as necessary to effect the foregoing arrangement with
IN's counsel in Canada currently handling the litigation listed on Exhibit G.
---------
7.3 Handset Technology.
------------------
(a) License Grant to TW Licensees. TWIN understands that handset
-----------------------------
manufacturers outside the Territory may wish to obtain licenses to the Handset
Technology from TW pursuant to which they can exploit the Handset Technology in
multiple jurisdictions. If, following the Approval Date, any such potential TW
licensee desires to exploit the Handset Technology in the Territory or any part
thereof and TWIN receives written notice of such desire, TWIN agrees to enter
into good faith negotiations with TW or such licensee, as appropriate, to enter
into a licensing arrangement whereby TWIN would grant a non-exclusive license to
exploit the Handset Technology in the Territory directly to such third party or
license such right to TW for further sublicensing to such third party, in either
case on terms and conditions mutually agreeable to TWIN and the party with whom
TWIN is contracting. Notwithstanding the foregoing, if, following the Approval
Date, TWIN is already exploiting (or has documented plans to exploit within nine
(9) months) the Handset Technology in the same market segment at the time of
receipt of the notice or is already under contract with a direct competitor of
the third party in the Territory with respect to the Handset Technology, TWIN
shall have no obligation to negotiate with or license the Handset Technology to
any such third party. Promptly after the later of (i) execution by TW of any
agreement which grants any rights or licenses to the Handset Technology in the
Territory and (ii) the Approval Date, TW shall assign to TWIN all of TW's
revenues under such agreement(s) which are derived from the Territory
(including, without limitation, sales of units in and to the Territory and all
sublicense income with respect to the Territory) and all of TW's licenses and
rights thereunder which may be exercised in or with respect to the Territory.
(b) Casco Agreement. The Parties acknowledge that, as of the
---------------
Effective Date, TW is in negotiations to conclude an agreement with Casco
Products International Inc. ("Casco") whereby Casco would license certain
Handset Technology for use in the Territory. TW agrees to keep IN informed of
the progress of negotiations, introduce IN to Casco, permit IN to review the
16
<PAGE>
license agreement prior to execution and to otherwise work with IN to finalize
the license agreement. Promptly after the later of (i) execution of such
agreement by TW and Casco and (ii) the Approval Date, TW shall assign to TWIN
all of TW's revenues thereunder (including without limitation those accrued
prior to the Approval Date) which are derived from the Territory (including,
without limitation, sales of units in and to the Territory and all sublicense
income with respect to the Territory) and all of TW's licenses and rights
thereunder which may be exercised in or with respect to the Territory.
(c) Exploitation in Territory. TWIN will undertake to exploit the
-------------------------
Handset Technology in the Territory under its licenses to TW Technology Related
to TWIN Business hereunder. If TWIN is not exploiting the Handset Technology
under its licenses to TW Technology Related to TWIN Business hereunder in any
particular market within the Territory, TW notifies TWIN in writing ("Handset
Notice") that TW desires to exploit the Handset Technology in such market, and
TWIN does not notify TW in writing within sixty (60) days of TWIN's receipt of
the Handset Notice that TWIN has documented plans to exploit such market within
nine (9) months of receipt of the Handset Notice, then TWIN shall thereafter
grant to TW a non-exclusive license to exploit the Handset Technology in such
specific market, provided that TWIN shall also retain the non-exclusive right to
exploit the Handset Technology in such market under Section 2.1 ("TW License").
7.4 Cooperation During Initial Non-Exclusivity. During the period between
------------------------------------------
the Effective Date and the Approval Date, each Licensor agrees (i) to consult
with each another and with TWIN with respect to any licenses or other rights
such Licensor may consider granting or may actually grant in the Territory, (ii)
to disclose to any such potential licensee that such license might be assigned
to TWIN, (iii) to include in any such license appropriate provisions permitting
such assignment and (iv) to assign any and all such licenses (including without
limitation revenues accrued thereunder prior to the Approval Date other than
payments for services actually provided prior to the Approval Date) to TWIN as
soon as practicable following the Approval Date.
8. PAYMENTS.
8.1 Royalties. The licenses set forth in Sections 2 ("Licenses to TWIN")
---------
and 3 ("Trademark License") shall be royalty-free.
8.2 Support Fees. In consideration of the Support services provided under
------------
Section 6.1 ("TW Support"), TWIN agrees to pay to TW fees ("Support Fees") of
four percent (4%) of its Gross Revenues received prior to the fifth (5th)
anniversary of the Effective Date, and three percent (3%) of its Gross Revenues
received thereafter.
8.3 Termination of Exclusivity and Support Fees. At any time, subject to
-------------------------------------------
IN's prior written approval, TWIN may elect to terminate the Support obligations
of TW under Section 6.1 ("TW Support") and any remaining obligations under
Section 4.1 ("TW Delivery") that were not required to be performed as of the
date of that termination along with TWIN's accompanying Support Fees payment
obligation, provided that (i) TWIN provides to Licensors sixty (60) days'
advance written notice of its intent to terminate; and (ii) TWIN pays to TW all
Support Fees owed through the date of such election. From such date of election,
(a) TW shall have no further
17
<PAGE>
obligations under Section 6.1 or Section 4.1, (b) TWIN's license to the TW
Technology under Section 2.1 ("TW License") and to the Licensed Marks under
Section 3 ("Trademark License") shall automatically convert to non-exclusive,
and (c) TW shall be released from its non-compete obligations in Section 7.1(a)
("Non-compete During Exclusivity").
8.4 Payment and Reports. All Support Fees payable under Section 8.2
-------------------
("Support Fees") shall be payable quarterly within sixty (60) days after the end
of each quarter of TWIN's fiscal year. On or before the date of such payment
TWIN shall send to IN and TW a report describing the basis for its payment
calculation. Notwithstanding the foregoing, in recognition of the need for TWIN
to attract funding from third parties, TWIN shall have the right to delay
payment of Support Fees to TW hereunder until the end of the quarter during
which cumulative Gross Revenues exceeds Ten Million U.S. Dollars (US$10
million).
8.5 Direct Expense Reimbursement. TWIN shall reimburse TW for all
----------------------------
reasonable actual incremental direct costs incurred by TW in providing the
initial transition services under Section 6.1 ("Support"), including the fees
paid to third-party consultants, and out-of-pocket costs of travel and
accommodations for such consultants and TW personnel sent to the United States
incurred in connection with providing the transition services, but not including
salaries of any TW personnel, up to a maximum amount of US$150,000, which amount
may be increased by mutual agreement of Licensors. TWIN shall pay such costs to
TW within thirty (30) days of receipt of the invoice therefor issued by TW,
provided, however, that TWIN may deduct any such amounts paid for costs from any
future Support Fees payable to TW pursuant to Section 8.2 ("Support Fees").
8.6 Currency. All payments made hereunder shall be free and clear of all
--------
deductions, withholding taxes or other charges, except as provided in Section 9,
and shall be made by TWIN in U.S. dollars by wire transfer to a bank account(s)
designated by TW, unless otherwise mutually agreed upon. Any currency conversion
required in connection with payment to TW shall be at the rate received by TWIN
at the time of such payment from the bank it utilizes to make such payment.
8.7 Audit. TW shall have the right, at its own expense, upon reasonable
-----
notice and at reasonable times, but not more than once each fiscal year, to
inspect, through an independent auditor or another person reasonably acceptable
to TWIN, TWIN's records for the purpose of verifying the accuracy of TWIN's
calculations of fees payable hereunder. Should TWIN's calculations be more than
five percent (5%) less than such auditor's or other person's calculations, TWIN
shall be responsible for the reasonable expenses of such audit. TWIN shall keep
records showing the TWIN products, services and technology sold, licensed or
otherwise disposed of in connection with the licenses granted herein and the
calculation of Gross Revenues in sufficient detail to enable the fees payable to
TW to be determined. Such records shall be maintained for a period of at least
three (3) years after the date when payment is due by TWIN.
8.8 Third-Party License Fees. In the event IN or TW, as the case may be,
------------------------
is required to pay a fee to a third party pursuant to any license agreement or
amendment to an existing license agreement for sublicensing such third party's
intellectual property rights to TWIN, TWIN shall be responsible for such fee to
the extent such fee is a separate royalty on sales or other use
18
<PAGE>
by TWIN. Where such fee is part of a general lump sum payment, the sublicensing
Licensor and TWIN shall agree upon a mutually acceptable allocation of such
payment.
9. TAXATION.
9.1 Withholding Tax. If required by Applicable Law, TWIN may withhold
---------------
income tax from any payment to TW. In the case of such withholding, TWIN shall,
(i) without delay, pay the withheld tax to the appropriate tax office and
furnish TW with appropriate evidence of the tax payment and (ii) increase the
amount payable by TWIN to TW hereunder to such amount which, after making all
required withholdings or deductions of withholding taxes therefrom, will equal
the amount payable hereunder had no such withholdings or deductions been
required. TWIN shall indicate on each statement the amount of payment thereunder
which represents TWIN's gross-up to cover required withholding taxes, if any.
Should TW be able, within the maximum period allowable by law, to utilize as a
tax credit an amount which has been paid by TWIN for such withholding taxes, TW
will notify TWIN of the amount which it is able to utilize as a tax credit and
TWIN may deduct such amount from any future payments owed to TW.
9.2 Other Taxes. TWIN shall bear all sales, use and other governmental
-----------
taxes or transaction charges imposed in any jurisdiction which arise in
connection with the delivery to or use by TWIN of TW Technology or IN Patents,
or the manufacture or sale of TWIN products, services and technology by TWIN
hereunder. The Parties will make reasonable commercial efforts to cooperate as
necessary to take advantage of such double taxation treaties as may be available
and to minimize the amount of taxes owed by either Party in connection with this
Agreement.
10. INTELLECTUAL PROPERTY RIGHTS.
10.1 TWIN Rights. TWIN shall own all right, title and interest in and to
-----------
the TWIN Technology and TWIN Derivative Works (subject to Licensors' respective
ownership interests in IN's Proprietary Rights, IN Technology, TW's Proprietary
Rights, TW Technology and Licensed Marks incorporated therein). TWIN shall have
the right, at its own expense, and solely in its own name, to apply for,
prosecute and defend its Proprietary Rights with respect to the TWIN Technology
and TWIN Derivative Works. Licensors agree to cooperate with TWIN to aid in any
application for registration and protection of such TWIN Derivative Works, and
all Proprietary Rights therein, at TWIN's expense. As between Licensors and
TWIN, except for the express licenses granted herein, Licensors and their
respective licensors shall retain and own all right, title and interest in and
to the TW Technology, IN Patents, IN Technology, and all Proprietary Rights
thereto.
10.2 TW Rights. As among the Parties, except for and to the extent of the
---------
express licenses granted herein, TW and its licensors shall retain and own all
right, title and interest in and to the Current TW Technology, TW Technology
Related to the TWIN Business, the Licensed Marks, and all Proprietary Rights
thereto.
10.3 IN Rights. As among the Parties, except for and to the extent of the
---------
express licenses granted herein, IN and its licensors shall retain and own all
right, title and interest in and to the IN Patents and all Proprietary Rights
thereto.
19
<PAGE>
11. CONFIDENTIALITY.
11.1 Non-disclosure; Non-use. Except as expressly authorized among the
-----------------------
Parties, (including, without limitation, the exercise of the rights granted to a
Party under this Agreement), each Party agrees not to disclose, use or permit
the disclosure or use by others of any other Party's Confidential Information,
unless and to the extent such Confidential Information (i) becomes a matter of
public knowledge through no action or inaction of the Party receiving the
Confidential Information, (ii) was in the receiving Party's possession under no
duty of confidentiality before receipt from the Party providing such
Confidential Information, (iii) is rightfully received by the receiving Party
from a third party without any duty of confidentiality, (iv) is disclosed to a
third party by the Party providing the Confidential Information without a duty
of confidentiality on the third party, (v) is disclosed with the prior written
approval of the Party providing such Confidential Information, or (vi) is
independently developed by employees, agents or subcontractors of the receiving
Party who had no access to and without any use of the other Party's Confidential
Information. Information shall not be deemed to be available to the general
public for the purpose of exclusion (ii) above with respect to each Party (x)
merely because it is embraced by more general information in the prior
possession of recipient or others, or (y) merely because it is expressed in
public literature in general terms not specifically in accordance with the
Confidential Information.
11.2 Care of Confidential Information. In furtherance, and not in
--------------------------------
limitation of the foregoing Section 11.1, each Party agrees to do the following
with respect to any such other Party's Confidential Information: (i) exercise
the same degree of care to safeguard the confidentiality of, and prevent the
unauthorized use of, such information as that Party exercises to safeguard the
confidentiality of its own similar information, (ii) restrict disclosure of such
information to those of its employees, agents and sublicensees who have a "need
to know", and (iii) instruct and require such employees, agents and sublicensees
to maintain the confidentiality of such information and not to use such
information except as expressly permitted herein. Each Party further agrees not
to remove or destroy any proprietary or confidential legends or markings placed
upon any documentation or other materials of any other Party.
11.3 Terms of Agreement. The foregoing confidentiality obligations shall
------------------
also apply to the terms and conditions of this Agreement and the Associated
Agreements.
11.4 Required Disclosure. The obligations under this Section 11 shall not
-------------------
prevent the Parties from disclosing the Confidential Information or the terms of
this Agreement to its legal and financial advisors or potential investors, in
each case subject to confidentiality provisions no less restrictive than those
contained herein, or to any government agency, regulatory body or stock exchange
authorities as required by law (provided that the Party intending to make such
disclosure in such circumstances has given prompt notice to the Party providing
such Confidential Information prior to making such disclosure so that such Party
may seek a protective order or other appropriate remedy prior to such disclosure
and cooperates fully with such other Party in seeking such order or remedy) or
as required to fulfill government filing or regulatory body or stock exchange
requirements.
11.5 Term of Confidentiality. The obligations under this Section 11 shall
-----------------------
apply with respect to any Confidential Information for a period of ten (10)
years from the date of disclosure
20
<PAGE>
of such Confidential Information to the receiving Party, unless, with respect to
any particular Confidential Information, the providing Party in good faith
notifies the receiving Party that a longer period shall apply, in which case the
obligations under this Section 11 with respect to such Confidential Information
shall apply for such longer period. Notwithstanding the foregoing, the
obligations under this Section 11 with respect to the source code of any Party
and any information that constitutes a Trade Secret will continue until the
source code or information no longer constitutes a Trade Secret.
11.6 Injunctive Relief. Notwithstanding Section 16.5 ("Arbitration"), the
-----------------
Parties agree that any material breach of Sections 2 ("License to TWIN"), 7.1
("Non-compete Obligations") and 11 ("Confidentiality") of this Agreement may
cause irreparable injury for which no adequate remedy at law exists; therefore,
the parties agree that equitable remedies, including without limitation
injunctive relief and specific performance, are appropriate remedies to redress
any such breach or threatened breach of this Agreement, in addition to other
remedies available to the Parties. If any legal action is brought under this
Section 11.6 ("Injunctive Relief"), the prevailing Party shall be entitled to
receive its attorneys' fees, court costs and other collection expenses, in
addition to any other relief it may receive. Each Party expressly waives the
defense that a remedy in damages will be adequate and any requirement in an
action for specific performance or injunction for the posting of a bond by the
Party seeking relief.
12. INDEMNIFICATION.
12.1 TW Obligation. TW shall defend, indemnify and hold harmless TWIN, IN
-------------
and their officers, shareholders, and employees from and against all costs,
expenses and losses (including reasonable attorneys' fees and costs) (i)
incurred through claims of any third parties against TWIN or IN based on a
breach by TW of any representation and warranty made in this Agreement and (ii)
arising out of any court ruling, arbitral ruling, judgment, or settlement
arising out of any claim that any TW Technology licensed to TWIN hereunder or
its use as permitted hereunder infringes or misappropriates any copyright, trade
secret, U.S. or Canadian nationally registered trademarks or other Proprietary
Rights (other than Patents) of any third party. TW shall have no obligation to
indemnify, hold harmless or defend, and shall have no liability for, any claim
of infringement or misappropriation to the extent any such claim is based on
modification of the TW Technology other than by or for TW where, absent such
modification, no valid claim would exist. If a final injunction against TWIN's
use of any of the TW Technology results from a claim of infringement or
misappropriation (or, if TW reasonably believes such a claim is likely), TW
shall, at its sole expense and option, obtain for TWIN the right to continue
using the subject TW Technology or replace or modify it so it becomes
noninfringing but functionally equivalent; if TWIN continues to use the
infringing TW Technology after receipt of such replacement or modification, TW
shall have no indemnification obligation for such further use.
12.2 IN Obligation. IN shall defend, indemnify and hold harmless TWIN and
-------------
TW and their officers, shareholders, and employees from and against all costs,
expenses and losses (including reasonable attorneys' fees and costs) incurred
through claims of third parties against TWIN based on a breach by IN of any
representation and warranty made in this Agreement.
21
<PAGE>
12.3 Condition to Obligations. The indemnification obligations herein are
------------------------
contingent upon (i) the indemnified Party giving prompt written notice to the
indemnifying Party(s) of any such claim, (ii) the indemnified Party allowing the
indemnifying Party(s) to control the defense and settlement of any such claim,
and (iii) the indemnified Party fully assisting, at the indemnifying Party's (or
Parties') expense, in the defense; provided, however, that without relieving the
indemnifying Party(s) of its (or their) obligations hereunder or impairing the
indemnifying Party's(s') right to control the defense or settlement thereof, the
indemnified Party may elect to participate through separate counsel in the
defense of any such claim, but the fees and expenses of such counsel shall be at
the expense of the indemnified Party unless (a) the employment of counsel by the
indemnified Party has been authorized in writing by the indemnifying Party(s),
(b) the indemnified Party shall have reasonably concluded that there exists a
material conflict of interest between the indemnified Party and the indemnifying
Party(s) in the conduct of the defense of such claim (in which case such
conflicted indemnifying Party(s) shall not have the right to control the defense
or settlement of such claim on behalf of the indemnified Party) or (c) the
indemnifying Party(s) shall not have employed counsel to assume the defense of
such claim within a reasonable time after notice of the commencement thereof.
In each of such cases the reasonable fees and expenses of counsel shall be at
the expense of the indemnifying Party(s).
12.4 Enforcement in the Territory. The following provisions of this
----------------------------
Section 12.4 ("Enforcement in the Territory") shall become effective on the
Approval Date and shall remain in effect thereafter, with respect to a
particular Licensor and its Proprietary Rights licensed hereunder, only for so
long as the license granted by such Licensor in Section 2.1 ("TW License") or
Section 2.2 ("IN License"), as applicable, is exclusive:
---------
The Parties agree that, commencing as of the Approval Date, TWIN shall be
responsible for, and shall bear all costs of (including without limitation
attorneys' fees), policing, protecting and enforcing in the Territory all
Proprietary Rights of the Licensors (whether existing as of the Approval
Date or coming into existence thereafter) which are exclusively licensed to
TWIN hereunder, but such obligation shall continue for each Proprietary
Right only for so long as such Proprietary Right remains subject to an
exclusive license grant hereunder. TWIN agrees to make its best efforts to
fulfill this obligation. If TWIN fails, for any reason, to fulfill this
obligation adequately, in the good faith judgment of the Licensor owner of
the affected Proprietary Right, such Licensor shall have the right to, upon
fifteen (15) days' prior written notice to TWIN, take whatever action it
deems appropriate and TWIN will fully cooperate therewith; provided,
however, that if TWIN fulfills this obligation during such 15-day period,
then such Licensor shall not have such right. In the event a Licensor
exercises such right in accordance with this Section 12.4, such Licensor
shall bear all expenses of such action and receive all benefits (which may
include money damages and cross-licenses) that may result therefrom.
Notwithstanding the foregoing, TWIN shall not take any formal legal action
on account of any suspected or actual infringement or in response to any
claim challenging any Proprietary Right of a Licensor without the prior
written consent of the relevant Licensor, which consent shall not be
unreasonably withheld.
12.5 Notice of Third Party Infringement. If any Party becomes aware of any
----------------------------------
product, service or activity of any third party that involves actual or
suspected infringement or violation
22
<PAGE>
of any Licensor Proprietary Rights in the Territory, whether or not subject to
an exclusive license grant hereunder, such Party shall promptly notify the other
Parties in writing of such infringement or violation. TWIN shall keep the other
Parties apprised of any action TWIN takes in accordance with Section 12.4
("Enforcement in the Territory").
13. WARRANTIES.
13.1 Representations and Warranties of TW. TW represents, warrants and
------------------------------------
agrees that (unless otherwise expressly stated):
(i) as of the Effective Date, it is a corporation duly
organized, validly existing and in good standing under the laws of England
and Wales, it has the corporate power and is authorized under its
memorandum and articles of association to carry on its business as now
conducted, and it is qualified to transact business and is in good standing
in England and Wales;
(ii) as of the Effective Date, it has performed all corporate
actions and received all corporate authorizations necessary to execute and
deliver this Agreement and to perform its obligations hereunder and this
Agreement is valid, binding and enforceable against it (subject to
applicable principles of equity and bankruptcy and insolvency laws);
(iii) as of the Effective Date, it has and shall maintain the
power and authority and all material governmental licenses, authorizations,
consents and approvals to be obtained within England to own its assets,
carry on its business and to execute, deliver, and perform its obligations
under this Agreement (but only to the extent that failure to do so would
have a material adverse effect on the TWIN Business; but the foregoing does
not include any representation regarding the operation of TWIN, as to which
TW makes no representation);
(iv) as of the Effective Date, there are no (A) non-governmental
third parties or (B) governmental or regulatory entities in England and
Wales or the United States who are entitled to any notice of the
transaction, licenses and services contemplated hereunder or whose consent
is required to be obtained by TW for the consummation of the transaction
contemplated hereunder;
(v) it and its licensors are the sole and rightful owners of
all right, title and interest in and to the TW Technology and the Licensed
Marks and all related Proprietary Rights therein and, other than the
necessary third-party consents set forth in Exhibit D which relate to
---------
immaterial portions of the TW Technology, it has the unrestricted right to
market, license and exploit the TW Technology and the Licensed Marks,
including the right to grant the licenses granted to TWIN hereunder;
(vi) the TW Technology as delivered does not infringe or
misappropriate any third-party Copyright or Trade Secret rights;
(vii) as of the Effective Date, to the best of its knowledge, (a)
no claims have been made in respect of the TW Technology or Licensed Marks and
no demands of
23
<PAGE>
any third party have been made pertaining to them, and (b) no proceedings
have been instituted or are pending or threatened that challenge the rights of
TW in respect thereof;
(viii) all software, firmware and systems containing software or
firmware licensed to TWIN hereunder (collectively, "Software Systems")
shall accurately and automatically handle and process all dates (including
without limitation all leap years), date values, and date-related data,
including, without limitation, interpreting, calculating, comparing and
sequencing and prior to, during, and after January 1, 2000; and
(ix) all Software Systems shall substantially conform to the
applicable user's manual, if any, specifications, and documentation
delivered to TWIN in connection with each such Software System; and
(x) upon the request of TWIN, following the Effective Date TW
will commence to deliver, and by completion of the initial transition
services will complete delivery of, all of the Current TW Technology.
13.2 Representations and Warranties of IN. IN represents, warrants and
------------------------------------
agrees that (unless otherwise expressly stated):
(i) as of the Effective Date, it is a corporation duly
organized and validly existing under the laws of California, it has the
corporate power and is authorized under its Certificate of Incorporation
and its Bylaws to carry on its business as now conducted, and it is
qualified to transact business and is in good standing in California;
(ii) as of the Effective Date, it has performed all corporate
actions and received all corporate authorizations necessary to execute and
deliver this Agreement and to perform its obligations hereunder and this
Agreement is valid, binding and enforceable against it (subject to
applicable principles of equity and bankruptcy and insolvency laws);
(iii) as of the Effective Date, it has and shall maintain the
power and authority and all material governmental licenses, authorizations,
consents and approvals to be obtained within the United States to own its
assets, carry on its business and to execute, deliver, and perform its
obligations under this Agreement (but only to the extent that failure to do
so would have a material adverse effect on the TWIN Business; but the
foregoing does not include any representation regarding the operation of
TWIN, as to which IN makes no representation;
(iv) as of the Effective Date, there are no (A) non-
governmental third parties or (B) governmental or regulatory entities in
the United States who are entitled to any notice of the transaction,
licenses and services contemplated hereunder or whose consent is required
to be obtained by IN for the consummation of the transaction contemplated
hereunder;
(v) to the best of its knowledge after due inquiry, other than
the third-party licenses set forth in Exhibit E and the rights granted
---------
therein, it and its licensors are the sole and rightful owners of all
right, title and interest in and to the IN Patents and it
24
<PAGE>
has the unrestricted right to license the IN Patents, including the right
to grant the licenses granted to TWIN hereunder, provided, however, that
the knowledge qualifier modifying this representation shall be deemed
deleted from this representation during any period when the license granted
by IN in Section 2.2 ("IN License") is exclusive;
(vi) as of the Effective Date, to the best of its knowledge,
other than claims asserted respectively by NTN Communications, Inc. and
David B. Lockton in connection with the litigation listed in Exhibit G, (a)
---------
no unresolved claims have been made in respect of the IN Patents and no
demands of any third party have been made pertaining to them, and (b) no
proceedings have been instituted or are pending or threatened that
challenge the rights of IN in respect thereof; and
(vii) as of the Effective Date, the list of patents and patent
applications in Exhibit A comprise all of IN's patents issued in the
---------
Territory prior to the Effective Date and all of IN's patent applications
filed in the Territory prior to the Effective Date.
13.3 Representations and Warranties of TWIN. TWIN represents, warrants and
--------------------------------------
agrees that:
(i) it is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation and it has the
corporate power and is authorized under its charter and organizational
documents to carry on its business as now conducted; and
(ii) it has performed all corporate actions and received all
corporate authorizations necessary to execute and deliver this Agreement
and to perform its obligations hereunder and this Agreement is valid,
binding and enforceable against it (subject to applicable principles of
equity and bankruptcy and insolvency laws).
13.4 No Warranty of Validity. Nothing in this Agreement shall be construed
-----------------------
as (a) a warranty or representation by IN or TW as to the validity of any IN
Patent or any of TW's Patents, respectively, or (b) a warranty or representation
that anything made, used, sold or otherwise disposed of under any license to the
IN Patents or TW's Patents is or will be free from infringement of patents of
third parties.
13.5 Sole Remedy. In the event of any breach by IN of Section 13.2(v), the
-----------
other Parties shall, as their sole and exclusive remedy for such breach, have
the right to seek monetary damages if the breach is material. For purposes of
this provision, "material" shall mean the breach directly caused actual monetary
losses (not including attorneys' fees) to a Party of Five Hundred Thousand U.S.
Dollars (US$500,000) or more. If IN and/or a Party claiming monetary damages
under this provision disagree as to the amount of damages or whether a breach is
material, such disagreement shall be resolved in accordance with the provisions
of Section 16.5 ("Arbitration"). For the sake of clarity, no Party shall have
the right to terminate this Agreement, terminate any license(s) hereunder, or
seek any other remedy for breach of Section 13.2(v) other than the sole and
exclusive remedy set forth in this Section 13.5 ("Sole Remedy").
14. DISCLAIMER; LIMITATION OF LIABILITY.
25
<PAGE>
14.1 Warranty Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NONE OF THE
-------------------
PARTIES HERETO MAKES ANY WARRANTIES, WHETHER EXPRESS OR OTHERWISE, CONCERNING
ANY PROPRIETARY RIGHTS, TW TECHNOLOGY, IN TECHNOLOGY, IN PATENTS, TWIN
TECHNOLOGY, TWIN DERIVATIVE WORKS, TRADEMARKS, PRODUCTS, PROCESSES, DESIGNS,
DOCUMENTS OR INFORMATION LICENSED OR OTHERWISE PROVIDED PURSUANT TO THIS
AGREEMENT, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND WARRANTIES OF FREEDOM FROM ERRORS OR DEFECTS.
14.2 No Consequential Damages. NONE OF THE PARTIES HERETO SHALL BE
------------------------
RESPONSIBLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER
CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES ARISING IN ANY WAY OUT OF THIS
AGREEMENT OR ANY PROPRIETARY RIGHTS, TW TECHNOLOGY, IN TECHNOLOGY, IN PATENTS,
TWIN TECHNOLOGY, TWIN DERIVATIVE WORKS, TRADEMARKS, PRODUCTS, PROCESSES,
DESIGNS, DOCUMENTS OR INFORMATION LICENSED OR OTHERWISE PROVIDED PURSUANT TO
THIS AGREEMENT.
14.3 Limitation on Liability. IN NO EVENT WILL ANY PARTY'S LIABILITY
-----------------------
ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE AMOUNT OF FIVE MILLION
U.S. DOLLARS (US$5,000,000), EXCEPT FOR LIABILITY (EXCLUDING LIABILITY FOR
PATENT INFRINGEMENT CLAIMS) ARISING OUT OF OR RELATED TO SECTION 12.1 (i)
(SOLELY WITH RESPECT TO CLAIMS BASED ON A BREACH OF SECTION 13.1(v) AND/OR (vi))
OR SECTION 12.1 (ii) WHICH SHALL IN NO EVENT EXCEED THE AMOUNT OF TEN MILLION
U.S. DOLLARS (US$10,000,000). Each Party acknowledges that its willingness to
grant such rights as it grants to any the other Party hereunder is expressly
conditioned on its ability to disclaim and exclude such warranties and to limit
its liabilities as set forth above.
15. TERM AND TERMINATION.
15.1 Term. This Agreement shall become effective as of the Effective Date
----
and continue in effect, unless and until terminated in accordance with the
provisions hereof.
15.2 Termination of Licenses on Material Breach by TWIN. Either Licensor
--------------------------------------------------
may terminate its licenses granted to TWIN hereunder, upon written notice to the
other Parties, if TWIN materially breaches Section 2.1 ("TW License") (only in
the case of TW), 2.2 ("IN License") (only in the case of IN), 3 ("Trademark
License") (only in the case of TW), 5 ("Licenses from TWIN"), 8.2 ("Support
Fees"), 8.5 ("Direct Expense Reimbursement") or 11 ("Confidentiality") of this
Agreement and (i) fails to cure such breach within thirty (30) days of written
notice to the other Parties describing the breach in reasonable detail, or (ii)
fails to make reasonably diligent efforts to begin to cure any such breach if a
cure cannot be accomplished within thirty (30) days. Such affected Licensor may
terminate its licenses and rights granted to TWIN immediately upon written
notice to the other Parties, if such material breach is not
26
<PAGE>
capable of cure. If either Licensor terminates its license grants under this
Section 15.2, (x) the Agreement shall be deemed terminated with respect to such
Licensor and all rights and obligations of such Licensor hereunder shall be
terminated simultaneously (except as provided in Section 15.6) and (y) the other
Licensor shall also have the right to terminate its licenses and rights granted
to TWIN effective upon delivery of written notice thereof to the other Parties
within sixty (60) days of the affected Licensor's notice of termination, and the
effect of such other Licensor's termination of its licenses shall be as set
forth in the immediately preceding subsection (x).
15.3 Termination on Material Breach of a Licensor. If either Licensor
--------------------------------------------
("Defaulting Licensor") materially breaches any material provision of this
Agreement (excluding Section 13.2(v)) and (i) fails to cure such breach within
thirty (30) days of written notice describing the breach in reasonable detail
("Default Notice"), or (ii) fails to make reasonably diligent efforts to begin
to cure any such breach if a cure cannot be accomplished within thirty (30) days
and to cure such breach within ninety (90) days of the Default Notice, then
(a) TWIN shall have the right to: (i) commence the dispute
resolution procedures set forth in Section 16.5 ("Arbitration") and/or seek
remedies under Section 11.6 ("Injunctive Relief"), as applicable; and/or (ii)
terminate the Defaulting Licensor's licenses by delivering written notice
thereof to the Licensors; and/or (iii) purchase (or permit its designee to
purchase) the Defaulting Licensor's equity interest in TWIN at its fair market
value (taking into consideration the effect of the breach) less a discount of
twenty-five percent (25%) by delivering written notice to the other Parties of
such election within thirty (30) days of such failure to cure and otherwise in
accordance with the procedures and provisions of Section 2.5 (but for such
purposes TWIN shall be deemed to be the purchasing stockholder) of the
Stockholders Agreement; and
(b) The other non-defaulting Licensor shall have the right to: (i)
if TWIN elected to terminate the Defaulting Licensor's licenses pursuant to
Section 15.3 (a)(ii), convert its own licenses from exclusive to non-exclusive;
and/or (ii) if TWIN did not elect to purchase the Defaulting Licensor's equity
interest pursuant to Section 15.3 (a)(iii), purchase (or permit its designee to
purchase) the Defaulting Licensor's equity interest in TWIN at its fair market
value (taking into consideration the effect of the breach) less a discount of
twenty-five percent (25%) by delivering written notice to the other Parties of
such election within thirty (30) days of such failure to cure and otherwise in
accordance with the procedures and provisions of Section 2.5 (a) of the
Stockholders Agreement.
15.4 Termination of Licenses on Cessation of TWIN Business Operations.
----------------------------------------------------------------
Upon any of the following events:
(a) the filing by TWIN of a petition in bankruptcy; (b) any
adjudication that TWIN is bankrupt or insolvent; (c) the filing by TWIN of any
legal action or document seeking reorganization, readjustment or arrangement of
TWIN's business under any law relating to bankruptcy or insolvency; (c) the
appointment of a receiver or bankruptcy trustee for all or substantially all of
the property of TWIN; (d) the making by TWIN of any general assignment for the
benefit of creditors; (e) the institution of any proceedings for the liquidation
or winding up of TWIN's business or for the termination of its corporate
charter, provided, in the event such
27
<PAGE>
proceedings are involuntary, the proceedings are not dismissed within ninety
(90) days; or (f) the cessation of normal business operations of TWIN, all
licenses from Licensors to TWIN hereunder shall immediately and automatically
terminate and Licensors shall be immediately released from their non-compete
obligations (if any remain) set forth in Section 7.1 ("Non-compete
Obligations").
15.5 Termination of Licenses on Cessation of Licensor Business Operations.
--------------------------------------------------------------------
Upon any of the following events:
(a) the institution of any proceedings for the liquidation or
winding up of a Licensor's business or for the termination of its corporate
charter, provided, in the event such proceedings are involuntary, the
proceedings are not dismissed within ninety (90) days; or (b) the cessation of
normal business operations of a Licensor, TWIN shall have the right, at its sole
discretion and option, to purchase the defaulting Licensor's equity interest in
TWIN at its fair market value, in accordance with the procedures and provisions
of Section 2.5 (but for such purposes TWIN shall be deemed to be the purchasing
stockholder) of the Stockholders Agreement. If TWIN does not provide notice to
the other Parties of its election to so purchase such equity interest within
thirty (30) days of the occurrence of the applicable event described in the
immediately preceding subsections (a) and (b), then the non-defaulting Licensor
shall have the right, at its sole discretion and option, to purchase the
defaulting Licensor's equity interest in TWIN at its fair market value, in
accordance with the procedures and provisions of Section 2.5 of the Stockholders
Agreement.
15.6 Effect of Termination.
---------------------
(a) Except as otherwise provided in this Section 15.6, all rights
and obligations of the Parties hereunder shall cease upon termination of this
Agreement. The definitions and the following sections and subsections shall
survive any termination of this Agreement on the dissolution of TWIN or
termination of any license granted hereunder automatically or by any Party:
Sections 8.2 ("Support Fees") (to the extent any amounts are owed to TW
hereunder), 8.7 ("Audit") (for three (3) years following termination), 10
("Intellectual Property Rights"), 11 ("Confidentiality"), 12.1 ("TW
Obligation"), 12.2 ("IN Obligation"), 12.3 ("Condition to Obligations"),
subsections (v), (vi), (viii) and (ix) of 13.1 ("Representations and Warranties
of TW"), subsections (v) and (vi) of 13.2 ("Representations and Warranties of
IN"), 13.4 ("No Warranty of Validity"), 13.5 ("Sole Remedy"), 14 ("Disclaimer;
Limitation of Liability"), 15 ("Term and Termination"), and 16
("Miscellaneous").
(b) Upon termination of this Agreement due to the dissolution,
liquidation, winding up, or other event described in Section 15.4, (i) all
licenses granted pursuant to this Agreement prior to its termination shall
terminate, provided that with respect to any outstanding sublicenses, the
Licensors shall cooperate and negotiate in good faith in an equitable manner to
allocate between them by transfer or assignment the sublicenses and any income
or revenues arising therefrom, (ii) all rights and licenses assigned to TWIN
pursuant to Section 7.2(a) ("Assignment of NTN Licenses"), if any, shall
immediately and automatically revert to IN and TWIN shall cooperate fully with
IN in transitioning such rights, licenses and associated matters and materials
back to IN, (iii) the Parties shall cooperate and negotiate in good faith in an
equitable manner to allocate between them the TWIN Technology, TWIN Derivative
Works, and
28
<PAGE>
TWIN Proprietary Rights, (iv) if applicable, TWIN shall cooperate with each
Licensor in transitioning back to such Licensor the responsibility to police,
protect and enforce such Licensor's Proprietary Rights in the Territory, and (v)
each Party shall return or destroy all Confidential Information of the other
Parties in its possession or control, including all copies thereof, whether
tangible or in electronic form or otherwise.
16. MISCELLANEOUS.
16.1 Force Majeure. No Party shall be liable for failure to perform, in
-------------
whole or in material part, its obligations under this Agreement if such failure
caused by any event or condition not existing as of the date of this Agreement
and not reasonably within the control of the affected Party, including, without
limitation, by fire, flood, typhoon, earthquake, explosion, strikes, labor
troubles or other industrial disturbances, unavoidable accidents, war (declared
or undeclared), acts of terrorism, sabotage, embargoes, blockage, acts of
Governmental Authorities, riots, insurrections, or any other cause beyond the
control of the Parties; provided that the affected Party promptly notifies the
other Parties of the occurrence of the event of force majeure and takes all
reasonable steps necessary to resume performance of its obligations so
interfered with.
16.2 Assignment. Neither this Agreement nor any of the rights and
----------
obligations created hereunder may be assigned, transferred, pledged, or
otherwise encumbered or disposed of, in whole or in part, whether voluntarily or
by operation of law, or otherwise, by any Party without the prior written
consent of the other Parties. This Agreement shall inure to the benefit of and
be binding upon the Parties' permitted successors and assigns.
16.3 Notices. All notices and communications required, permitted or made
-------
hereunder or in connection herewith shall be in writing and shall be mailed by
first class, registered or certified mail (and if overseas, by airmail), postage
prepaid, or otherwise delivered by hand or by messenger, or by recognized
courier service (with written receipt confirming delivery), addressed:
(a) If to IN, to: Interactive Network, Inc.
1161 Old County Road
Belmont, California 94002
with a copy to: Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105-2482, U.S.A.
Attn: Robert Townsend
(b) If to TW, to: Two Way TV Ltd.
Beaumont House
Kensington Village
Avonmore Road
London, England W148TS
29
<PAGE>
with a copy to: Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111-3143, U.S.A.
Attn: Greg Bibbes
(c) If to TWIN: TWIN Entertainment Inc.
50 Francisco Street, Suite 490
San Francisco, CA 94111, U.S.A.
with a copy to: Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105-2482, U.S.A.
Attn: Robert Townsend
Each such notice or other communication shall for all purposes hereunder be
treated as effective or as having been given as follows: (i) if delivered in
person, when delivered; (ii) if sent by mail or airmail, at the earlier of its
receipt or at 5 p.m., local time of the recipient, on the seventh day after
deposit in a regularly maintained receptacle for the deposition of mail or
airmail, as the case may be; and (iii) if sent by recognized courier service, on
the date shown in the written confirmation of delivery issued by such delivery
service. Any Party may change the address and/or addressee(s) to whom notice
must be given by giving appropriate written notice at least seven (7) days prior
to the date the change becomes effective.
16.4 Export Control. Without in any way limiting the provisions of this
--------------
Agreement, each of the Parties hereto agrees that no products, items,
commodities or technical data or information obtained from a Party hereto nor
any direct product of such technical data or information is intended to or shall
be exported or reexported, directly or indirectly, to any destination restricted
or prohibited by Applicable Law without necessary authorization by the
Governmental Authorities, including (without limitation) the United States
Bureau of Export Administration (the "BEA") or other Governmental Authorities of
the United States, Canada or England with jurisdiction with respect to export
matters.
16.5 Arbitration.
-----------
(a) Except as set forth below, any disputes arising among the Parties
or between any two Parties in connection with this Agreement shall be settled by
the affected Parties amicably through good faith discussions upon the written
request of any Party. In the event that any such dispute cannot be resolved
through such discussions within a period of sixty (60) days after delivery of
such notice, the dispute shall be finally resolved exclusively by confidential
arbitration pursuant to the rules of the American Arbitration Association in San
Francisco, California, U.S.A., or such other location agreed between or among
the disputing Parties; provided, however, that the arbitrators shall be
empowered to hold hearings at other locations within or without the United
States. The appointing authority shall nominate all three arbitrators. Any Party
shall have the right (but not the obligation) to join an already constituted
arbitration proceeding subject to such Party's agreement concerning the members
of the already constituted panel of arbitrators. The arbitrators shall not have
the power to impose any
30
<PAGE>
obligation on any of the Parties, or take any other action, which could not be
imposed or taken by a federal or state court sitting in the State of California.
The judgment upon award of the arbitrators shall be final and binding and may be
enforced in any court of competent jurisdiction in the United States or England
and Wales, and each of the Parties hereto unconditionally submits to the
jurisdiction of such court for the purpose of any proceeding seeking such
enforcement. The fees and expenses of the arbitrators shall be paid by the
Parties to the dispute in equal shares, unless the arbitrators determine that
the conduct of any Party (with regard to the subject matter of the dispute
and/or the arbitration proceedings) warrants divergence from this rule, in which
event an appropriate costs order may be made. Subject only to the provision of
Applicable Law and Section 11.6 ("Right to Special Relief"), the procedure
described in this Section 16.5 shall be the exclusive means of resolving
disputes involving TW and arising under this Agreement.
(b) Confidential Resolution. All papers, documents or evidence,
-----------------------
whether written or oral, filed with or presented to the panel of arbitrators
shall be deemed by the Parties and by the arbitrators to be Confidential
Information. No Party or arbitrator shall disclose in whole or in part to any
other person any Confidential Information submitted in connection with the
arbitration proceedings, except to the extent reasonably necessary to assist
counsel in the arbitration or preparation for arbitration of the dispute.
Confidential Information may be disclosed (i) to attorneys, (ii) to Parties, and
(iii) to outside experts requested by any Party's counsel to furnish technical
or expert services or to give testimony at the arbitration proceedings, subject,
in the case of such experts, to execution of a legally binding written statement
that such expert is fully familiar with the terms of this section, that such
expert agrees to comply with the confidentiality terms of this section, and that
such expert will not use any Confidential Information disclosed to such expert
for personal or business advantage.
16.6 Entire Agreement. This Agreement and the Associated Agreements, and
----------------
the attachments and exhibits hereto and thereto, embody the entire agreement and
understanding between and among the Parties with respect to the subject matter
hereof, superseding all previous and contemporaneous communications,
representations, agreements and understandings, whether written or oral,
including without limitation that certain Heads of Terms between IN and TW to
Form a Joint Venture. No Party has relied upon any representation or warranty of
any other Party except as expressly set forth herein and in the Associated
Agreements.
16.7 Modification. This Agreement may not be modified or amended, in whole
------------
or part, except by a writing executed by duly authorized representatives of all
Parties.
16.8 Announcement. The Parties may announce the existence of the Parties'
------------
relationship and this Agreement only at a time and in a form to be mutually
determined, except for any such disclosure required by law, governmental
authorities or stock exchanges. No Party shall unreasonably withhold its
consent to a time proposed by any other Party.
16.9 Severability. If any term or provision of this Agreement shall be
------------
determined to be invalid or unenforceable under Applicable Law, such provision
shall be deemed severed from this Agreement, and a reasonable valid provision to
be mutually agreed upon shall be substituted. In the event that no reasonable
valid provision can be so substituted, the remaining provisions of this
Agreement shall remain in full force and effect, and shall be construed and
interpreted in a
31
<PAGE>
manner that corresponds as far as possible with the intentions of the Parties as
expressed in this Agreement.
16.10 No Waiver. Except to the extent that a Party hereto may have
---------
otherwise agreed in writing, no waiver by that Party of any condition of this
Agreement or breach by any other Party of any of its obligations or
representations hereunder shall be deemed to be a waiver of any other condition
or subsequent or prior breach of the same or any other obligation or
representation by any other Party, nor shall any forbearance by the first Party
to seek a remedy for any noncompliance or breach by any other Party be deemed to
be a waiver by the first Party of its rights and remedies with respect to such
noncompliance or breach.
16.11 Nature of Rights. Each Party shall have the rights licensed under
----------------
this Agreement to any other Party's technology and the related Proprietary
Rights when created, developed or invented regardless of whether physically
delivered to such Party. All rights and licenses granted under or pursuant to
this Agreement by a Party to another Party are, for purposes of Section 365(n)
of the U.S. Bankruptcy Code (the "Bankruptcy Code"), licenses of "Intellectual
property" within the scope of Section 101 of the Bankruptcy Code.
16.12 Governing Law. The validity, construction, performance and
-------------
enforceability of this Agreement shall be governed in all respects by the laws
of the State of California, U.S.A., without regard to its conflicts of laws
principles. The Parties exclude the application of the United Nations
Convention on Contracts for the International Sale of Goods.
16.13 No Agency or Partnership. This Agreement shall not constitute an
------------------------
appointment of any Party as the legal representative or agent of any other
Party, nor shall any Party have any fight or authority to assume, create or
incur in any manner any obligation or other liability of any kind, express or
implied, against, in the name or on behalf of, any other Party. Nothing herein
or in the transactions contemplated by this Agreement shall be construed as, or
deemed to be, the formation of a partnership, association, joint venture, or
similar entity by or among the Parties hereto.
16.14 Heading. The section and other headings contained in this Agreement
-------
are for convenience of reference only and shall not be deemed to be a part of
this Agreement or to affect the meaning or interpretation of this Agreement.
16.15 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, and all of which shall be deemed to
constitute one and the same instrument.
16.16 No Third Party Beneficiaries. The Parties intend and agree that no
----------------------------
other Person, entity or other party shall be considered a third-party
beneficiary of this Agreement. Nothing contained in this Agreement shall be
construed to create rights for any third party beneficiary.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in triplicate by their duly authorized representatives on the date set
forth above.
32
<PAGE>
INTERACTIVE NETWORK, INC. TWO WAY TV LTD.
/s/ Bruce W. Bauer /s/ Piers Wilson
- --------------------------------------------- ---------------------------
By: Bruce W. Bauer By: Piers Wilson
Title: President and Chief Executive Officer Title: Finance Director
TWIN ENTERTAINMENT INC.
/s/ Bruce W. Bauer
- ---------------------------------------------
By: Bruce W. Bauer
Title: President
/s/ Piers Wilson
- ---------------------------------------------
By: Piers Wilson
Title: Secretary and Treasurer
33
<PAGE>
EXHIBIT A
DESCRIPTION OF THE IN PATENTS
United States
- -------------
Patent Number Filed Granted Application Number
- ------------- ----- ------- ------------------
US4592546 Apr 26, 1984 June 3, 1986 US1984000604145
Game of skill playable by remote participants in conjunction with a live event
US5013038 Dec 8, 1989 May 7, 1991 US1989000448001
Method of evaluating data relating to a common subject
US5083800 June 7, 1990 Jan 28, 1992 US1990000535309
Game of skill or chance playable by several participants remote from each other
in conjunction with a common event
US5120076 Apr 25, 1991 June 9, 1992 US1991000692816
Method of evaluating data relating to a common subject
US5643088 May 31, 1995 July 1, 1997 US1995000454925
Game of skill or chance playable by remote participants in conjunction with a
common game event including inserted interactive advertising
US5813913 May 30, 1995 Sep 29, 1998 US1995000453403
Game of skill playable by remote participants in conjunction with a common game
event where participants are grouped as to skill level
Canada
- ------
Patent Number Filed Granted Application Number
- ------------- ----- ------- ------------------
507982 Apr 30, 1986 Oct 2, 1990 1274903
Game of skill playable by remote participants in conjunction with a live event
June 8, 1990 Pending 2018597
Game of skill or chance playable by several participants remote from each other
in conjunction with a common event
<PAGE>
EXHIBIT B
TWIN BUSINESS
"TWIN Business" shall mean developing, marketing, supplying, operating and
licensing certain digital (and analog) interactive and other related services,
products and technology in the Territory.
<PAGE>
EXHIBIT D
DESCRIPTION OF CURRENT TW TECHNOLOGY
This description of Current TW Technology is for descriptive purposes only.
TW makes no representations or warranties with respect to TW Technology other
than as specifically set forth in Section 13 of this Agreement.
Introduction
The Two Way TV System allows the delivery of a platform and network
independent interactive entertainment service. The service is initially targeted
at Set-Top Boxes (STBs) in customer's homes, but is equally applicable in many
other environments.
The system described in this document is the second iteration of the Two
Way TV System. The first version was used to support a substantial field trial
with several thousand customers over a period of three years.
The `Two Way TV Service' is the entire package provided by Two Way TV. The
`Two Way TV System' is the technology components provided by Two Way TV that
allow the service to be operated
The Two Way TV service is based on extensible technology that is capable of
delivering simultaneous service across multiple networks.
The system is divided into distinct layers, as illustrated below:
[DIAGRAM APPEARS HERE]
<TABLE>
<S> <C> <C>
---------------------------- ---------------
Control and Management Tools Two Way TV
---------------------------- System
Two Way TV CCS Components
---------------------------- ---------------
---------------------------- ---------------
Service
Provider
---------------------------- ---------------
---------------------------- ---------------
Two Way TV Engine Two Way TV
---------------------------- System
Two Way TV Applications Components
---------------------------- ---------------
</TABLE>
The Two Way TV system includes components either side of the service
provider's infrastructure. The different layers within the system are used to
provide as much abstraction as possible to ensure that introduction of support
for new platforms can be achieved as quickly as possible.
The abstraction layers allow all internal components within the CCS system
that manage the delivery of data and return path data processing to operate on a
known data also ensure that new platforms can leverage the functionality
available to existing platforms.
<PAGE>
The diagram below expands on the initial layers, providing more detail in
each. Each of the separate modular components illustrated below are discussed
later in this document.
[DIAGRAM APPEARS HERE]
As can be seen from the diagram, the system is divided into three main
areas, Central Systems, the Broadcast Network, and the STB (or client). The
Central Systems and STB areas are provided by the Two Way TV system. In the
majority of deployments the Broadcast Network will be the responsibility of the
service provider.
The main components of both the CCS and the engine in the STB (or client)
are described in the following sections.
Central Computer System (C.C.S.)
The Two Way TV Central Systems (CCS) deliver the Two Way TV service to the
supported infrastructures. The software is developed and deployed on Sun Solaris
UltraSPARC(TM) workstations.
The CCS system is a collection of collaborating services that combine to
provide the Two Way TV functionality required in a given installation. This
results in a system that can be tailored to specific requirements and commercial
arrangements.
Standard Service Set
The following services are the key services included in a standard CCS
system. All services can be enabled or disable for a given CCS configuration,
although is does not make sense to disable certain services, such as messaging!
Services can be easily added to the CCS
<PAGE>
system. Currently, development versions of the system support far more services
than are presented here.
CCS Core
This service is responsible for bringing up the system and subsequent
monitoring of other active services. This also provides the functionality to
start and stop services at run-time.
Messaging Service
This service provides the messaging functionality used by the CCS to
communicate with all external clients (Two Way TV Tools, return path data
etc.).
Schedule Service
This provides a central scheduling facility within the CCS. This can be
used to schedule CCS events, and control messages can be scheduled to automate
CCS operation.
Storage Service(s)
These provide all of the permanent storage facilities required by the CCS.
Broadcast Service
Provides all data broadcast functionality within the CCS. This service
includes the broadcast system interfaces for all supported platforms. This is
not defined as a core service as the CCS system may not be used for broadcast
applications in certain configurations.
Broadcast Game Service
Provides Enhanced TV and Games Lounge style functionality. The service
handles application broadcast, real-time data transmission, game synching, real-
time management and control of the game and all other aspects of broadcast game
play.
Return Path Service
This service provides standard return path processing, vote processing,
score processing and an active scoring algorithm using the Two Way TV patented
score gathering technique.
Chat Service
This service provides a chat engine that can be accessed using the CCS
messaging system. This allows applications/games to access chat functionality,
as well as stand-alone chat applications to be built.
Broadcast System Interfaces
The CCS system produces data for broadcast in an abstract form. It is the
job of the broadcast system interface to convert this data into an appropriate
form for the target platform.
<PAGE>
This may involve, for example, using different methods of data transmission
for different types of components, using a broadcast carousel for application
components such as executable code, bitmaps fonts etc., and using a separate
out-of-band communications channel for the applications real-time data.
Additionally the broadcast system interface may convert, manipulate, or process
the application components and/or real-time data.
The CCS itself provides a messaging API for external clients. The same API
is used internally by CCS components such as return path handling and
application control services. Not only does this allow application developers to
define the data transmitted to their application but also allows them to define
the format of return path data and the processing that takes place on that data.
Scalability and Robustness
The growth of the Two Way TV service will impact the performance
requirements of the CCS system. This is a factor of how many different services
are offered, the number of different infrastructures being supported, and the
number of subscribers. The number of services and infrastructures being
supported affects the transmission section of the CCS and the number of
subscribers increasing affects the return path sub-systems. The impact of
increased subscribers will only be substantial if applications requiring
feedback from all subscribers are used.
The architecture of the system allows new infrastructures to be supported
easy and with no disruption to the rest of the system. This allows for rapid
implementation and test times.
The CCS has been designed from the ground up to be a multi-threaded
distributed system. Entire sub-systems can be hosted on different systems if
necessary with very little effort. The multi-threaded nature of the system also
means significant performance improvements can be achieved by simply adding
processors to the hosting workstation.
Given the broadcast nature of the Two Way TV system it is critical that the
central systems are robust. This can be measured in a number of ways. The system
must itself have integrity to ensure that operation is uninterrupted during
operational periods. In addition to this features must be provided to ensure
that known failure modes can be handled. Operating system crashes, both Sun and
Windows NT will affect the operation of the system. Currently a crash of the
operating system hosting the control tools would have no effect on the operation
of the system.
Protection is built into the CCS program itself to provide best efforts to
handle a rogue sub-system by detecting abnormal behaviour and shutting down the
sub-system responsible.
CCS Toolset
The CCS comes complete with a set of Windows NT(TM) based tools. These
provide an easy to use front-end interface to the Two Way TV CCS system:
<PAGE>
Mission Control
This is the main CCS control tool. It allows initiation and the subsequent
management of Two Way TV applications. The tool clearly displays the state of
running applications, and allows the user to adjust the timing of the
application. The application can also be paused, terminated early, and the like.
CCT Tool
This is the primary real-time content creation tool. It allows custom
templates to be created for each Two Way TV application.
Authoring Tools
Two Way TV have developed application authoring tools for each supported
target platform. These provide a more productive and time-efficient route to
authoring than the standard facilities provided with the target platforms.
LIPS Tools
These are a set of Windows NT(TM) based applications which are used to
support real-time applications. These tools are usually application specific and
are geared towards a live broadcast environment where operators require a simple
to use interface reducing the risk of transmission errors. Typically a live tool
will include a database of possible live data and the operator will simply
select the correct data to send at the appropriate time.
In addition to these a universal tool is provided that provide generic live
application support which is useful for initial prototypes.
Two Way TV Engine
Many set top box execution environments do not provide the functionality
necessary to support Two Way TV applications. These applications require very
specific yet simple functionality. As a minimum, Two Way TV applications
require:
. Reliable, Live broadcast message protocols
. Video/Time Synchronisation (including an accurate set top clock)
. Fairness
. Security
. Efficient Return Path Use
Some of the above requirements are met by systems compliant with the ATVEF
specification for enhanced TV content. Underlying standards such as DVB or ATSC
provide access to the underlying networks.
<PAGE>
On platforms where one or more of these do not exist, the Two Way TV Engine
may provide them.
The Two Way TV Engine can be used in both one-way broadcast and two way
video systems, and is designed to be compatible with all international standards
for both analog and digital video systems.
Overview
The Two Way TV Engine is a native code plug-in, which provides access to
Two Way TV services delivered on the underlying network. In the context of the
Engine, native code may mean low level set top specific code or high-level
application code; implementation depends on platform capability.
The Engine can also provide access to commonly used services and building
blocks utilised by Two Way TV applications and interactive services.
The objective of the Engine is to provide a common set of capabilities to
application developers, which hide the native implementations of message queues
and underlying network protocols. It does not inhibit access to desirable
features found on some platforms and networks. It is important that application
developers may make use of technologies provided by a set top box without
becoming bogged down with implementation issues.
It is important that the handling of Two Way TV service specific messages,
particularly real time messages is carried out as efficiently as possible. By
providing a core Engine to handle this, it removes the responsibility from the
application developer and ensures a reliable fast and efficient core on which to
base applications. Furthermore, changes to the underlying protocols do not
warrant code changes or recompiling of Two Way TV applications.
The handling of Two Way TV service specific messages within a well defined
core Engine allows the use of a common messaging protocol across different
platforms. This enables one head end Central Computer System (CCS) to drive
services across multiple platforms and networks.
<PAGE>
Engine Reference Architecture
The Two Way TV Engine Reference Architecture is a high level view of a
generic set top box environment. The architecture demonstrates the physical
implementation of the Two Way TV Engine in relation to other set top box
software components and existing digital TV standards.
In the Reference Architecture, the Two Way TV Engine bridges the gap
between the functionality specified by existing environments (such as OpenTV,
PowerTV, ATVEF) and the functionality required for Two Way TV.
ATVEF Based Engine
The Reference Architecture may be based on an ATVEF compliant receiver. The
ATVEF specification for enhanced television programming uses existing Internet
technologies. It delivers enhanced TV programming over both analog and digital
video systems using terrestrial, cable, satellite and Internet networks.
. ATVEF mandates support for the following standard specifications:
. HTML 4.0 (Frameset Document Type Definition)
. CSS 1
. ECMAScript
. DOM 0
<PAGE>
With the inclusion of ATVEF Triggers (All forms of ATVEF transport involve
data delivery and triggers), most of the Two Way TV Engine may be coded as
client JavaScript delivered within applications.
Functional Elements
The functional elements of the Two Way TV Engine may be broken down into
the following components:
. High Level Engine API
. Live message Handling
. Two Way TV Live Message Protocol
. Timing and Synchronisation
. Return Path Management
. Low Level Abstraction Layer
These core components of the Engine offer a common API to the application
developer. This API may be in the form of direct function calls or through an
event model, depending on target platform.
High Level Engine API
This module provides a standardised API to the application developer.
Depending on target platform, this API may be direct function calls, an event
model or a combination of the two. In the Reference Architecture, based on an
ATVEF compliant receiver, the API is based on a JavaScript event model.
The primary purpose of this API is to simplify access to the Two Way TV
Engine and the underlying environments API.
Live Message Handling
This module provides a reliable timed delivery of messages to the
application. The messages are delivered to this module using the Two Way TV Live
Message Protocol. The messages passed to the application by this module are
guaranteed to be in order and on time. Some messages handled by this module may
not be passed all the way to the application, but are used to control behaviour
of the Engine itself.
Two Way TV Live Message Protocol
The Two Way TV Live Message Protocol is a multi-layered specification,
which includes definitions for application, system and transport level
protocols. Only those layers that are not provided by the underlying set top and
network are required. In most cases, a DVB or ATSC
<PAGE>
broadcast bitstream is used to carry the Two Way TV data. Two Way TV system and
transport layers may be used in lieu of system provided transports such as ATVEF
(type A or type B) or DVB carousels (DSM-CC).
Optionally, the Two Way TV Message Protocol also provides a definition for
physical layer transports though this is normally provided by the underlying
network in the form of DVB or ATSC compliant bit streams within the broadcast.
The Two Way TV Message Protocol does not limit what content can be sent,
but rather provides a common set of capabilities so that content developers can
author content once for delivery to multiple platforms.
Return Path Handler
This module handles the complex issues arising through the use of the
return path feature found on many set top boxes. Network bandwidth and head end
capacity issues make this an important part of the Two Way TV Engine. The Return
Path Handler is controlled by both the Two Way TV application and by messages
from the Head End delivered through the Live Message Handlers.
Timing and Synchronisation
This module controls the execution of Two Way TV applications and services
relative to a common clock. Timing and synchronisation of applications is
controlled by messages broadcast from the Head End by the Central Computer
System (CCS).
Low Level Abstraction Layer
This module is present to allow an element of re-use within the code which
implements the core Engine. The Low Level Abstraction Layer may not necessarily
be present in all implementations. Alongside the abstraction of Operating System
services, its key contribution to the Engine is the provision of debugging and
development support macros and functions.
<PAGE>
<TABLE>
<CAPTION>
Title Two Way TV Reference Country Applicant Application Number
- -----------------------------------------------
<S> <C> <C> <C> <C>
Method and apparatus for sampling remote data Active Scoring Algorithm CA Two Way TV Limited 2279890
sources Handset Multiplexing CA Two Way TV Limited 2252074
Method and apparatus for transmitting data LIPS CA Two Way TV Limited 2231946
Interactive predictive game control Multiple Architectures CA Two Way TV Limited 2279069
Delivering interactive applications Status Flag CA Two Way TV Limited
Broadcasting interactive applications Time Stamping CA Two Way TV Limited 2252021
Method and apparatus for input of data Tokens CA Two Way TV Limited 2225317
Interactive communication system Variable Priority CA Two Way TV Limited 2229772
Method and apparatus for transmitting data
Method and apparatus for sampling remote data Active Scoring Algorithm USA Two Way TV Limited 09/376244
sources Handset Interface USA Two Way TV Limited 08/672591
Game playing system Handset Multiplexing USA Two Way TV Limited 09/203967
Method and apparatus for transmitting data LIPS USA Two Way TV Limited 09/064118
Interactive predictive game control Multiple Architectures USA Two Way TV Limited 09/366064
Delivering interactive applications Status Flag USA Two Way TV Limited
Status Flag Time Stamping USA Two Way TV Limited 09/203458
Method and apparatus for input of data Tokens USA Two Way TV Limited 09/019892
Interactive communication system Variable Priority USA Two Way TV Limited 09/039202
Method and apparatus for transmitting data
- ----------------------------------------------------------------------------------------------------------------------------------
US and CA pending National Phase patent applications
Interactive television broadcast system Automatic capture of Two Way TV Limited 99303717.5
Interactive applications viewing figures Two Way TV Limited 98309944.1
Interactive applications Delayed program start Two Way TV Limited 99303495.5
Security
- ---------------------------------------------------------------------------------------------------------------------------------
Licensed Technology
Input device for inputting positional Puck (X-Y Sensor) CA David Woodfield 2241506
information Puck (X-Y Sensor) USA David Woodfield 09/004675
Input device for inputting positional Square wave sensor David Woodfield PCT/GB98/03731
information Multichannel Game US & CA David Woodfield
Square wave sensor (pending National Phase)
Method and apparatus for generating a display Awaiting Details
signal
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Title Application Grant Grant
Date Date Number
- -----------------------------------------------
<S> <C> <C> <C>
Method and apparatus for sampling remote data 10-Aug-99
sources 25-Nov-98
Method and apparatus for transmitting data 22-Apr-98
Interactive predictive game control 28-Jul-99
Delivering interactive applications Oct-99
Broadcasting interactive applications 18-Nov-98
Method and apparatus for input of data 30-Jan-98
Interactive communication system 18-Mar-98
Method and apparatus for transmitting data
Method and apparatus for sampling remote data 18-Aug-99
sources 14-Oct-94 18-May-99 5905523
Game playing system 2-Dec-98
Method and apparatus for transmitting data 21-Apr-98
Interactive predictive game control 2-Aug-99
Delivering interactive applications Oct-99
Status Flag 2-Dec-98
Method and apparatus for input of data 6-Feb-98
Interactive communication system 13-Mar-98
Method and apparatus for transmitting data
- ---------------------------------------------------------------------------------------------------------------------
US and CA pending National Phase patent applications
Interactive television broadcast system 12-May-99
Interactive applications 4-Dec-98
Interactive applications 4-May-99
- ---------------------------------------------------------------------------------------------------------------------
Licensed Technology
Input device for inputting positional 22-Jun-98 17-Aug-99 Awaiting
information 8-Jan-98 Details
Input device for inputting positional 18-Dec-99
information
Square wave sensor (pending National Phase)
Method and apparatus for generating a display
signal
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Required Consents:
The following are the agreements in effect as of the Effective Date pursuant to
which third parties have licensed certain technology and/or proprietary rights
to TW which are incorporated in the Current TW Technology and which TW may
sublicense to TWIN as part of the TW Technology subject to such third parties'
prior written consent, not to be unreasonably withheld. TW agrees to make its
best efforts to obtain such consents as soon as practicable after the Effective
Date and to promptly thereafter provide a copy of each such consent.
License Agreement between David Woodfield and TW dated 2 April 1998.
<PAGE>
EXHIBIT F
---------
SUPPORT SERVICES
Initial Transition Services
- ---------------------------
TW shall provide sufficient training to TWIN personnel in order to provide such
personnel with the necessary understanding of the Current TW Technology and
future TW Technology to enable TWIN to exploit the Current TW Technology and
future TW Technology as contemplated by the Agreement and TWIN's initial
business plan.
The training shall be provided at the facilities of either TW or TWIN and at the
times as are mutually agreed upon by TW and TWIN. The parties expect that such
initial training services (the "Initial Transition") shall continue for a period
of six (6) months from the Effective Date, or six (6) months from the time that
TWIN has retained appropriately skilled personnel (as reasonably determined by
TWIN) to receive the training, whichever occurs last. It is understood that
there may be need for additional training of new personnel or updating of
training other than that required in connection with the delivery of new
technology, upgrades, enhancements, or modifications. If such need occurs and
TWIN seeks to receive such additional training from TW, TWIN may deliver said
personnel to the TW training facility and receive that training at no added
costs to TWIN other than as set forth in the next sentence. In the case of such
additional training (i.e. that not included in the delivery of new technology,
upgrades, enhancements, or modifications), all expenses incurred by TWIN are the
obligation of TWIN. If TWIN prefers to have TW deliver the training on-site as
designated by TWIN, then all costs, including those reasonable out-of-pocket
costs (but not salaries, allocated overhead, fees for personnel's time, and like
costs) incurred by TW to meet that obligation are to be paid for by TWIN.
During the course of the Initial Transition it is acknowledged that TWIN shall
create and maintain an adequate staff so as to operate and manage TWIN's
business and the technology delivered after the Initial Transition. After the
Initial Transition TW will provide on-going Support Services as described below.
On-going Support Services
- -------------------------
TW shall provide and deliver future TW Technology and associated Proprietary
Rights to TWIN in accordance with Section 4.1 ("TW Delivery") of this Agreement.
TW shall provide TWIN with on-going technical training and support services in
connection with the TW Technology licensed to TWIN under the Agreement. Such
support shall include, without limitation, maintenance and bug fixes to TW
Technology and appropriate further training of TWIN personnel with respect to
upgraded or improved TW Technology.
TW shall have no obligation to provide support with respect to any TWIN
modifications to TW Source Code except as provided in Section 4.1(b) ("Source
Code") of this Agreement.
<PAGE>
TW shall use commercially reasonable efforts to acquire or recruit the necessary
resources and personnel to satisfy TWIN's reasonable requirements for support.
After the Initial Transition period TW and TWIN will discuss and agree in good
faith upon and generate in writing appropriate service level agreements and
escalation procedures for on-going support services.
General
- -------
The Support services shall be provided in consideration of the fees described in
Section 8.2 ("Support Fees") of the Agreement.
Notwithstanding the above, if at any time after the Initial Transition period
any member of TW's senior management team is requested to travel to the United
States at TWIN's direct request, then TWIN shall pay for the reasonable travel
and accommodation costs incurred by TW with respect to such visit. This will not
include, however, situations where the travel is necessary because of
deficiencies in the TW Technology, or as a result of problems in the quality, or
responsiveness, of TW support. In such instance the costs are the obligation of
TW.
In addition, TWIN may request TW to provide staff on secondment to TWIN. If TW
can reasonably meet this request, such staff shall be assigned to TWIN and TWIN
shall reimburse TW for all salary and related direct costs for such employees or
contractors during the period of their secondment unless the staffing was
necessary because of deficiencies in the TW Technology, or the failure of TW to
properly and punctually meet the TW required support role, in which case the
costs are the obligation of TW and TW shall supply whatever staffing is required
to immediately (defined as within a reasonable time based upon the priority of
the deficiency or failure to perform the support role by TW) correct the
problem.
TW shall perform all of its Support services hereunder in a commercially
reasonable manner.
TW and TWIN shall each use their best efforts to cooperate with each other with
respect to the Support services.
Without limiting the general obligations above the table below outlines the
Parties' intended general split of responsibilities between TWIN and TW with
respect to TW Technology:
<TABLE>
<CAPTION>
TW Responsibility TWIN Responsibility
- --------------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------------
Provision of documentation for current and Creation and maintenance of a TWIN
future technology technology group, comprising
appropriately skilled individuals
- --------------------------------------------------------------------------------------
Provision of new, improved and upgraded TWIN to provide its own technical
technology support team, to be trained by TW
- --------------------------------------------------------------------------------------
Provision of training to appropriately Produce localization and
qualified TWIN staff customizations of games and
technology for the U.S. market
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
24hr support for emergency or operationally
critical issues
- --------------------------------------------------------------------------------------
Timely support of technology delivered to Documented requests for modifications
TWIN and code modifications requested by and improvements to TW Technology
TWIN
- --------------------------------------------------------------------------------------
</TABLE>
Documentation
- --------------
TW will deliver documentation for all technology delivered to TWIN. This
documentation shall include, but not be limited to, a description of each
component or module of the products, source code, and a complete set of API's
(Application Programming Interfaces) for each component or module. The API's
will be complete and detailed enough so that a reasonably skilled software
programmer would be able to write a replacement component or module and have it
interface and communicate with all the other necessary parts of the system,
without any undue difficulty.
Response Time
- -------------
TW will respond immediately (defined as within a reasonable time based upon the
priority of the deficiency or failure to perform the support role by TW) with
support to TWIN if a problem occurs which significantly affects the performance
of services to TWIN's customers or partners, and where TWIN personnel cannot
reasonably solve such problem in a timely manner. TW agrees that such problems
can occur without prior warning, and consequently cannot expect TWIN to give
advance notice thereof. TW will make its best efforts to solve the problem,
even to the extent of sending personnel to the TWIN facility, if necessary.
If TWIN requests an improvement, extension, or modification to the TW Technology
which is not practical for TWIN to implement, TW agrees to make such
modifications in a timely fashion and at a cost at no more than its standard
rate. The schedule will be worked out in good faith between TW and TWIN and
will be based upon a high priority requirement, if so deemed by TWIN.
<PAGE>
EXHIBIT 2.3
TWIN Entertainment Inc.
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is made and entered into as
of this 31 day of January 2000, by and among TWIN Entertainment Inc., a Delaware
corporation (the "Company"), and each of the entities listed on Exhibit A hereto
(which entities are hereinafter collectively referred to as the "Stockholders"
and each individually as a "Stockholder").
Recitals
Whereas, the Stockholders are the beneficial owners of an aggregate of Five
Million (5,000,000) shares of the Common Stock of the Company;
Whereas, the parties desire to enter into this Agreement in order to grant
certain rights to the Company and to the Stockholders as described herein;
Now, Therefore, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
1. Definitions.
1.1 "Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or which is controlled by an
entity which controls, another Person; provided, however, that "control" shall
mean the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
1.2 "Common Stock" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon exercise of any option, warrant or other
security or right of any kind convertible into or exchangeable for Common Stock.
1.3 "IN Director" or "IN Directors" shall mean those members of the
Company's board of directors nominated to serve on the board of directors by IN
Stockholder pursuant to Section 5.
1.4 "IN Stockholder" shall mean Interactive Network, Inc. and its
permitted successors and assigns.
1.5 "Person" means any natural person, partnership, corporation, limited
liability company, trust, estate, association, custodian or nominee or any other
individual or entity in its own or any representative capacity.
1.
<PAGE>
1.6 "Stock" shall mean the Company's Common Stock now owned or
subsequently acquired by the Stockholders by gift, purchase, dividend, option
exercise or any other means whether or not such securities are only registered
in a Stockholder's name or beneficially or legally owned by such Stockholder.
The number of shares of Common Stock owned by the Stockholders as of the date
hereof are set forth on Exhibit A, which Exhibit may be amended from time to
time by the Company to reflect changes in the number of shares owned by the
Stockholders, but the failure to so amend shall have no effect on such Common
Stock being subject to this Agreement.
1.7 "Transfer" shall include any sale, assignment, encumbrance,
hypothecation, pledge, conveyance in trust, gift, transfer by request, devise or
descent, or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, of any of the
Stock.
1.8 "TW Stockholder" shall mean Two Way TV Limited and its permitted
successors and assigns.
1.9 "TW Director" or "TW Directors" shall mean those members of the
Company's board of directors nominated to serve on the board of directors by TW
Stockholder pursuant to Section 5.
2. Transfers by a Stockholder.
2.1 Notice of Transfer. If a Stockholder wishes to Transfer any shares of
its Stock, then the transferring Stockholder (the "Transferring Stockholder")
shall give written notice of its desire to Transfer such Stock (the "Notice")
simultaneously to the Company and to each of the other Stockholders. The Notice
shall describe in reasonable detail the proposed Transfer including, without
limitation, the number of shares of Stock to be transferred, the nature of such
Transfer and the consideration proposed to be paid.
2.2 Company Right of First Offer. For a period of ten (10) days following
receipt of any Notice described in Section 2.1, the Company shall have the right
to purchase all or a portion of the Stock subject to such Notice on the same
terms and conditions as set forth therein. The Company's purchase right shall be
exercised by written notice signed by an officer of the Company (the "Company
Notice") and delivered to the Transferring Stockholder. The Company shall effect
the purchase of the Stock, including payment of the purchase price, not more
than five (5) business days after delivery of the Company Notice, and at such
time the Transferring Stockholder shall deliver to the Company the
certificate(s) representing the Stock to be purchased by the Company, each
certificate to be properly endorsed for transfer. The Stock so purchased shall
thereupon be cancelled and cease to be issued and outstanding shares of the
Company's Common Stock.
2.3 Stockholder Right of First Offer.
(a) In the event that the Company does not elect to purchase all of
the Stock available pursuant to its rights under Section 2.2 within the period
set forth therein, the Transferring Stockholder shall promptly give written
notice (the "Second Notice") to each other
2.
<PAGE>
Stockholder and stockholders of the Company holding at least ten percent (10%)
of the shares of Common Stock (each, an "Eligible Stockholder"), which shall set
forth the number of shares of Stock not purchased by the Company and which shall
include the terms of Notice set forth in Section 2.1. The Eligible Stockholder
shall then have the right, exercisable upon written notice to the Transferring
Stockholder (the "First Offer Notice") within ten (10) days after the receipt of
the Second Notice, to purchase its pro rata share of the Stock subject to the
Second Notice and on the same terms and conditions as set forth therein. The
Eligible Stockholder who so exercises its rights (the "Participating
Stockholder") shall effect the purchase of the Stock, including payment of the
purchase price, not more than fifteen (15) days after delivery of the First
Offer Notice, and at such time the Transferring Stockholder shall deliver to the
Participating Stockholder the certificate(s) representing the Stock to be
purchased by the Participating Stockholder, each certificate to be properly
endorsed for transfer.
(b) The Participating Stockholder's pro rata share shall be equal to
the product obtained by multiplying (x) the aggregate number of shares of Stock
covered by the Second Notice and (y) a fraction, the numerator of which is the
number of shares of Common Stock owned by the Participating Stockholder at the
time of the Transfer and the denominator of which is the total number of shares
of Common Stock owned by all Stockholders (other than the Transferring
Stockholder) at the time of the Transfer.
(c) In the event that not all of the Eligible Stockholders elect to
purchase their pro rata share of the Stock available pursuant to their rights
under Section 2.3(a) within the time period set forth therein, then the
Transferring Stockholder shall promptly give written notice to each of the
Participating Stockholders, which shall set forth the number of shares of Stock
not purchased by the other Eligible Stockholders, and shall offer such
Participating Stockholders the right to acquire such unsubscribed Stock. The
Participating Stockholders shall have fifteen (15) days after receipt of such
notice to notify the Transferring Stockholder of its election to purchase its
pro rata share of the unsubscribed Stock on the same terms and conditions as set
forth in the Second Notice.
(d) In the event that any Stock of the Transferring Stockholder
remains unsubscribed after giving effect to the provisions of Sections 2.1, 2.2,
and 2.3 above, the Transferring Stockholder may (subject to Section 2.4 hereof)
Transfer such shares to a third party; provided, however, that such Transfer
shall be on terms no more favorable to the transferee than those set forth in
the Notice.
2.4 Tag-Along Rights.
(a) Without limiting the rights of the parties under Section 2.3,
each Stockholder (a "Selling Holder") agrees that it shall not Transfer Stock
held by it (other than in exempted transfers pursuant to Section 3.1 ("Exempted
Transfers")), unless the terms and conditions of such Transfer shall include an
offer to the other Stockholder to include in the Transfer to the proposed
transferee (the "Third Party"), at such Stockholder's option and on the same
price and on the same terms and conditions as apply to the Selling Holder, an
amount of Common Stock determined in accordance with this Section 2.4.
3.
<PAGE>
The Third Party shall be required to purchase from each Stockholder
desiring to participate in such transaction the number of shares of Common Stock
owned by such Stockholder equaling the lesser of (x) the number derived by
multiplying (i) the total number of shares to be purchased by the Third Party by
(ii) a fraction, the numerator of which is the total number of shares of Common
Stock owned by such Stockholder and the denominator of which is the total number
of shares of the Company's Common Stock then owned in the aggregate by all
Stockholders (assuming for this purpose that all then outstanding options and
warrants have been exercised), or (y) such lesser number of shares as the
Stockholder shall designate in the Tag-Along Notice (defined below).
The Selling Holder shall notify the Company and the other Stockholder
of any proposed Transfer to which the provisions of this Section 2.4 apply.
Each such notice shall set forth: (i) the name of the Third Party, (ii) the
proposed amount and form of consideration and terms and conditions of payment
offered by the Third Party, and any other material terms pertaining to the
proposed Transfer (the "Third Party Terms") and (iii) that the Third Party has
been informed of the "Tag-Along Rights" provided for in this Section 2.4 and has
agreed to purchase shares of Common Stock in accordance with the terms hereof.
The Tag-Along Rights set forth above in this Section 2.4 may be
exercised by any Stockholder by delivery of a written notice to the Company and
the Selling Holder (the "Tag-Along Notice") within fifteen (15) days following
receipt of the notice specified in the preceding paragraph. The Tag-Along
Notice shall state the number of shares of Common Stock that such Stockholder
wishes to include in such Transfer to the Third Party.
Upon the giving of a Tag-Along Notice, such Stockholder shall be
entitled and obligated to sell the number of shares of Common Stock set forth in
the Tag-Along Notice to the Third Party on the Third Party Terms; provided,
however, that neither the Selling Holder nor any such Stockholder shall
consummate the sale of any shares offered by it if the Third Party does not
purchase all shares which the Selling Holder and the Stockholders are entitled
and desire to sell pursuant hereto. After expiration of the fifteen-day notice
period referred to above, if the provisions of this Section have been complied
with in all respects, the Selling Holder shall have the right for a 120-day
period to Transfer the shares of Common Stock to the Third Party on the Third
Party Terms (or on other terms no more favorable to the Selling Holder) without
further notice to each Stockholder who has not given a Tag-Along Notice, but
after such 120-day period no such Transfer may be made without again giving
notice to all Stockholders of the proposed transfer and complying with the
requirements of this Section 2.4.
(b) At the closing of the Transfer to any Third Party (of which the
Selling Holder shall give each Stockholder who has elected to exercise the Tag-
Along Right provided by this Section 2.4 at least five business days' prior
written notice), the Third Party shall remit to each Stockholder the
consideration for the total sales price of the Common Stock of such Stockholder
sold pursuant thereto, against delivery by such Stockholder of certificates for
such Common Stock, duly endorsed or with duly exercised stock powers and the
compliance by such Stockholder with any other conditions to closing generally
applicable to the Selling Holder and all Stockholders selling Common Stock in
such transaction.
2.5 Liquidation Transfer.
4.
<PAGE>
(a) Notwithstanding any other provision of this Agreement but subject
to the provisions of Section 15.5 of that certain Joint Venture License
Agreement dated as of the date hereof between IN Stockholder, TW Stockholder and
the Company (the "Joint Venture License Agreement"), in the event of an
institution of any proceedings for the liquidation or winding up of TW
Stockholder's business or for the termination of its corporate charter,
provided, in the event such proceedings are involuntary, the proceedings are not
dismissed within ninety (90) days; or the cessation of normal business
operations of TW Stockholder, the IN Stockholder shall have the right, at its
sole discretion and option, to purchase the TW Stockholder's equity interest in
the Company at its fair market value upon notice to TW Stockholder. If the fair
market value of TW Stockholder's Stock cannot be mutually agreed upon by TW
Stockholder and IN Stockholder within fifteen (15) days of the notice described
in (a) above, then the parties shall determine the fair market value of the
stock through an appraisal process in which the TW Stockholder and the IN
Stockholder each appoint an appraiser within twenty (20) days of such notice to
determine, within thirty (30) days of such appointment, the fair market value of
the TW Stockholder's Stock. If the two appraisals are within ten percent (10%)
of one another, the fair market value shall be the average of the two
appraisals. If the two appraisals have a greater than ten percent (10%)
difference, the two appraisers shall appoint a third appraiser, whose appraisal
shall serve as the fair market value of the TW Stockholder's Stock.
(b) Notwithstanding any other provision of this Agreement but subject
to the provisions of Section 15.5 of the Joint Venture License Agreement, in the
event of an institution of any proceedings for the liquidation or winding up of
IN Stockholder's business or for the termination of its corporate charter,
provided, in the event such proceedings are involuntary, the proceedings are not
dismissed within ninety (90) days; or the cessation of normal business
operations of IN Stockholder, the TW Stockholder shall have the right, at its
sole discretion and option, to purchase the IN Stockholder's equity interest in
the Company at its fair market value upon notice to IN Stockholder. If the fair
market value of IN Stockholder's Stock cannot be mutually agreed upon by IN
Stockholder and TW Stockholder within fifteen (15) days of the notice described
in (a) above, then the parties shall determine the fair market value of the
stock through an appraisal process in which the TW Stockholder and the IN
Stockholder each appoint an appraiser within twenty (20) days of such notice to
determine, within thirty (30) days of such appointment, the fair market value of
the IN Stockholder's Stock. If the two appraisals are within ten percent (10%)
of one another, the fair market value shall be the average of the two
appraisals. If the two appraisals have a greater than ten percent (10%)
difference, the two appraisers shall appoint a third appraiser, whose appraisal
shall serve as the fair market value of the IN Stockholder's Stock.
2.6 Transfer Obligations. In connection with any transfer made pursuant to
this Section 2, the Transferring Stockholder, if reasonably requested by the
Company, shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the Securities Act of 1933, as amended. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
5.
<PAGE>
3. Exempt Transfers.
3.1 Notwithstanding the foregoing, the rights of the Company and the
Stockholders in Section 2 above shall not apply to any transfer to any Affiliate
of any Stockholder; provided that (a) the Stockholder (or its representative)
shall inform the Company of such transfer prior to effecting it and (b) the
transferee shall furnish the Company with a written agreement to be bound by and
comply with all provisions of Section 2. Such transferred Stock shall remain
"Stock" hereunder, and such transferee shall be treated as the "Stockholder" for
purposes of this Agreement.
3.2 This Agreement is subject to, and shall in no manner limit the right
which the Company may have to repurchase securities from the Stockholder
pursuant to a stock restriction agreement or other agreement between the Company
and the Stockholder.
4. Voting.
4.1 Common Stock. Each Stockholder agrees to hold all shares of Stock
registered in its name or beneficially owned by it subject to, and to vote its
Stock in accordance with, the provisions of this Agreement.
4.2 Election of Directors. As of the date hereof, the Company's Board of
Directors (the "Board of Directors") shall be four (4) members. The parties
agree that the number of directors on the Board of Directors shall be increased
to five (5) upon the selection of a Chief Executive Officer. On all matters
relating to the election of directors of the Company, each Stockholder agrees to
vote all Stock held by it (or the holder thereof shall consent pursuant to an
action by written consent of the holders of capital stock of the Company) so as
to elect members of the Company's Board of Directors as follows:
(a) At each election of directors, so long as a Stockholder holds at
least ten percent (10%) of the Stock, that Stockholder shall be entitled to
designate and elect one (1) member of the Company's Board of Directors. At each
election of directors, so long as a Stockholder holds at least forty percent
(40%) of the Stock, that Stockholder shall be entitled to designate and elect
two (2) members of the Company's Board of Directors. Should a director nominated
by a Stockholder resign, become deceased, incapacitated or otherwise be unable
or unwilling to perform his or her duties, or perform in a manner contrary to
that desired by that Stockholder which nominated such person, such Stockholder
shall be entitled to replace such director and designate a successor thereto to
serve for the balance of such director's term, effective upon the giving of
notice to the Company and to the other Stockholder. Any vote taken to remove any
director elected pursuant to this Section 4.2(a), or to fill any vacancy created
by the resignation or death of a director elected pursuant to this Section
4.2(a), shall also be subject to the provisions of this Section 4.2(a).
(b) The Stockholders shall designate and elect a fifth member of the
Board of Directors who shall also be the Chief Executive Officer of the Company.
Any vote taken to remove any director elected pursuant to this Section 4.2(b),
or to fill any vacancy created by the resignation or death of a director elected
pursuant to this Section 4.2(b), shall also be subject to the provisions of this
Section 4.2(b).
6.
<PAGE>
(c) Each Stockholder agrees that no director elected by the other
Stockholder shall be removed except for cause.
4.3 Quorum. Except as provided in Section 4.7 below, at all meetings of
the Board of Directors, at least one IN Director and at least one TW Director
shall be required to constitute a quorum for the transaction of business.
4.4 Special Meetings. Special meetings of the Board of Directors may be
called by either of the TW Directors or the IN Directors. The Board of Directors
shall hold meetings at the times and to take the actions described in the Joint
Venture License Agreement, including, without limitation, the actions described
in Sections 2.6 and 4.1 therein.
4.5 TW Directors and IN Directors Votes Required. Unless otherwise set
forth in Section 4.6 or 4.7, the affirmative vote of all TW Directors and IN
Directors shall be required for the following matters:
(a) approval of the Company's annual business plan and any amendments
thereto; provided, however, that in the event that approval of a business plan
is not obtained by March 31 of any year, the business plan for the preceding
year shall remain in effect;
(b) approval of any additional business activities pursuant to
Section 1.15 of the Joint Venture License Agreement;
(c) causing any material change in the nature or conduct of the
business of the Company;
(d) subject to Section 4.7, entering into, amending or terminating
any contract or agreement between the Company and/or any of its Affiliates
(other than TW Stockholder or IN Stockholder, if applicable) on the one hand,
and any shareholder and/or any of its Affiliates;
(e) any determination made by the Company pursuant to Section 2.6 of
the Joint Venture License Agreement;
(f) entering into any transaction or incurring total indebtedness
involving more than One Hundred Thousand Dollars ($100,000) unless otherwise
pursuant to the Company's annual business plan;
(g) hiring or terminating the employment of the President, Secretary,
Treasurer or Chief Executive Officer of the Company;
(h) issuing any securities or instruments convertible into securities
of the Company;
(i) declaring any dividends, combinations, splits, recapitalizations
or similar events with respect to securities of the Company;
7.
<PAGE>
(j) voluntarily filing or acquiescing to the filing of a petition in
bankruptcy under Title 11 of the United States Code or other legal proceeding on
behalf of the Company for protection from its creditors;
(k) merging or consolidating with any other entity by the Company;
(l) selling or otherwise disposing of the assets of the Company
(including by exclusive license) not in the ordinary course of business;
(m) determining the terms of any stock option plan of the Company;
(n) causing the Company to enter into any joint venture with any
other entity or person or causing the Company to make any investment (other than
in the ordinary course of business) in any other entity or person;
(o) amending the Company's Bylaws; and
(p) adopting any resolution recommending, or otherwise taking any
final action with respect to, the amendment of the Company's certificate of
incorporation.
4.6 Majority Votes Required. Unless otherwise specified in Section
4.5 or 4.7, the affirmative vote of a majority of the Board of Directors shall
be required for:
(a) hiring or terminating the employment of any department head of
the Company;
(b) entering into, amending or terminating any agreement of the
Company, or the Company otherwise engaging in any act, outside
the ordinary course of business;
(c) any decision by the Company to commence, settle, or otherwise
compromise any material litigation or arbitration;
(d) the selection or termination of any professional advisor for the
Company; and
(e) determining whether the Company may modify Source Code pursuant
to Section 4.1(b) of the Joint Venture License Agreement.
4.7 Company Action Against Stockholder. Notwithstanding any provision
in this Agreement to the contrary, if the Company believes in good faith that a
Stockholder is in breach of its obligations under any agreement between such
Stockholder and the Company, and the Company wishes to approve the taking of
action against such Stockholder at any meeting of the Board of Directors, the
representatives of the allegedly breaching Stockholder shall be entitled to
attend such Board of Directors meeting (and shall be entitled to ten (10)
business days' prior notice of such meeting), but their attendance shall not be
required for a quorum in any meeting the Board of Directors called for the
purpose of taking such action. The Company may take action against such
allegedly breaching Stockholder with the approval of a majority of
8.
<PAGE>
the Board of Directors other than the representative(s) of the allegedly
breaching Stockholder, so long as such majority includes at least one director
who is not a representative of a Stockholder.
4.8 Deadlock Provisions. In the event the Board of Directors fails to
resolve, in accordance with Section 4.5 or 4.6 of this Agreement, any matter
properly before the Board of Directors that materially and adversely affects the
continued operation of the Company and provided that such failure is not caused
by a material breach under this Agreement or any other Company agreement by IN
Stockholder or TW Stockholder or the Affiliates of IN Stockholder or TW
Stockholder, the Board of Directors shall schedule another meeting as soon as
reasonably possible to discuss and resolve such matter. If the IN Directors and
TW Directors fail to resolve such matter, or if a quorum is not present at such
meeting, or if a quorum is not present for any two consecutive Board of
Directors meetings, either such Stockholder may declare a deadlock ("Deadlock")
and send written notice thereof to the other Stockholder.
(a) Executive Officers' Good Faith Negotiation. Within fifteen (15) days
of receipt of a notice declaring a Deadlock, the Stockholders shall convene a
meeting of two senior officers from each Stockholder and such senior officers
shall negotiate in good faith and without delay to attempt to resolve the
Deadlock.
(b) Failure to Resolve Deadlock; Negotiations for Purchase. In the event
the senior officers described in Section 4.8(a) cannot resolve the Deadlock
within thirty (30) days of submission of the Deadlock to such committee, or
within such extended period as agreed by such senior officers or by the
Stockholders, the Stockholders shall immediately commence negotiations for the
purchase by one Stockholder of all or some of the other Stockholder's Stock and
other Company securities owned by such Stockholder ("Stockholder's Securities"
or "Securities") or for another mutually acceptable option. In the event the
Stockholders cannot reach an agreement regarding such purchase within thirty
(30) days, or within a mutually agreed extended period, each Stockholder may bid
to purchase the other Stockholder's Securities pursuant to the procedures set
forth in Section 4.8(c), with the high bidder purchasing all, but not less than
all, of the other Stockholder's Securities; provided that neither Stockholder
will be required to sell its Securities to the other Stockholder for less than
the fair market value thereof as determined in accordance with Section 4.8(c).
(c) Bidding Procedure. In the event that either Stockholder bids to
purchase the other Stockholder's Securities pursuant to Section 4.8(b), no later
than thirty (30) days following the last day of the period set forth in the last
sentence of Section 4.8(b) each of the bidding Stockholders shall submit to the
Company's external auditors in writing its bid in U.S. dollars to purchase, for
cash, all of the other Stockholder's Securities. The Stockholders shall
instruct the external auditors to, and the external auditors shall, promptly
examine such bids in confidence and notify the Stockholders of the results of
such bid submissions. If the bids are not equal and the lower bid is less than
the higher bid by more than ten percent (10%) of the value of the higher bid,
then this Agreement shall be terminated and the higher bidding Stockholder shall
purchase the Securities owned by the other Stockholder. If the bids are equal,
or if the lower bid is less than the higher bid by equal to or less than ten
percent (10%) of the value of the higher bid, then the external auditors shall
notify the Stockholders of such fact but not of the amounts of the bids, and the
Stockholders shall, within seven (7) days of such notice, submit new bids, which
shall be handled by the external auditors in the same manner as the original
bids. After three (3)
9.
<PAGE>
submissions of bids by the Stockholders and regardless of the values of the
third set of bids, this Agreement shall be terminated and the Stockholder that
submitted the higher bid shall be entitled to purchase the Securities of the
Stockholder that either did not submit a bid or submitted the lower bid at the
price set forth in the higher bid.
If the Stockholder not bidding or submitting the lower bid believes
that the higher bid is at less than fair market value of such Securities, such
Stockholder shall have the right, upon notice to the other Stockholder, to
institute the following appraisal process. Each Stockholder shall appoint an
appraiser within twenty (20) days of such notice to determine, within thirty
(30) days of such appointment, the fair market value of such Securities. If the
two appraisals are within ten percent (10%) of one another, the fair market
value shall be the average of the two appraisals. If the two appraisals have a
greater than ten percent (10%) difference, the two appraisers shall appoint a
third appraiser, whose appraisal shall serve as the fair market value. If the
fair market value so determined is less than the winning bid price, such
Stockholder shall sell its Securities and the winning bidder shall purchase such
Securities at the winning bid price within seven (7) days of the completion of
the appraisal. If the fair market value so calculated is greater than the
winning bid price, such Stockholder may either sell its Securities at the bid
price or institute the liquidation proceedings set forth in Section 4.8(d).
(d) Liquidation Procedure. If neither Stockholder submits a bid pursuant
to Section 4.8(c), or if the losing bidder institutes liquidation pursuant to
the last sentence of Section 4.8(c), then the Stockholders shall promptly and in
good faith cooperate to dissolve and liquidate the Company in an equitable
manner that fairly distributes to the Stockholders any assets of the Company
available for such distribution.
(e) Initial Stockholders. This Section 4.8 shall only accord benefits to,
and be binding upon, IN Stockholder, TW Stockholder and their respective
permitted successors and assigns.
5. Legend.
(a) Each certificate representing shares of Stock now or hereafter owned
by the Stockholder or issued to any person in connection with a transfer
pursuant to Section 3.1 hereof shall be endorsed with the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND, EXCEPT IN CERTAIN
CIRCUMSTANCES, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.
THE SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS
10.
<PAGE>
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
STOCKHOLDERS AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE COMPANY AND
CERTAIN HOLDERS OF STOCK OF THE COMPANY. SUCH AGREEMENT INCLUDES
CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY.
ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO
AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH
AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY."
(b) The Company agrees that, during the term of this Agreement, it will
not remove, and will not permit to be removed (upon registration of transfer,
reissuance or otherwise), the Legend from any such certificate and will place or
cause to be placed the Legend on any new certificate issued to represent Stock
theretofore represented by a certificate carrying the Legend.
(c) The Stockholders agree that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
6. Miscellaneous.
(a) Conditions to Exercise of Rights. Exercise of the Eligible
Stockholders' rights under this Agreement shall be subject to and conditioned
upon, and the Stockholders and the Company shall use their best efforts to
assist each Eligible Stockholder in, compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware.
(c) Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only by the Company, (ii) as to the Eligible Stockholders
other than the Stockholders, by persons holding more than sixty-six and two-
thirds percent in interest of the Common Stock held by the Eligible Stockholders
and their assignees, pursuant to Section 6(d) hereof and (iii) as to the
Stockholders, by persons holding more than ninety percent in interest of the
Company's outstanding Common Stock held by the Stockholders. Any amendment or
waiver effected in accordance with clauses (i), (ii), and (iii) of this Section
6(c) shall be binding upon each Eligible Stockholder, its successors and
assigns, the Company and the Stockholders.
(d) Entire Agreement; Assignment of Rights. This Agreement constitutes the
entire agreement between the parties relative to the specific subject matter
hereof. Any previous agreement among the parties relative to the specific
subject matter hereof is superseded by this Agreement. This Agreement and the
rights and obligations of the parties hereunder shall inure to
11.
<PAGE>
the benefit of, and be binding upon, their respective permitted successors,
assigns and legal representatives.
(e) Term. This Agreement shall continue in full force and effect from the
date hereof through the earliest of the following dates, on which date it shall
terminate in its entirety:
(i) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended;
(ii) the date of the closing of a sale, lease, or other disposition
of all or substantially all of the Company's assets or the Company's merger into
or consolidation with any other corporation or other entity, or any other
corporate reorganization, in which the holders of the Company's outstanding
voting stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, provided
that this Section 6(e)(ii) shall not apply to a merger effected exclusively for
the purpose of changing the domicile of the Company; or
(iii) the date as of which the parties hereto terminate this
Agreement by written consent of the Company and persons holding more than ninety
percent in interest of the Company's outstanding Common Stock held by the
Stockholders.
(f) Ownership. The parties hereto represent and warrant that each is the
sole legal and beneficial owner of those shares of Common Stock he or she
currently holds subject to the Agreement and that no other person has any
interest (other than a community property interest) in such shares.
(g) Further Action. If and whenever any Stock is transferred, the
transferring Stockholder or the personal representative of the transferring
Stockholder shall do all things and execute and deliver all documents and make
all transfers, and cause any transferee of such Stock to do all things and
execute and deliver all documents, as may be necessary to consummate such sale
consistent with this Agreement.
(h) Specific Performance. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or its
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
(i) Successors. The Company shall not permit the transfer of any Stock on
its books or issue a new certificate representing any Stock unless and until the
person to whom such security is to be transferred shall have executed a written
agreement to be bound by and comply with all the provisions hereof as if such
person were a Stockholder, as applicable. Any sale,
12.
<PAGE>
assignment, transfer, pledge, hypothecation or other encumbrance or disposition
of Stock not made in conformance with this Agreement shall be null and void,
shall not be recorded on the books of the Company and shall not be recognized by
the Company
(j) Waiver. No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
(k) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(l) Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(m) Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(n) Entire Agreement. This Agreement and the Exhibits hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(o) Additional Stockholders. Notwithstanding anything to the contrary
contained herein, if the Company shall issue shares of its Common Stock pursuant
to any purchase agreement, any purchaser of such shares of Common Stock may
become a party to this Agreement by executing and delivering an additional
counterpart signature page to this Agreement and shall be deemed a "Stockholder"
hereunder.
(p) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.
<PAGE>
(q) Books and Records. The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with United States generally accepted accounting principles
consistently applied, and will set aside on its books all such proper accruals
and reserves as shall be required under United States generally accepted
accounting principles consistently applied.
[SIGNATURE PAGE NEXT]
14.
<PAGE>
The foregoing Stockholders Agreement is hereby executed as of the
date first above written.
COMPANY: STOCKHOLDERS:
TWIN Entertainment Inc. Two Way TV Limited
By: /s/ Bruce W. Bauer By: /s/ Piers Wilson
Name: Bruce W. Bauer Name: Piers Wilson
Title: President Title: Finance Director
By: /s/ Piers Wilson Interactive Network, Inc.
Name: Piers Wilson
Title: Secretary and Treasurer By: /s/ Bruce W. Bauer
Name: Bruce W. Bauer
Title: President and Chief Executive
Officer
<PAGE>
Exhibit A
LIST OF STOCKHOLDERS
Shares of
Name of Stockholder Common Stock
- ---------------------------------------------------------- -----------------
Two Way TV Limited 2,500,000
Interactive Network, Inc. 2,500,000
<PAGE>
EXHIBIT 2.4
TWIN Entertainment Inc.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is entered into as of the
31 day of January 2000, by and among TWIN Entertainment Inc., a Delaware
corporation (the "Company") and the purchasers of the Company's common stock
("Common Stock") set forth on Exhibit A of that certain Joint Venture and Stock
Purchase Agreement, dated as of December 6, 1999 (the "Purchase Agreement") and
Exhibit A hereto. The purchasers of the Common Stock shall be referred to
hereinafter as the "Investors" and each individually as an "Investor."
Recitals
Whereas, the Company proposes to sell and issue Five Million (5,000,000)
shares of its Common Stock pursuant to the Purchase Agreement;
Whereas, as a condition of purchasing the Common Stock pursuant to the
Purchase Agreement, the Investors have requested that the Company extend to them
registration rights, information rights and other rights as set forth below.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or which is controlled by
an entity which controls, another Person; provided, however, that "control"
shall mean the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
1.
<PAGE>
"Holder" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with this Agreement.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Person" means any natural person, partnership, corporation, limited
liability company, trust, estate, association, custodian or nominee or any other
individual or entity in its own or any representative capacity.
"Registrable Securities" means (a) shares of Common Stock purchased
under the Purchase Agreement (including, without limitation, those shares of
Common Stock acquired by an Investor pursuant to that certain stockholders
agreement dated as of the date hereof between the Investors and the Company (the
"Stockholders Agreement")); and (b) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of
counsel for the Holders, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Common Stock when and if issued by
the Company pursuant to a purchase agreement.
2.
<PAGE>
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Without limiting in any way any additional restrictions on
transfer set forth in the Stockholders Agreement, each Holder agrees not to make
any disposition of all or any portion of the Shares (if issued) or Registrable
Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the foregoing, the rights of the
Company and the Holders in this Section 2 shall not apply to any transfer to any
Affiliate of any Holder; provided that (A) the Holder (or its representative)
shall inform the Company of such transfer prior to effecting it and (B) the
transferee shall furnish the Company with a written agreement to be bound by and
comply with all provisions of this Section 2. Such transferred Shares shall
remain "Shares" hereunder, and such transferee shall be treated as the "Holder"
for purposes of this Agreement.
(b) Each certificate representing Shares (if issued) or
Registrable Securities shall (unless otherwise permitted by the provisions of
the Agreement) be stamped or otherwise imprinted with a legend substantially
similar to that set forth in Section 6 of the Stockholders Agreement.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
3.
<PAGE>
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of two-thirds of the
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of a majority of the Registrable Securities then outstanding (or a
lesser percent if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed $15,000,000 at a per share price
reflecting a pre-money valuation of the Company of $60,000,000 (a "Qualified
Public Offering")), then the Company shall, within thirty (30) days of the
receipt thereof, give written notice of such request to all Holders, and subject
to the limitations of this Section 2.2, use its best efforts to effect, as soon
as practicable, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (A) the third anniversary
of the date of this Agreement or (B) one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;
4.
<PAGE>
(iii) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days;
(iv) if the Company shall furnish to Holders requesting
a registration statement pursuant to this Section 2.2, a certificate signed by
the Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration statement to be effected at such
time, in which event the Company shall have the right to defer such filing for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company not more than once in any twelve (12) month
period; or
(v) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders
that the Holders seek to register pursuant to the
5.
<PAGE>
provisions hereof; and third, to any shareholder of the Company (other than a
Holder) on a pro rata basis. No such reduction shall (i) reduce the securities
being offered by the Company for its own account to be included in the
registration and underwriting, or (ii) reduce the amount of securities of the
selling Holders included in the registration below twenty-five percent (25%) of
the total amount of securities included in such registration, unless such
offering is the Initial Offering and such registration does not include shares
of any other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than
ninety percent (90%) of the Registrable Securities proposed to be sold in the
offering. If any Holder disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration.
(b) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than one million dollars ($1,000,000), or
6.
<PAGE>
(iii) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively. All such Registration
Expenses incurred in connection with registrations requested pursuant to this
Section 2.4 after the first two (2) registrations shall be paid by the selling
Holders pro rata in proportion to the number of shares sold by each.
2.5 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable (in which event such right shall be forfeited
by all Holders). If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
7.
<PAGE>
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and
8.
<PAGE>
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) such Holder (together with its
affiliates, partners and former partners) holds less than 1% of the Company's
outstanding Common Stock; and (b) all Registrable Securities held by and
issuable to such Holder (and its affiliates, partners, former partners, members
and former members) may be sold under Rule 144 during any ninety (90) day
period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
9.
<PAGE>
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will pay as
incurred to each such Holder, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished by such Holder, partner, officer, director, underwriter or
controlling person of such Holder under an instrument duly executed by such
person and stated to be specifically for use in connection with such
registration.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and
10.
<PAGE>
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least ninety percent (90%)
of the Registrable Securities then outstanding. Any amendment or waiver effected
in accordance with this Section 2.10 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.11 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of ninety percent (90%) of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights pari passu or
senior to those granted to the Holders hereunder.
11.
<PAGE>
2.12 "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(i) such agreement shall apply only to the Company's Initial
Offering; and
(ii) all officers and directors of the Company and holders of at
least one percent (1%) of the Company's voting securities enter into similar
agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.12 shall
not apply to a registration relating solely to employee benefit plans on Form S-
1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.13 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder
12.
<PAGE>
may reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 Basic Financial Information and Reporting.
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor a balance sheet of the Company, as at the end of such
fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be audited and accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(b) The Company will furnish each Investor, as soon as practicable
after the end of each calendar quarter, and in any event within thirty (30) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made. Notwithstanding the foregoing, if at any time the Company prepares a
balance sheet, statement of income or statement of cash flows for any period
other than as set forth above, then the Company shall furnish to each Investor
such balance sheet, statement of income or statement of cash flows upon
completion.
(c) So long as an Investor (with its affiliates) shall own not less
than ten percent (10%) of the Registrable Securities (as adjusted for stock
splits and combinations) (a "Major Investor"), the Company will furnish each
such Major Investor at least sixty (60) days prior to the beginning of each
fiscal year an annual operating plan and budget, prepared on a monthly basis for
the ensuing fiscal year, and on a basis consistent with prior periods
(including, among other items, appropriate reserves, accruals and provisions for
income taxes) and representing the best estimate of the Company based upon
available information. The Company shall also furnish to such Major Investor,
within a reasonable time of its preparation, amendments to the annual budget, if
any. Such budget shall include underlying assumptions and a brief qualitative
description of the Company's plan by the Chief Executive Officer in support of
that budget.
(d) The Company will notify each Major Investor, as soon as
practicable, and in any event within ten (10) days of discovery, of (i) any
event (including pending or threatened litigation) which could have a material
adverse effect upon the financial condition or results of operations of the
Company considered in the aggregate; (ii) any change in any material fact or
circumstance represented or warranted in this Agreement, (iii) a default or any
event or occurrence which with the lapse of time or notice or both could become
a default under the Purchase Agreement and (iv) a material default or any event
or occurrence which with the lapse of time or notice or both could become a
default under any of the Company's material
13.
<PAGE>
agreements. Such notice shall contain a reasonably detailed statement outlining
such default or event, and the Company's proposed response.
(e) In the event the Company fails to provide the reports or
financial statements required by this Section 3.1, the Major Investors may give
the Company notice requesting immediate delivery of such reports. If the Company
fails to deliver such reports upon receipt of such notice, then any of the Major
Investors shall have the right and authority, at the Company's sole expense, to
request an audit by a single accounting firm of its or their choice, such that
the reports or financial statements are produced to its or their sole
satisfaction.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed; and, provided further,
that the preceding proviso shall not, in any case, apply to the Investors listed
on Exhibit A hereto.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. Each Investor owning at least ten percent (10%)
of the Company's Shares (a "Participating Holder") shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.6 hereof. Each Participating Holder's pro rata share is equal to the ratio of
(a) the number of shares of the Company's Common Stock which such Participating
Holder is deemed to be a holder immediately prior to the issuance of such Equity
Securities to (b) the total number of shares of the Company's outstanding Common
Stock (including all shares of Common Stock issued or issuable upon conversion
of any preferred shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock or other security of the
Company, (ii) any security convertible, with or without consideration, into any
Common Stock or other security (including any option to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock or other security or (iv) any such
warrant or right.
14.
<PAGE>
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Participating Holder written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Participating
Holder shall have thirty (30) days from the giving of such notice to agree to
purchase its pro rata share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Participating Holder who would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If not all of the
Participating Holders elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Participating
Holders who do so elect and shall offer such Participating Holders the right to
acquire such unsubscribed shares. The Participating Holders shall have five (5)
days after receipt of such notice to notify the Company of its election to
purchase all or a portion thereof of the unsubscribed shares. If the
Participating Holders fail to exercise in full the rights of first refusal, the
Company shall have ninety (90) days thereafter to sell the Equity Securities in
respect of which the Participating Holder's rights were not exercised, at a
price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Participating
Holders pursuant to Section 4.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
4.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Participating Holders in the
manner provided above.
4.4 Termination and Waiver of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the effective date of the registration statement pertaining to the
Company's Initial Offering.
4.5 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other
rights), as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like, issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board of Directors, including the representatives designated by
the Investors;
(b) stock issued pursuant to any rights or agreements granted after
the date of this Agreement; provided that the rights of first refusal
established by this Section 4 applied with respect to the initial sale or grant
by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;
15.
<PAGE>
(d) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company affecting all such shares
equally;
(e) any Equity Securities issued pursuant to any equipment leasing or
loan arrangement, or debt financing from a bank or similar financial or lending
institution approved by the Board of Directors;
(f) any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act; and
(g) shares of the Company's Common Stock or other Equity Securities
issued in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors, including the representatives
designated by the Investors.
SECTION 5. MISCELLANEOUS
5.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
permitted successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price; and, provided further, that no assignment of Registrable
Securities shall be valid hereunder unless exercised in accordance with Section
2.1.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.5 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such
16.
<PAGE>
invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least ninety percent (90%) of the Registrable Securities.
(b) Notwithstanding the foregoing, this Agreement may be amended with
only the written consent of the Company to include purchasers of Shares as
"Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue shares of its Common Stock pursuant
to any purchase agreement, any purchaser of such shares of Common Stock may
become a party to this
17.
<PAGE>
Agreement by executing and delivering an additional counterpart signature page
to this Agreement and shall be deemed an "Investor" hereunder.
5.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18.
<PAGE>
In Witness Whereof, the parties hereto have executed this Investor Rights
Agreement as of the date set forth in the first paragraph hereof.
<TABLE>
<CAPTION>
COMPANY: INVESTORS:
- -------- ---------
<S> <C>
TWIN Entertainment Inc. Two Way TV Limited
By: /s/ Bruce W. Bauer By: /s/ Piers Wilson
------------------------------ ------------------------------
Name: Bruce W. Bauer Name: Piers Wilson
Title: President Title: Finance Director
By: /s/ Piers Wilson Interactive Network, Inc.
------------------------------
Name: Piers Wilson
Title: Secretary and Treasurer By: /s/ Bruce W. Bauer
------------------------------
Name: Bruce W. Bauer
Title: President and Chief Executive Officer
</TABLE>
<PAGE>
EXHIBIT 2.5
TERMINATION AND LICENSE AGREEMENT
This Termination and License Agreement ("Agreement"), dated as of January
31, 2000 ("Effective Date"), is between Two Way TV Limited ("TW"), a corporation
organized under the laws of England and Wales, having its principal office at
Beaumont House, Kensington Village, Avonmore Road, London, England W14 8TS, and
Interactive Network, Inc. ("IN"), a California corporation having its principal
office at 1161 Old County Road, Belmont, California 94002, U.S.A. (hereinafter
collectively referred to as the "Parties" and individually as a "Party").
Recitals
A. The Parties desire to resolve all issues between them with respect to
the Know-How License Agreement dated September 29, 1992 between the Parties
("Know-How License Agreement").
B. In connection therewith, each Party desires to terminate, and release
all claims it may have against the other Party under, the Know-How License
Agreement.
C. IN and TW have entered into a Joint Venture and Stock Purchase
Agreement dated as of December 6, 1999 to establish a joint venture company,
TWIN Entertainment Inc. ("TWIN") to develop, market and supply digital (as well
as analog) interactive and related services, products and technology in the
United States and Canada.
D. Contemporaneously with the execution of this Agreement, the Parties
are entering into certain other Joint Venture Agreements (as defined below) in
connection with the formation of TWIN.
E. TW desires IN to grant to TW, and IN is willing to grant to TW, a
license under certain of IN's patents to make, use and sell interactive
television services and products in the Territory (as defined below) and subject
to the terms and conditions as hereinafter set forth.
ACCORDINGLY, in consideration of the mutual covenants and promises
contained herein, the Parties agree as follows:
1. DEFINITIONS.
1.1. "Applicable Law" shall mean, as to any Person, any statute, law, rule,
regulation, directive, treaty, judgment, order, decree or injunction of any
Governmental Authority that is applicable to or binding upon such Person or any
of its properties.
1.2. "Confidential Information" shall mean information or materials
disclosed to a Party by another Party that are marked as "Confidential" or
"Proprietary" or, if disclosed orally, identified as such at the time of
disclosure and reduced by the disclosing
1
<PAGE>
Party to written form marked "Confidential" or "Proprietary" within twenty (20)
days after oral disclosure.
1.3. "Costs" shall mean, subject to Section 5.5 ("Gross Profits
Calculation"), the direct variable costs incurred by TW and TW's Subsidiaries in
connection with their commercial manufacture, sale and promotion of the Two Way
System and related products and services in the Interactive Field of Use
excluding any amount attributable to TW's or TW's Subsidiaries' overhead
expenses and, for the avoidance of doubt, such direct variable costs (a) shall
include (i) personnel salaries for sales department employees (excluding
- -------
executives), sales commissions paid to such employees, costs incurred by such
employees in their sales efforts (including telephone, travel and entertainment
costs), (ii) advertising and promotion costs for the Two Way System, (iii)
royalties paid to third parties where necessary to exploit the Two Way System
(which, for the avoidance of doubt, may include royalties payable for
programming content used but shall not include royalties payable under this
Agreement), and (iv) product packaging, insurance and shipping costs for the Two
Way System products; but (b) shall exclude (i) all other salaries, benefits, and
-------
costs associated with other personnel (including, without limitation,
executives, directors, and personnel engaged in development and support), (ii)
all costs associated with the personnel, administration, customer service,
operations and all other departments, (iii) all general and administrative
costs, including without limitation, rent, utilities, legal fees, business
insurance, the costs of maintaining financial reporting systems and preparing
financial accounts, (iv) costs associated with the technical development of the
Two Way System and related programs, content and services, and (v) income tax
and any other tax or duty (including, without limitation, income tax credits
carried over from prior periods). Notwithstanding the foregoing, "Costs" shall
exclude all costs of any nature incurred by or on behalf of TW and TW's
- -------
Subsidiaries in connection with TWIN or in connection with performing its or
their obligations under the Joint Venture License Agreement among the Parties
and TWIN of even date herewith.
1.4. "Governmental Authority" shall mean any domestic or foreign
government, governmental authority, court, tribunal, agency or other regulatory,
administrative or judicial agency, commission or organization, and any
subdivision, branch or department of any of the foregoing.
1.5. "Gross Profits" shall mean, subject to Section 5.5 ("Gross Profits
Calculation"), the total Revenues accrued during that period less Costs incurred
during that period.
1.6. "Interactive Field of Use" shall mean the interactive television
products and services market as further described in Exhibit A hereto.
---------
1.7. "Joint Venture Agreements" shall mean the Joint Venture and Stock
Purchase Agreement dated as of December 6, 1999, and the Stockholders Agreement,
Investors Rights Agreement, and Joint Venture License Agreement among the
Parties and TWIN of even date herewith.
2
<PAGE>
1.8. "Know-How License" shall mean the Know-How License between the
Parties dated September 29, 1992.
1.9. "Licensed Patents" shall mean the specific patents set forth in
Exhibit B and any continuations, divisionals, continued prosecution
- ---------
applications, reissues, and reexaminations thereof (but excluding any
continuations in part and new inventions).
1.10. "Person" shall mean a natural individual, Governmental Authority,
legal entity, partnership, firm, corporation or other association.
1.11. "Proprietary Rights" shall mean, collectively, Patents, Trade
Secrets, Copyrights, moral rights, rights in trade dress, and all other
intellectual property rights and proprietary rights, excluding trademarks,
whether arising under the laws of the United States or any other state, country
or jurisdiction in each case now existing or hereafter developed during the term
of this Agreement. For purposes of this Agreement: (a) "Patents" shall mean all
patent rights and all right, title and interest in all letters patent or
equivalent rights throughout the world; (b) "Trade Secrets" shall mean all
right, title and interest in all trade secrets and trade secret rights arising
under common law, state law, federal law or laws of foreign countries; and (c)
"Copyrights" shall mean all copyrights, and all right, title and interest in all
copyrights, copyright registrations and applications for copyright registration,
certificates of copyright and copyrighted interests throughout the world, and
all right, title and interest in related applications and registrations
throughout the world.
1.12. "Revenue" shall mean, subject to Section 5.5 ("Gross Profits
Calculation"), all the revenue (excluding all taxes or duties in the nature of
purchase, service, sales, excise or value added taxes but not excluding income
tax payable on such revenue) accrued by TW and TW's Subsidiaries arising from
the establishment, operation, development, commercial exploitation, promotion
and sale of the Two Way System and associated products and services and from any
other business activity conducted by or for TW and/or its Subsidiaries in the
Interactive Field of Use (including without limitation such activities as
entering licensing arrangements with third parties), including without
---------
limitation:
(a) any royalties or other fees TW and its Subsidiaries receive from any
joint venturer or sublicensee (other than TWIN) which is responsible for the
establishment, operation, development, commercial exploitation, promotion and/or
sale of the Two Way System and related products and services; and
(b) revenue received by TW and its Subsidiaries arising from the sale of
hardware relating to the Two Way System or the provision of services in
connection with the Two Way System
but excluding interest received on investments and dividends issued on shares
---------
held in Subsidiaries (whether paid in the form of shares or cash).
Notwithstanding the foregoing, "Revenues" shall exclude all revenues accrued by
-------
TW and TW's Subsidiaries directly
3
<PAGE>
from TWIN or in connection with performing its or their obligations under the
Joint Venture License Agreement among the Parties and TWIN of even date
herewith.
1.13. "Subsidiary," with respect to a Party, shall mean any corporation,
partnership or other entity, ten percent (10%) or more of whose shares or
ownership interests entitled to vote for the election of directors (other than
any shares whose voting rights are subject to restriction) or, in the case of a
noncorporate entity, the equivalent interests, are owned or controlled by such
party, directly or indirectly, now or hereafter, but such corporation,
partnership or other entity shall be deemed to be a Subsidiary only for so long
as such ownership or control exists. Notwithstanding the foregoing, for
purposes of this Agreement, "Subsidiary" shall not include TWIN.
1.14. "Territory" shall mean all countries and jurisdictions of the world
excluding the United States of America and all its territories and Canada,
subject to the provisions of Section 7.8 ("Additional Patent Filings").
1.15. "Two Way System" shall mean TW's interactive television system that
operates on digitally based platforms and/or devices and is capable of
delivering simultaneous services across multiple networks.
2. TERMINATION OF KNOW-HOW AGREEMENT. TW and IN hereby agree to terminate the
Know-How License, effective as of the Effective Date, subject to the following
terms and conditions:
2.1. Surviving Obligations.
---------------------
(a) Neither Party will have any further obligation to the other Party
except that the definitions and the following provisions of the Know-How License
shall survive: (i) Section 7 ("Confidentiality") shall remain in effect with
respect to disclosures made in connection with the Know-How License prior to the
Effective Date hereof; (ii) Section 3 ("Royalty") shall remain in effect with
respect to any royalties owed to IN through the Effective Date hereof; and (iii)
Section 4 ("Records and Reports"), excluding Section 4.2, shall remain in effect
for three (3) years following the Effective Date hereof.
(b) Notwithstanding the foregoing, as soon as reasonably practicable
following the Effective Date hereof, TW shall deliver to IN a financial
statement and report setting forth in detail the calculation of TW's Gross
Profits (as defined in the Know-How License) in each relevant country and the
royalties owed (or not owed, as the case may be) to IN under the Know-How
License through the date of such report, accompanied, if applicable, by a check
in U.S. dollars drawn on a U.S. bank for royalties owed. IN shall, within one
hundred twenty (120) days of receipt of such report (and check, if applicable),
notify TW in writing that it accepts and approves such report or, in the
alternative, wishes to exercise its audit rights under surviving Section 4.3 of
the Know-How License. If IN so approves such report, Sections 3 ("Royalty") and
4 ("Records and Reports") of the Know-How License shall terminate and have no
further force and effect.
4
<PAGE>
2.2. No License. Without limiting the generality of the foregoing, but
----------
subject to the terms and conditions of this Agreement, effective as of the
Effective Date neither Party shall have any license under or other rights to use
any of the other Party's Know-How, Patents, Copyrights (as such terms are
defined under the Know-How License) or any other technology or proprietary
rights under the Know-How License.
2.3. Costs of Termination. Each Party is responsible for its own expenses
--------------------
incurred in connection with termination of the Know-How License.
2.4. Public Announcement. Neither Party shall make a public announcement
-------------------
with respect to termination of the Know-How License or the terms and conditions
of this termination provision, except as required by law or to fulfill
government filing or regulatory body or stock exchange requirements and except
as set forth in Section 13.9 ("Announcement").
3. WAIVER AND RELEASE.
3.1. Release. Effective as of the Effective Date, each Party, on behalf of
-------
itself and its parents, subsidiaries, affiliates, agents, representatives,
directors, employees, attorneys, advisors, insurers, licensees, sublicensees,
successors and assigns, hereby irrevocably releases and forever discharges the
other Party and its parents, subsidiaries, affiliates, agents, representatives,
directors, employees, attorneys, advisors, insurers, licensees, sublicensees,
successors and assigns of and from any and all claims, counterclaims, demands,
actions, causes of action, damages, liabilities, losses, payments, obligations,
costs and expenses (including, without limitation, attorneys' fees and costs) of
any kind or nature, past, present or future, fixed or contingent, direct or
indirect, in law or equity, several or otherwise, known or unknown, suspected or
unsuspected, that arise from or relate in any way to any act prior to the
Effective Date with respect to the Know-How License. The foregoing release is
expressly intended to cover and include, without limitation, all claims, past,
present or future, known or unknown, suspected or unsuspected, which can or may
ever be asserted by successors or otherwise, as the result of the matters herein
released, or the effects or consequences thereof. The foregoing release shall
not apply to the Parties' obligations required to be performed under this
Agreement, including without limitation the Parties' continuing obligations set
forth in Section 2.1 ("Surviving Obligations").
3.2. Waiver. Effective as of the Effective Date, each Party, on behalf of
------
itself and its parents, subsidiaries, affiliates, agents, representatives,
directors, employees, attorneys, advisors, insurers, licensees, sublicensees,
successors and assigns, hereby irrevocably and forever waives all rights such
Party may have arising under California Civil Code Section 1542 (or any
analogous requirement of law), with respect to the foregoing release. Each
Party understands that Section 1542 provides that:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release which, if known by him,
must have materially affected his settlement with the
debtor.
5
<PAGE>
Each Party acknowledges that it has been fully informed by its
counsel concerning the effect and import of this Agreement under California
Civil Code Section 1542 and other requirements of law.
3.3. No Admission. This Agreement is entered into in order to compromise
------------
and settle disputed claims, without any concession or admission by any Party,
and without any acquiescence on the part of either IN or Licensee as to the
merit of any claim, defense, affirmative defense, counterclaim, liabilities or
damages related to the Know-How License. Neither this Agreement nor any part
thereof shall be, or be used as, an admission of infringement or liability by
anyone, at any time for any purpose.
3.4. Further Assurances. Each Party shall take all such actions and steps
------------------
as are necessary to complete the transactions contemplated by this Section 3
("Resolution of Outstanding Issues").
4. LICENSE GRANT.
4.1. Patent License. Subject to all the terms and conditions of this
--------------
Agreement, IN hereby grants to TW a royalty-bearing, non-transferable (except as
provided in Section 13.2 ("Assignment") license, under the Licensed Patents,
until the date of expiration of the last claim of the last unexpired patent
among the Licensed Patents, (subject to termination under Section 12 ("Term and
Termination")), in the Territory, to:
(a) Make, have made for TW (which terms shall include the acts of
assembling and/or testing), use, sell, offer for sale, operate, lease or
otherwise dispose of products and services embodying the inventions described in
the Licensed Patents as part of the Two Way System in the Interactive Field of
Use; and
(b) Sublicense any of the foregoing rights in subsection (a) on a non-
exclusive or (subject to the third-party rights and licenses under the Licensed
Patents existing as of the Effective Date as set forth in Exhibit C) exclusive
---------
basis to TW's Subsidiaries and other third parties in the Territory, provided
that the other terms and conditions of such sublicense are consistent with and
no less restrictive than the terms and conditions of this Agreement (including,
without limitation, consistent with the territorial limitations and the
prohibition on further sublicensing), provided further than any such sublicense
(or amendment or extension thereof) shall be subject to the prior written
approval of IN, which approval shall not be unreasonably withheld, and provided
further that this right to sublicense shall terminate immediately and
automatically upon any conversion of the license grant in this Section 4.1
("Patent License") from exclusive to non-exclusive in accordance with the terms
hereof. This right to sublicense shall not include the right of any sublicensee
to grant further sublicenses. By way of example but not limitation, IN may
reasonably withhold approval of any sublicense if the sublicense is unlikely to
generate any significant income for IN.
The foregoing license shall be exclusive, subject to Section 7.8 ("Additional
---------
Patent Filings") and to the third-party licenses under the Licensed Patents
existing as of the
6
<PAGE>
Effective Date as set forth in Exhibit C. Notwithstanding the foregoing, TW
---------
acknowledges that the licenses granted under the Joint Venture License Agreement
may extend incidentally outside of the Territory as described in Section 2.3
("Territorial Considerations") of the Joint Venture License Agreement, which
shall not be deemed an infringement of TW's rights or a breach of IN's
representations and warranties hereunder. No other rights (including without
limitation any implied rights or licenses) to the Licensed Patents or any other
Proprietary Rights of IN are granted to TW by IN. IN shall have no obligation to
license to TW any of its future technology or (except as specifically provided
in Section 7.8 ("Additional Patent Filings")) Proprietary Rights developed or
coming into existence after the Effective Date.
4.2. Minimum Payment Obligation. For the effective term of this Agreement,
--------------------------
TW agrees to pay to IN minimum annual royalties pursuant to Section 5.1
("Royalties") of no less than (a) $250,000 ("Initial Threshold Amount") for the
one (1) year period commencing on the Effective Date and ending on the first
anniversary thereof; (b) the Initial Threshold Amount plus eight percent (8%) of
the Initial Threshold Amount (i.e. $250,000 + [$250,000 X 8%] = $270,000) for
the subsequent one (1) year period (such resulting minimum payment amount
referred to as the "Threshold Amount"); and (c) for each one (1) year period
thereafter, 108% of the Threshold Amount of the immediately preceding one (1)
year period . By way of example but not limitation, in the event that the annual
royalties paid to IN pursuant to Section 5.1 ("Royalties") do not equal or
exceed $314,928 for the fourth one (1) year period of this Agreement, TW shall
"gross up" the royalties paid (i.e. pay to IN the difference between $314,928
and the royalties paid pursuant to Section 5.1) such that IN receives no less
than $314,928 for such measuring year. Payment by TW of royalties pursuant to
Section 5.1 ("Royalties") in excess of the minimum annual royalty amounts
required by this Section 4.2 shall not reduce or increase any future minimum
payment owed to IN under this provision. On TW's material breach of this Section
4.2 ("Minimum Payment Obligation"), IN shall have the right to (x) exercisable
on delivery of written notice thereof to TW, convert to nonexclusive the
licenses granted under Section 4.1 ("Patent License") or (y) exercise its right
to terminate this Agreement in accordance with Section 12.2 ("Termination on
Material Breach by TW").
4.3. Sublicenses. TW shall monitor the operations of its sublicensees in
-----------
connection with the obligations of TW and each sublicensee pursuant to this
Agreement. TW shall take all reasonable steps to ensure that its sublicensees
comply fully with such their obligations under their sublicense agreements. TW
shall promptly inform IN of the name and address of each of its sublicensees
sublicensed under this Agreement. Upon termination of this Agreement or
conversion of the license grants in Section 4.1 ("IN License") from exclusive to
nonexclusive in accordance with the terms hereof, any sublicenses granted by TW
hereunder shall also terminate in accordance with Section 12.4(b)(i).
4.4. Delivery. IN shall deliver to TW, as soon as reasonably practicable
--------
after the Effective Date, a photocopy of each Licensed Patent and, if TW
initially brings suit for patent infringement or informs IN in good faith that
it intends to bring suit against a suspected third-party infringer in accordance
with Section 7.5 ("Enforcement in the
7
<PAGE>
Territory"), such records related to filings and approvals thereof and related
relevant documents as may be necessary to assist TW in its legal proceedings,
unless IN is under legal or contractual obligation not to disclose any such
records, to be delivered at TW's expense.
4.5. Support. IN shall have no training, maintenance or support
-------
obligations under this Agreement.
5. PAYMENTS.
5.1. Royalties. In consideration for the licenses granted hereunder and
---------
for the convenience of the Parties and to avoid administrative costs and
inconvenience, TW agrees to pay to IN a royalty of (a) three percent (3%) of all
worldwide Gross Profits of TW and TW's Subsidiaries (subject to Section 5.5
("Gross Profits Calculation")) through the fifth (5th) anniversary of the
Effective Date and (b) two and a half percent (2.5%) of all worldwide Gross
Profits of TW and TW's Subsidiaries (subject to Section 5.5 ("Gross Profits
Calculation")) thereafter. The obligation to pay royalties under this Agreement
shall terminate on the sooner of (i) December 31, 2015 or (ii) the date of
expiration of the last claim of the last unexpired patent among the Licensed
Patents filed in the Territory.
5.2. Payment and Reports. All royalties payable under Section 5.1
-------------------
("Royalties") shall be payable quarterly within thirty (30) days after the end
of each calendar quarter. On or before the date of such payment TW shall send to
IN a report describing in detail the basis for its payment calculation. Late
payments shall incur interest at the rate of one and a half percent (1.5%) per
month from the date such payments were originally due, or the maximum amount
permitted under Applicable Law, whichever is less.
5.3. Currency. All payments made hereunder shall be free and clear of all
-------
deductions, withholding taxes or other charges, except as provided in Section 6
("Taxation"), and shall be made by TW in U.S. dollars by wire transfer to a bank
account(s) designated by IN, unless otherwise mutually agreed upon. Any currency
conversion required in connection with payment to IN shall be at the rate
received by TW at the time of such payment from the bank it utilizes to make
such payment.
5.4. Audit. IN shall have the right, at its own expense, upon reasonable
-----
notice and at reasonable times, but not more than once each calendar year, to
inspect, through an independent auditor TW's records for the purpose of
verifying the accuracy of TW's calculations of fees payable hereunder. Should
TW's calculations be more than five percent (5%) less than such auditor's
calculations, TW shall be responsible for the reasonable expenses of such audit.
TW shall keep correct and complete records showing TW's and TW's Subsidiaries'
products, services and technology sold, distributed, licensed or otherwise
disposed of in connection with the licenses and sublicenses granted herein and
the calculation of Gross Profits in sufficient detail to enable the fees payable
to IN to be determined. TW shall not include in its calculations of Gross
Profits any revenues received from TWIN or any costs incurred by or on behalf of
TW or TW's Subsidiaries related to TWIN (including, without limitation, any
costs incurred by or on
8
<PAGE>
behalf of TW and TW's Subsidiaries in connection with providing support services
to TWIN or any costs associated with negotiating the Joint Venture Agreements).
Such records shall be maintained for a period of at least five (5) years after
the date when payment is due by TW.
5.5. Gross Profits Calculation. The following rules shall apply to the
-------------------------
calculation of Gross Profits under this Agreement:
(a) Gross Profits shall be calculated on an entity-by-entity basis (i.e.,
Gross Profits shall be calculated separately for TW and for each TW Subsidiary).
(b) A loss (i.e. a negative number resulting from the calculation of Gross
Profits) for one entity may not be offset against or deducted from profits (i.e.
a positive number resulting from the calculation of Gross Profits) for any other
entity.
(c) In calculating the Gross Profits for each TW Subsidiary, the Costs
incurred and Revenues accrued by a Subsidiary shall be calculated on a pro-rata
basis taking into consideration the ownership or equivalent economic interest of
TW. By way of example but not limitation, if TW owns sixty percent (60%) of a TW
Subsidiary, the Costs and Revenues of such Subsidiary shall be multiplied by
sixty percent (60%) to determine the amount of Gross Profits of such Subsidiary
on which the royalty payable to IN hereunder shall be based.
(d) In calculating the Gross Profits for TW, the Costs incurred and
Revenues accrued by TW in connection with transactions with a TW Subsidiary
shall be counted in full.
6. TAXATION.
6.1. Withholding Tax. If required by Applicable Law, TW may withhold
---------------
income tax from any payment to IN. In the case of such withholding, TW shall:
(i) without delay, pay the withheld tax to the appropriate tax office and
furnish IN with appropriate evidence of the tax payment and (ii) increase the
amount payable by TW to IN hereunder to such amount which, after making all
required withholdings or deductions of withholding taxes therefrom, will equal
the amount payable hereunder had no such withholdings or deductions been
required. TW shall indicate on each statement the amount of payment thereunder
which represents TW's gross-up to cover required withholding taxes, if any.
Should IN be able, within the maximum period allowable by law, to utilize as a
tax credit an amount which has been paid by TW for such withholding taxes, IN
will notify TW of the amount which it is able to utilize as a tax credit and TW
may deduct such amount from future payments owed to IN.
6.2. Other Taxes. TW shall bear all sales, use and other governmental
-----------
taxes or transaction charges imposed in any jurisdiction which arise in
connection with the delivery or use of the Licensed Patents, or the use,
manufacture or sale of products and services under its licenses (and
sublicenses) hereunder. The Parties will make reasonable commercial efforts to
cooperate as necessary to take advantage of such double taxation
9
<PAGE>
treaties as may be available and to minimize the amount of taxes (including
without limitation withholding taxes) owed by either Party in connection with
this Agreement.
7. INTELLECTUAL PROPERTY RIGHTS.
7.1. IN Rights. As between the Parties, except for and to the extent of
---------
the express licenses granted herein, IN and its licensors shall retain and own
all right, title and interest in and to the Licensed Patents and all Proprietary
Rights thereto.
7.2. Marking Requirement. TW shall, and agrees to require its sublicensees
-------------------
to, mark all products made, used or sold under the terms of this Agreement, or
their containers, in full compliance with the patent marking provisions of the
intellectual property laws of the applicable countries in the Territory.
7.3. Notice of Third Party Infringement. If either Party becomes aware of
----------------------------------
any product, service or activity of any third party that involves actual or
suspected infringement or violation of any Licensed Patent(s) in the Territory,
whether or not subject to an exclusive license grant hereunder, such Party shall
promptly notify the other Party in writing of such infringement or violation.
Each Party shall keep the other Party apprised of the actions such Party takes
in accordance with Section 7.5 ("Enforcement in the Territory").
7.4. Maintenance in the Territory. IN shall have the responsibility for
----------------------------
maintaining the Licensed Patents licensed hereunder in the jurisdictions within
the Territory where such patents have issued. All future costs and government
charges incurred by IN in connection with the maintaining of the Licensed
Patents in the Territory (including without limitation the costs of all
interferences and opposition) shall be borne by TW, so long as the licenses
granted to TW herein are exclusive.
7.5. Enforcement in the Territory. In the event that TW provides notice to
----------------------------
IN in accordance with Section 7.3 ("Notice of Third Party Infringement"), the
Parties agree that during the period and in a jurisdiction where TW has
exclusive rights under this Agreement, neither will notify the suspected
infringer of the alleged infringement without first obtaining the consent of the
other Party, which consent shall not be unreasonably denied, and that IN will
take appropriate action with respect to the suspected infringer, including
sending a demand letter, if necessary, within thirty (30) days of the date it
receives notice from TW. Both Parties shall use their reasonable efforts in
cooperation with each other to terminate any such suspected or actual
infringement without litigation. If such efforts fail, TW may request in writing
that IN take legal action against the infringement, and if the infringing
activity has not ceased within ninety (90) days following the effective date of
such request, IN shall have the right to either commence suit or refuse to
participate in such suit; and IN shall give notice of its election in writing to
TW within one hundred (100) days of receipt of TW's written request. TW may
thereafter bring suit for patent infringement at its own expense if and only if
IN elects not to commence suit and if the infringement occurred during the
period and in a jurisdiction where TW has exclusive rights under this Agreement
under the Licensed Patent at issue. In such event, TW shall have the sole
control and decision-making authority with respect
10
<PAGE>
to defending and enforcing the Licensed Patent solely in connection with such
suit and further provided that IN does not thereafter join such suit. If TW
elects to bring suit in accordance with this Section 7.5 ("Enforcement in the
Territory"), IN may thereafter join such suit at its own expense. Any such legal
action as is decided upon shall be at the expense of the Party on account of
whom suit is brought and all recoveries recovered thereby shall belong to such
Party, provided, however, that any legal action decided upon by TW and IN and
fully participated in by both shall be at the joint expense of both Parties and
all recoveries shall be allocated in the following order: (i) to each Party,
reimbursement of costs and fees of outside attorneys and other related expenses
to the extent each Party paid for such costs, fees, and expenses; and (ii) any
remaining amount shall be allocated as follows: to IN, all settlement amounts,
licenses, damages, and other recoveries based on infringement through the
Effective Date, if any; and to TW, all settlement amounts, licenses, damages,
and other recoveries based on infringement after the Effective Date, if any; or,
if the remaining amount is insufficient to cover both, the Parties will share
jointly in proportion to the amount of such recoveries such Party would
otherwise be entitled to receive. Each Party agrees to cooperate with the other
in legal proceedings instituted hereunder but at the expense of the Party on
account of whom suit is brought. Such legal proceedings shall be controlled by
the Party bringing the action, except that IN may be represented by counsel of
its choice in any action brought by TW. TW shall have no right to bring suit
against any suspected or alleged infringer during the period and in a
jurisdiction where TW does not have exclusive rights under this Agreement under
the Licensed Patent at issue, unless the Parties agree otherwise. IN shall not
grant any licenses to any Licensed Patent as part of any settlement under this
Section 7.5 without obtaining TW's prior written consent, which consent shall
not be unreasonably withheld.
7.6. IN Warranty. IN represents and warrants that, as of the Effective
-----------
Date:
(a) other than the third-party licenses set forth in Exhibit C and the
---------
rights granted therein, it and its licensors are the sole and rightful owners of
all right, title and interest in and to the Licensed Patents and it has the
unrestricted right to license the Licensed Patents in the jurisdictions of the
Territory where the Licensed Patents have issued, including the right to grant
the licenses granted to TW hereunder in such jurisdictions;
(b) it has performed all corporate actions and received all corporate
authorizations necessary to execute and deliver this Agreement and to perform
its obligations hereunder and this Agreement is valid, binding and enforceable
against it (subject to applicable principles of equity and bankruptcy and
insolvency laws);
(c) to the best of its knowledge, other than as set forth in Exhibit D
attached hereto, (a) no unresolved claims have been made in respect of the
Licensed Patents and no demands of any third party have been made pertaining to
them, and (b) no proceedings have been instituted or are pending or threatened
that challenge the rights of IN in respect thereof;
11
<PAGE>
(d) the patents set forth in Exhibit B comprise all of IN's patents in the
---------
Interactive Field of Use issued in the Territory as of the Effective Date;
(e) it has and shall maintain the power and authority and all material
governmental licenses, authorizations, consents and approvals to be obtained
within the United States to own its assets, carry on its business and to
execute, deliver, and perform its obligations under this Agreement; and
(f) there are no (A) non-governmental third parties or (B) governmental or
regulatory entities in the United States who are entitled to any notice of the
transaction, licenses and services contemplated hereunder or whose consent is
required to be obtained by IN for the consummation of the transaction
contemplated hereunder.
7.7. No Warranty of Validity. Nothing in this Agreement shall be construed
-----------------------
as (a) a warranty or representation by IN as to the validity of any Licensed
Patent or (b) a warranty or representation that anything made, used, sold or
otherwise disposed of under any license to the Licensed Patents is or will be
free from infringement of patents of third parties.
7.8. Additional Patent Filings. TW understands and acknowledges that,
-------------------------
notwithstanding the geographical scope of the definition of "Territory" and the
license granted by IN in Section 4.1 ("Patent License"), as of the Effective
Date IN has not filed for patent protection of the inventions claimed in the
Licensed Patents in jurisdictions in the Territory other than as listed in
Exhibit B (such jurisdictions where patents on the same inventions claimed in
- ---------
the Licensed Patents have not issued are referred to hereinafter as "New
Jurisdictions").
(a) TW Filing Request. In the event that, after the Effective Date, TW
-----------------
wishes to obtain patent protection in a New Jurisdiction where TW plans to
practice an invention covered by a Licensed Patent and delivers written notice
thereof to IN, including the specific Licensed Patent(s) describing the
invention for which TW requests protection, then IN shall, at TW's expense,
apply for patent registration of such Licensed Patent(s) in the New
Jurisdiction. If a patent issues on such patent filing in the New Jurisdiction,
and provided TW has reimbursed IN in full for all the expenses of such patent
prosecution process, such patent shall be deemed included in the definition of
"Licensed Patents" and incorporated in this Agreement effective as of the date
such patent issues in the New Jurisdiction, subject to all the terms and
conditions hereof.
(b) IN Filing Notification. In the event that, after the Effective Date,
----------------------
IN wishes to apply for patent registration of any Licensed Patent in a New
Jurisdiction, IN shall deliver written notice thereof to TW and TW shall have
thirty (30) days after receipt of such notice to notify IN that (i) TW will bear
all costs of such patent prosecution effort (i.e. all patent filing and related
expenses) or (ii) TW is not interested in paying for such costs. If TW elects
the former option (i.e. to bear all costs), IN shall, at TW's expense, apply for
patent registration of such Licensed Patent in the New Jurisdiction. If a patent
issues on such patent filing in the New Jurisdiction, and provided TW has
reimbursed IN in full for all the expenses of such patent prosecution process,
such patent shall be
12
<PAGE>
deemed included in the definition of "Licensed Patents" and incorporated in this
Agreement effective as of the date such patent issues in the New Jurisdiction,
subject to all the terms and conditions hereof. If TW elects not to pay the
costs of patent prosecution or fails to elect either option within the time
allotted, then (i) IN shall have the right to, at IN's expense, apply for patent
registration of such Licensed Patent in the New Jurisdiction, (ii) TW shall have
no license or other rights to any resulting issued patent in the New
Jurisdiction, (iii) such New Jurisdiction shall be removed from the definition
of "Territory" hereunder, and (iv) IN shall have the exclusive right to exploit,
license and otherwise dispose of such patent in the New Jurisdiction.
8. CONFIDENTIALITY.
8.1. Non-disclosure; Non-use. Except as expressly authorized among the
-----------------------
Parties, (including, without limitation, the exercise of the rights granted to a
Party under this Agreement), each Party agrees not to disclose, use or permit
the disclosure or use by others of any other Party's Confidential Information,
unless and to the extent such Confidential Information (i) becomes a matter of
public knowledge through no action or inaction of the Party receiving the
Confidential Information, (ii) was in the receiving Party's possession before
receipt from the Party providing such Confidential Information under no duty of
Confidentiality, (iii) is rightfully received by the receiving Party from a
third party without any duty of confidentiality, (iv) is disclosed to a third
party by the Party providing the Confidential Information without a duty of
confidentiality on the third party, (v) is disclosed with the prior written
approval of the Party providing such Confidential Information, or (vi) is
independently developed by employees, agents or subcontractors of the receiving
Party who had no access to and without any use of the other Party's Confidential
Information. Information shall not be deemed to be available to the general
public for the purpose of exclusion (ii) above with respect to each Party (x)
merely because it is embraced by more general information in the prior
possession of recipient or others, or (y) merely because it is expressed in
public literature in general terms not specifically in accordance with the
Confidential Information.
8.2. Care of Confidential Information. In furtherance, and not in
--------------------------------
limitation of the foregoing Section 8.1 ("Non-disclosure; Non-use"), each Party
agrees to do the following with respect to any such other Party's Confidential
Information: (i) exercise the same degree of care to safeguard the
confidentiality of, and prevent the unauthorized use of, such information as
that Party exercises to safeguard the confidentiality of its own similar
information, (ii) restrict disclosure of such information to those of its
employees, agents and Subsidiaries who have a "need to know", and (iii) instruct
and require such employees, agents and Subsidiaries to maintain the
confidentiality of such information and not to use such information except as
expressly permitted herein. Each Party further agrees not to remove or destroy
any proprietary or confidential legends or markings placed upon any
documentation or other materials of any other Party.
8.3. Terms of Agreement. The foregoing confidentiality obligations shall
------------------
also apply to the terms and conditions of this Agreement.
13
<PAGE>
8.4. Required Disclosure. The obligations under this Section 8
-------------------
("Confidentiality") shall not prevent the Parties from disclosing the
Confidential Information or the terms of this Agreement to its legal and
financial advisors, subject to confidentiality provisions no less restrictive
than those contained herein, or to any government agency, regulatory body or
stock exchange authorities as required by law (provided that the Party intending
to make such disclosure in such circumstances has given prompt notice to the
Party providing such Confidential Information prior to making such disclosure so
that such Party may seek a protective order or other appropriate remedy prior to
such disclosure and cooperates fully with such other Party in seeking such order
or remedy) or as required to fulfill government filing or regulatory body or
stock exchange requirements.
8.5. Term of Confidentiality. The obligations under this Section 8
-----------------------
("Confidentiality") shall apply with respect to any Confidential Information for
a period of ten (10) years from the date of disclosure of such Confidential
Information to the receiving Party, unless, with respect to any particular
Confidential Information, the providing Party in good faith notifies the
receiving Party that a longer period shall apply, in which case the obligations
under this Section 8 ("Confidentiality") with respect to such Confidential
Information shall apply for such longer period. Notwithstanding the foregoing,
the obligations under this Section 8 ("Confidentiality") with respect to
information that constitutes a Trade Secret will continue until the information
no longer constitutes a Trade Secret.
9. INDEMNIFICATION.
9.1. TW Indemnification. TW shall defend, indemnify and hold harmless IN
------------------
and its officers, shareholders, and employees from and against all costs,
expenses and losses (including reasonable attorneys' fees and costs) incurred
through claims of third parties against IN based on the manufacture or sale of
products or services by TW or TW's sublicensees including, but not limited to,
actions founded on product liability. The indemnification obligation herein is
contingent upon (i) IN giving prompt written notice to TW of any such claim,
(ii) IN allowing TW to control the defense and settlement of any such claim, and
(iii) IN fully assisting, at TW's expense, in the defense; provided, however,
that without relieving TW of its obligations hereunder or impairing TW's right
to control the defense of settlement thereof, IN may elect to participate
through separate counsel in the defense of any such claim, but the fees and
expenses of such counsel shall be at the expense of IN unless (a) the employment
of counsel by IN has been authorized in writing by TW, (b) IN shall have
reasonably concluded that there exists a material conflict of interest between
IN and TW in the conduct of the defense of such claim (in which case TW shall
not have the right to control the defense or settlement of such claim on behalf
of IN) or (c) TW shall not have employed counsel to assume the defense of such
claim within a reasonable time after notice of the commencement thereof. In each
of such cases the reasonable fees and expenses of counsel shall be at the
expense of TW.
9.2. IN Indemnification. IN shall defend, indemnify and hold harmless TW
------------------
and its officers, shareholders, and employees from and against all costs,
expenses and
14
<PAGE>
losses (including reasonable attorneys' fees and costs) incurred through claims
of third parties against TW based on a breach by IN of its representations or
warranties in Section 7.6 ("IN Warranty"). The indemnification obligation herein
is contingent upon (i) TW giving prompt written notice to IN of any such claim,
(ii) TW allowing IN to control the defense and settlement of any such claim, and
(iii) TW fully assisting, at IN's expense, in the defense; provided, however,
that without relieving IN of its obligations hereunder or impairing IN's right
to control the defense or settlement thereof, TW may elect to participate
through separate counsel in the defense of any such claim, but the fees and
expenses of such counsel shall be at the expense of TW unless (a) the employment
of counsel by TW has been authorized in writing by IN, (b) TW shall have
reasonably concluded that there exists a material conflict of interest between
IN and TW in the conduct of the defense of such claim (in which case IN shall
not have the right to control the defense or settlement of such claim on behalf
of TW) or (c) IN shall not have employed counsel to assume the defense of such
claim within a reasonable time after notice of the commencement thereof. In each
of such cases the reasonable fees and expenses of counsel shall be at the
expense of IN.
10. DISCLAIMER. EXCEPT AS EXPRESSLY WARRANTED IN SECTION 7.6 ("IN WARRANTY"),
IN MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
CONCERNING ANY PROPRIETARY RIGHTS, LICENSED PATENTS, PRODUCTS, PROCESSES,
DESIGNS, DOCUMENTS OR INFORMATION LICENSED OR OTHERWISE PROVIDED PURSUANT TO
THIS AGREEMENT OR AS TO ANY OTHER MATTER, IN FACT OR BY OPERATION OF LAW, AND IN
HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED
TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT OF THIRD PARTY RIGHTS. Each Party acknowledges that its
willingness to grant such rights as it grants to the other Party hereunder is
expressly conditioned on its ability to disclaim and exclude such warranties and
to limit its liabilities as set forth below.
11. LIMITATION OF LIABILITY.
11.1. Consequential Damages Limitation. EXCEPT FOR LIABILITY ARISING
--------------------------------
UNDER SECTION 9 ("TW INDEMNIFICATION"), NEITHER OF THE PARTIES HERETO SHALL BE
RESPONSIBLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES IN ANY WAY
ARISING OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED, ON ANY THEORY OF
LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
11.2. Maximum Liability. IN NO EVENT WILL EITHER PARTY'S LIABILITY
-----------------
ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE AMOUNT OF TWO MILLION
U.S. DOLLARS (US$2,000,000), EXCEPT FOR LIABILITY ARISING OUT OF OR RELATED TO
SECTION 9.2 ("IN INDEMNIFICATION") WHICH SHALL IN NO EVENT EXCEED THE AMOUNT OF
FOUR MILLION U.S. DOLLARS (US$4,000,000).
15
<PAGE>
12. TERM AND TERMINATION.
12.1. Term. This Agreement shall become effective as of the Effective
----
Date and continue in effect until the date of expiration of the last claim of
the last unexpired patent among the Licensed Patents filed in the Territory,
unless terminated earlier in accordance with the provisions hereof.
12.2. Termination on Material Breach by TW. IN may, at its sole option,
------------------------------------
(a) convert its licenses granted to TW hereunder from exclusive to nonexclusive
or (b) terminate this Agreement, upon written notice to TW, if TW materially
breaches Section 4.1 ("Patent License"), 4.2 ("Minimum Payment Obligation"), 4.3
("Sublicenses"), 5.1 ("Royalties") or 8 ("Confidentiality") of this Agreement or
any material provision of any Joint Venture Agreement and fails to cure such
breach within thirty (30) days of written notice to TW describing the breach in
reasonable detail. IN may, at its sole option, (a) convert its licenses granted
to TW hereunder from exclusive to nonexclusive or (b) terminate this Agreement
immediately upon written notice to TW, if such material breach is not capable of
cure. For purposes solely of this Section 12.2 ("Termination on Material Breach
by TW"), the following provisions shall be deemed material provisions of the
Joint Venture Agreements: Sections 4.1 ("TW Delivery"), 6.1 ("Support"), 7.1
("Non-compete Obligations"), 7.3 ("Handset Technology"), 11 ("Confidentiality"),
13.1(ii), 13.1(viii), and 13.1(x) of the Joint Venture License Agreement;
Sections 2.9(b) (Holder's indemnification) and 3.3 ("Confidentiality of
Records") of the Investor Rights Agreement; Section 2 ("Representations and
Warranties of Each Purchaser") and 3(a) ("TW Obligation") (subject to the terms
and conditions of those indemnification obligations as set forth in such
agreement) of the Joint Venture and Stock Purchase Agreement; and Sections 2
("Transfers by a Stockholder") and 4 ("Voting") of the Stockholders Agreement.
In addition, TW's unreasonably preventing TWIN from meeting its Performance
Criteria as further described in Section 2.4 ("Performance Criteria") of the
Joint Venture License Agreement shall be deemed a material breach of a material
provision of a Joint Venture Agreement for purposes of this Section 12.2
("Termination on Material Breach by TW"). Notwithstanding the foregoing, IN's
rights to convert its licenses or terminate this Agreement on TW's material
breach of a material provision of a Joint Venture Agreement, as described in
this Section 12.2, may be exercised only if (i) TWIN's Board of Directors
determines that TW has materially breached such a provision and (ii) such
material breach has caused or resulted in, or is highly likely to cause or
result in, material harm to TWIN.
12.3. Termination on Material Breach of IN. TW may terminate this
------------------------------------
Agreement, upon written notice to IN, if IN materially breaches any material
provision of this Agreement and fails to cure such breach within thirty (30)
days of written notice describing the breach in reasonable detail. TW may
terminate this Agreement immediately upon notice to IN, if such material breach
is not capable of cure.
12.4. Effect of Termination.
---------------------
(a) Except as otherwise provided in this Section 12.4 ("Effect
of Termination"), all rights and obligations of the Parties hereunder shall
cease upon
16
<PAGE>
termination or expiration of this Agreement. The definitions and the following
sections and subsections shall survive any termination or expiration of this
Agreement: Sections 2 ("Termination of Know-How Agreement"), 3 ("Resolution of
Outstanding Issues"), 5 ("Payments") (to the extent any payments have accrued
prior to termination to IN), 6 ("Taxation"), 7.6 ("No Warranty of Validity"), 8
("Confidentiality"), 9 ("TW Indemnification"), 10 ("Disclaimer"), 11
("Limitation of Liability"), 12 ("Term and Termination"), and 13 ("General
Provisions") and, for five (5) years following the last due date for any payment
owed to IN, Section 5.4 ("Audit").
(b) Upon termination or expiration of this Agreement for
whatever reason, (i) all licenses granted by IN to TW and sublicenses granted
pursuant to this Agreement prior to its termination shall terminate, provided
that any sublicensee may elect to continue its sublicense by advising IN in
writing, within sixty (60) days of the sublicensee's receipt of written notice
of such termination, of its election, and of its agreement to assume in respect
to IN all the obligations (including obligations for payment) contained in its
sublicensing agreement with TW. Any sublicense granted by TW shall contain
provisions corresponding to those of this paragraph respecting termination and
the conditions of continuance of sublicenses, (ii) TW shall cooperate with IN in
transitioning back to IN any maintenance and enforcement activities (and
associated records and documentation) undertaken by TW in connection with the
Licensed Patents in the Territory, and (iii) each Party shall return or destroy
all Confidential Information of the other Party in its possession or control,
including all copies thereof, whether tangible or in electronic form or
otherwise.
(c) Neither Party shall incur any liability whatsoever for any
damage, loss or expenses of any kind suffered or incurred by the other (or for
any compensation to the other) arising from or incident to any termination of
this Agreement by such Party in accordance with the terms of this Agreement
whether or not such Party is aware of any such damage, loss or expenses.
13. GENERAL PROVISIONS.
13.1. Force Majeure. Neither Party shall be liable for failure to
-------------
perform, in whole or in material part, its obligations under this Agreement
(other than payment obligations) if such failure is caused by any event or
condition not existing as of the date of this Agreement and not reasonably
within the control of such Party, including, without limitation, by fire, flood,
typhoon, earthquake, explosion, strikes, labor troubles or other industrial
disturbances, unavoidable accidents, war (declared or undeclared), acts of
terrorism, sabotage, embargoes, blockage, acts of Governmental Authorities,
riots, insurrections, or any other cause beyond the control of such; provided
that the affected Party promptly notifies the other Party of the occurrence of
the event of force majeure and takes all reasonable steps necessary to resume
performance of its obligations so interfered with.
13.2. Assignment. Neither this Agreement nor any of the rights and
----------
obligations created hereunder may be assigned, transferred, pledged, or
otherwise encumbered or disposed of, in whole or in part, whether voluntarily,
or by operation of law, or otherwise,
17
<PAGE>
by either Party without the prior written consent of the other Party; provided,
however, that either Party may assign or otherwise transfer this Agreement
without the other Party's consent in connection with the acquisition of all or
substantially all of its assets or its merger with or into another entity
("Merger Assignment"), and provided further that, in the event of such a Merger
Assignment by TW, TW shall be required to obtain the consent of IN, which
consent shall not be unreasonably withheld.
13.3. Notices. All notices and communications required, permitted or made
-------
hereunder or in connection herewith shall be in writing and shall be mailed by
first class, registered or certified mail (and if overseas, by airmail), postage
prepaid, or otherwise delivered by hand or by messenger, or by recognized
courier service (with written receipt confirming delivery), addressed:
(a) If to IN, to the address shown in the introduction to this
Agreement
with a copy to: Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105-2482,
U.S.A.
Attn: Robert Townsend
(b) If to TW, to: Two Way TV Limited
Beaumont House
Kensington Village
Avonmore Road
London, England W14 8TS
with a copy to: Orrick, Herrington & Sutcliffe LLP
400 Sansome St.
San Francisco, California 94111-3143,
U.S.A.
Attn: Greg Bibbes
(c) If to TWIN: TWIN Entertainment Inc.
50 Francisco Street, Suite 490
San Francisco, CA 94111, U.S.A.
with a copy to: Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105-2482,
U.S.A.
Attn: Robert Townsend
18
<PAGE>
Each such notice or other communication shall for all purposes hereunder be
treated as effective or as having been given as follows: (i) if delivered in
person, when delivered; (ii) if sent by mail or airmail, at the earlier of its
receipt or at 5 p.m., local time of the recipient, on the seventh day after
deposit in a regularly maintained receptacle for the deposition of mail or
airmail, as the case may be; and (iii) if sent by recognized courier service, on
the date shown in the written confirmation of delivery issued by such delivery
service. Any Party may change the address and/or addressee(s) to whom notice
must be given by giving appropriate written notice at least seven (7) days prior
to the date the change becomes effective.
13.4. Export Control. Without in any way limiting the provisions of this
--------------
Agreement, each Party hereto agrees that no products, items, commodities or
technical data or information obtained from the other Party nor any direct
product of such technical data or information is intended to or shall be
exported or reexported, directly or indirectly, to any destination restricted or
prohibited by Applicable Law without necessary authorization by the Governmental
Authorities, including (without limitation) the United States Bureau of Export
Administration (the "BEA") or other Governmental Authorities of the United
States, England, the European Community or any other country in the Territory
with jurisdiction with respect to export matters.
13.5. Arbitration.
-----------
(a) Except as set forth in this Section 13.5 ("Arbitration") and
Section 13.6 ("Injunctive Relief"), any disputes arising between the Parties in
connection with this Agreement shall be settled by the Parties amicably through
good faith discussions upon the written request of either Party. In the event
that any such dispute cannot be resolved through such discussions within a
period of sixty (60) days after delivery of such notice, the dispute shall be
finally resolved exclusively by confidential arbitration pursuant to the rules
of the American Arbitration Association in San Francisco, California, U.S.A., or
such other location agreed between the Parties; provided, however, that the
arbitrators shall be empowered to hold hearings at other locations within or
without the United States. Each Party shall nominate one arbitrator and those
two arbitrators shall nominate the third arbitrator. The arbitrators shall not
have the power to impose any obligation on the Parties, or take any other
action, which could not be imposed or taken by a federal or state court sitting
in the State of California. The judgment upon award of the arbitrators shall be
final and binding and may be enforced in any court of competent jurisdiction in
the United States or England and Wales or in any other jurisdiction, and each
Party unconditionally submits to the jurisdiction of such court for the purpose
of any proceeding seeking such enforcement. The fees and expenses of the
arbitrators shall be paid by the Parties in equal shares, unless the arbitrators
determine that the conduct of either Party (with regard to the subject matter of
the dispute and/or the arbitration proceedings) warrants divergence from this
rule, in which event an appropriate costs order may be made. Subject only to the
provision of Applicable Law and Section 13.6 ("Injunctive Relief"), the
procedure described in this Section 13.5 ("Arbitration") shall be the exclusive
means of resolving disputes arising under this Agreement.
19
<PAGE>
(b) Confidential Resolution. All papers, documents or evidence, whether
-----------------------
written or oral, filed with or presented to the panel of arbitrators shall be
deemed by the Parties and by the arbitrators to be Confidential Information.
Neither Party nor any arbitrator shall disclose in whole or in part to any other
Person any Confidential Information submitted in connection with the arbitration
proceedings, except to the extent reasonably necessary to assist counsel in the
arbitration or preparation for arbitration of the dispute. Confidential
Information may be disclosed (i) to either Party's attorneys, (ii) to the
Parties, and (iii) to outside experts requested by either Party's counsel to
furnish technical or expert services or to give testimony at the arbitration
proceedings, subject, in the case of such experts, to execution of a legally
binding written statement that such expert is fully familiar with the terms of
this section, that such expert agrees to comply with the confidentiality terms
of this section, and that such expert will not use any Confidential Information
disclosed to such expert for personal or business advantage.
13.6. Injunctive Relief. Notwithstanding Section 13.5 ("Arbitration"),
-----------------
the Parties agree that any material breach of Section 4.1 ("Patent License") or
Section 8 ("Confidentiality") of this Agreement would cause irreparable injury
for which no adequate remedy at law exists; therefore, the parties agree that
equitable remedies, including without limitation injunctive relief and specific
performance, are appropriate remedies to redress any such breach or threatened
breach of this Agreement, in addition to other remedies available to the
Parties. If any legal action is brought under this Section 13.6 ("Injunctive
Relief") to enforce Section 4.1 ("Patent License"), the prevailing Party shall
be entitled to receive its attorneys' fees, court costs and other collection
expenses, in addition to any other relief it may receive. Each Party expressly
waives the defense that a remedy in damages will be adequate and any requirement
in an action for specific performance or injunction for the posting of a bond by
the Party seeking relief.
13.7. Entire Agreement. This Agreement and the Joint Venture Agreements,
-----------------
and the attachments and exhibits hereto and thereto, embody the entire agreement
and understanding between the Parties with respect to the subject matter hereof,
superseding all previous and contemporaneous communications, representations,
agreements and understandings, whether written or oral, including without
limitation that certain Heads of Terms between IN and TW to Form a Joint
Venture. Neither Party has relied upon any representation or warranty of any
other party except as expressly set forth herein and in the Joint Venture
Agreements.
13.8. Modification. This Agreement may not be modified or amended, in
------------
whole or part, except by a writing executed by duty authorized representatives
of both Parties.
13.9. Announcement. The Parties may announce the existence of the
------------
Parties' relationship and this Agreement only at a time and in a form to be
mutually determined, except for any such disclosure required by law,
governmental authorities or stock exchanges.
13.10. Severability. If any term or provision of this Agreement shall be
------------
determined to be invalid or unenforceable under Applicable Law, such provision
shall be
20
<PAGE>
deemed severed from this Agreement, and a reasonable valid provision to
be mutually agreed upon shall be substituted. In the event that no reasonable
valid provision can be so substituted, the remaining provisions of this
Agreement shall remain in full force and effect, and shall be construed and
interpreted in a manner that corresponds as far as possible with the intentions
of the Parties as expressed in this Agreement.
13.11. No Waiver. Except to the extent that either Party hereto may have
---------
otherwise agreed in writing, no waiver by such Party of any condition of this
Agreement or breach by the other Party of any of its obligations or
representations hereunder shall be deemed to be a waiver of any other condition
or subsequent or prior breach of the same or any other obligation or
representation by the other Party, nor shall any forbearance by the first Party
to seek a remedy for any noncompliance or breach by the other Party be deemed to
be a waiver by the first Party of its rights and remedies with respect to such
noncompliance or breach.
13.12. Nature of Rights. All rights and licenses granted under or pursuant
----------------
to this Agreement by IN to TW are, for purposes of Section 365(n) of the U.S.
Bankruptcy Code (the "Bankruptcy Code"), licenses of "Intellectual property"
within the scope of Section 101 of the Bankruptcy Code.
13.13. Governing Law. The validity, construction, performance and
-------------
enforceability of this Agreement shall be governed in all respects by the laws
of the State of California, U.S.A., without regard to its conflicts of laws
principles. The Parties expressly exclude the application of the United Nations
Convention on Contracts for the International Sale of Goods.
13.14. No Agency or Partnership. This Agreement shall not constitute an
------------------------
appointment of either Party as the legal representative or agent of the other
Party, nor shall the Party have any right or authority to assume, create or
incur in any manner any obligation or other liability of any kind, express or
implied, against, in the name or on behalf of, the other Party. Nothing herein
or in the transactions contemplated by this Agreement shall be construed as, or
deemed to be, the formation of a partnership, association, joint venture, or
similar entity by or between the Parties hereto.
13.15. No Third Party Beneficiaries. The Parties intend and agree that no
----------------------------
other Person, entity or other party shall be considered a third-party
beneficiary of this Agreement. Nothing contained in this Agreement shall be
construed to create rights for any third party beneficiary.
13.16. Heading. The section and other headings contained in this
-------
Agreement are for convenience of reference only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
13.17. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, and all of which shall be deemed to
constitute one and the same instrument.
21
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives on the date set forth above.
INTERACTIVE NETWORK, INC. TWO WAY TV LIMITED
/s/ Bruce W. Bauer /s/ Piers Wilson
____________________________________________ _________________________________
By: Bruce W. Bauer By: Piers Wilson
Title: President and Chief Executive Officer Title: Finance Director
22
<PAGE>
Exhibit A
Interactive Field of Use
"Interactive Field of Use" shall include developing, marketing, supplying,
operating and licensing certain digital (and analog) interactive and other
related services, products and technology in the Territory.
23
<PAGE>
Exhibit B
Licensed Patents
Japan
- -----
Patent Number Filed Granted
- ------------- ----- -------
2093252 June 11, 1990 Sept. 18, 1996
Game of skill or chance playable by several participants remote from each other
in conjunction with a common event.
Germany, Spain, France, United Kingdom, Italy
- ---------------------------------------------
Patent Number Filed Granted
- ------------- ----- -------
0405776 June 8, 1990 March 26, 1997
Game of skill or chance playable by several participants remote from each other
in conjunction with a common event.
Austria, Belgium, Switzerland, Germany, Denmark, Spain, France, United Kingdom,
- ------------------------------------------------------------------------------
Italy, Netherlands, Sweden
- --------------------------
Patent Number Filed Granted
- ------------- ----- -------
504267 Dec. 10, 1990 July 27, 1994
Method of evaluating data relating to a common subject.
24
<PAGE>
EXHIBIT 99.1
(BW)(CA-INTERACTIVE-NETWORK)(INNN) New Interactive TV Entertainment Venture
Formed; Joint Venture Will Commercialize Pioneering ITV Patents, Expertise
Business Editors and High-Tech Writers
LONDON and SAN FRANCISCO--(BUSINESS WIRE)--December 7, 1999--Interactive
Network, Inc. (INNN: NASDAQ bb) and Two Way TV Ltd. today announced the
formation of an equally-owned, Silicon Valley-based interactive television
company operating in the United States and Canada. The joint venture will
deliver real-time, competitive interactive games and sports channels on digital
TV and the Internet.
The new entity, through licenses from each party, will exploit INNN's
significant patent portfolio and Two Way TV's leading edge content, production
systems, operating platform and patents for digital interactive services.
INNN's Chairman and CEO Bruce Bauer said, "By partnering with Two Way TV, we
will create a powerful vehicle through which to maximize exploitation of INNN's
pioneering interactive television patents."
The joint venture licenses will initially be non-exclusive and will become
exclusive upon INNN shareholder approval. Bauer said INNN's board of directors
had approved formation of the venture and authorized convening of a
shareholders' meeting. The board will recommend, among other things, that
shareholders approve the licenses becoming exclusive.
INNN also will exclusively license its suite of foreign patents to Two Way TV
outside of the U.S. and Canada on a royalty basis.
In announcing the agreements, Simon Cornwell, Two Way TV managing director,
said: "Through the venture, we will be able to form partnerships to produce live
interactive TV entertainment for distribution on digital satellite, cable and
broadband Internet platforms. With key patent protection, the venture will be in
a unique and powerful position in the rapidly developing interactive TV market."
INNN's Bauer added that "Two Way TV is the preferred software and production
system delivering real-time live interactive TV programming that incorporates
the knowhow embodied in our patents. We fully expect that Two Way TV's
experience of launching interactive television in the UK will speed
commercialization in North America."
Two Way TV's Cornwell noted that "This is a highly attractive deal that will
create considerable value for both parties. The venture will make use of a whole
range of unique and protected capabilities, and as it moves forward we will
produce amazing real-time entertainment on all digital platforms."
Final execution of the agreements is conditional on U.S. Bankruptcy Court
approval of the termination of an existing license
<PAGE>
between the companies. The companies expect court approval in January.
Editors Notes
About Two Way TV Ltd. (www.twowaytv.com) Two Way TV, based in London, is
launching its live service in January to the first 50,000 customers on the Cable
& Wireless Communications' rollout of the first national broadband digital cable
TV service in northwest England. The service will run on the Liberate
Technologies TV Navigator (TM) platform. Two Way TV recently formed an alliance
with Liberate Technologies Inc. (NASDAQ: LBRT) under which they will work
together to embed the Two Way TV real-time game-playing technologies into the
Liberate TV Navigator (TM) client software platform. Two Way TV's production
systems are also compatible with the OpenTV (NASDAQ: OPTV) platform and
Microsoft TV from Microsoft (NASDAQ: MSFT). Two Way TV's major shareholders
include Cable & Wireless Communications, which owns 50.1% of the company, Vencom
and Ladbroke plc.
About Interactive Network Inc.
INNN was incorporated in 1986 and has been publicly traded company since 1991.
Its major corporate shareholders are AT&T (NYSE: T, through TCI), Motorola Inc.
(MOT), General Electric Inc. (NYSE: GE, through NBC), Sprint (FON), Gannett
(GCI) and A.C. Nielsen. Two Way TV was first licensed INNN's patents and
technology in 1991.
Blue Sky
This release contains forward-looking statements that are subject to risks and
uncertainties. Although Interactive Network Inc. and Two Way TV believe that the
expectations reflected in its forward-looking statements are reasonable, actual
results could differ materially from those expectations. Important cautionary
statements and risk factors that would affect actual results are discussed in
materials filed by INNN with the Securities and Exchange Commission.
--30--
CONTACT: Interactive Network Inc.
Bruce Bauer, 650/508-8793
Chairman and CEO
or
Dick Grove, 816/753-6222
Ink, Inc.
or
Two Way TV Ltd.
U.K.
Marjorie Curtis, +44 208.742-2422
or
Frank Demaria, +44 207.404-5959
Brunswick
or
U.S.
Andrew Honnor/Mayer Resnick, 212/333-3810
Brunswick
<PAGE>
EXHIBIT 99.2
FOR IMMEDIATE RELEASE For additional information, contact:
Feb. 10, 2000 Bruce Bauer, 650-508-8793
TWIN ENTERTAINMENT IS NEW JOINT VENTURE
OF INTERACTIVE NETWORK AND TWO WAY TV
SAN FRANCISCO -- TWIN Entertainment Inc., a new U.S.-based joint venture of
two world leaders in interactive television, has been formally launched,
bringing the dream of real-time gaming and interactive entertainment and
information one step closer to realization.
Bruce W. Bauer, chairman and CEO of Interactive Network Inc. (IN), and
William Andrews, chairman of Two Way TV Limited (TWTV), said that TWIN
Entertainment -- to be jointly owned by both companies -- will incorporate
Interactive Network's software and proprietary intellectual property and Two Way
TV's advanced technology, knowhow and intellectual property.
"The launch of TWIN Entertainment -- coupled with new exclusive licensing
agreements between IN and TWTV and the growth of digital television -- assures
that the new joint venture and its two parent companies will be able to dominate
the interactive gaming, entertainment and advertising markets worldwide," said
Bauer.
"Best of all, the ability to play along with game shows, live sporting
events and other TV programming doesn't compete with home shopping, video-on-
demand and the like," he added. "It's compatible, even synergistic -- giving
consumers more choices in the world of interactive digital television."
IN says that all conditions to the closing of the joint venture and stock
purchase agreement, including bankruptcy court approval, have been met and that
TWIN Entertainment Inc., the previously announced joint venture, has been formed
as of Jan. 31, 2000,
<PAGE>
As previously announced, the licenses from each of the parties will
initially be non-exclusive. IN has agreed to solicit the approval of its
shareholders to make its licenses to TWIN Entertainment exclusive at its annual
meeting, at which time the TWTV licenses will also become exclusive. IN will be
filing the text of the joint venture agreements shortly with the SEC.
"The licensing to TWIN by these two pioneering interactive companies --
with more than 20 years of interactive experience between them -- vests the new
joint venture with what it needs to become the dominant player in the
interactive segment of games of skill and real-time play-along," Bauer said.
"It is my opinion that this segment will be the driving force behind the
delivery of that single magic box that delivers whatever consumers want in the
way of entertainment as well as telecommunications, home shopping and all the
rest."
Interactive Network (INNN OTC:bb), founded in 1988, holds some of the most
basic patents in the emerging market for delivering entertainment and
information directly to consumers' homes, whether via cable, satellite, the
Internet, VBI (vertical blanking signal) or wireless.
A settlement in April 1999 with TCI, NBC, Sprint and Motorola returned
clear title of those patents to the company. In addition, $38.4 million in
principal and accrued interest on IN's notes was converted to common stock, and
the noteholders paid $10 million plus interest in cash.
"Those patents represent a genuine bar to direct competition," Bauer said,
"giving IN -- and now TWIN Entertainment -- a leg up on the growing market for
interactive services."
Two Way TV Ltd. has been rolling out interactive services via all three
major cable operators in the United Kingdom -- TeleWest, Cable & Wireless and
NTL.
By one analyst's estimate, the 700,000 homes in the U.S. now capable of
being served by interactive TV will rise to 14 million by 2004, creating a
$4.7-billion market.
<PAGE>
---
This news release contains forward-looking statements that involve known
and unknown risks, uncertainties and other factors not under the two companies'
control, and which may cause actual results, performance and achievements of the
joint venture to be materially different from the results, performance or
expectations implied by these forward-looking statements.
These factors include, but are not limited to, those detailed in the
companies' period filings with the Securities and Exchange Commission.
