-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KF97a7BXKbzkOK6vtIEDnQ6DCJGqEA3BO1kbgiQ7zV0D0+8+5E8VNi988gOFDmXK kQjbG02DIRG60zwmow1dzA== 0000929624-00-000144.txt : 20000214 0000929624-00-000144.hdr.sgml : 20000214 ACCESSION NUMBER: 0000929624-00-000144 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000131 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERACTIVE NETWORK INC /CA CENTRAL INDEX KEY: 0000879482 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 943025019 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-19579 FILM NUMBER: 534191 BUSINESS ADDRESS: STREET 1: 1161 OLD COUNTRY RD CITY: SAN JOSE STATE: CA ZIP: 94002 BUSINESS PHONE: 6505088793 MAIL ADDRESS: STREET 1: 1161 OLD COUNTRY RD CITY: SAN JOSE STATE: CA ZIP: 94002 8-K 1 FORM 8-K 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 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. 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 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 EX-2.1 2 JOINT VENTURE AND STOCK PURCHASE AGREEMENT 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 "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 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 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 (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 (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 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 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 EX-2.2 3 JOINT VENTURE LICENSE AGREEMENT EXHIBIT 2.2 JOINT VENTURE LICENSE AGREEMENT JOINT VENTURE LICENSE AGREEMENT Table of Contents
Page ---- 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
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 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. 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 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 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 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 (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 (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 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 (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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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. 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] ---------------------------- --------------- 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 ---------------------------- ---------------
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. 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 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. 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: 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. 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. 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 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 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.
Title Two Way TV Reference Country Applicant Application Number - ----------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
Title Application Grant Grant Date Date Number - ----------------------------------------------- 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 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
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. 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. 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:
TW Responsibility TWIN Responsibility - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------
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 - --------------------------------------------------------------------------------------
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. EX-2.3 4 STOCKHOLDERS AGREEMENT 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. 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. 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. 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. (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. 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. (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. (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. 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. 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. 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. 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. 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. (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. 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 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 EX-2.4 5 INVESTOR RIGHTS AGREEMENT 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. "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. 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. 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. (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. 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. (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. 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. 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. 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. 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. 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. 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. 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. 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. (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. 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. 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. In Witness Whereof, the parties hereto have executed this Investor Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS: - -------- --------- 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
EX-2.5 6 TERMINATION AND LICENSE AGREEMENT 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 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 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 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 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 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 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 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 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 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 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 (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 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 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 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 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 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 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 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 (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 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 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 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 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 EX-99.1 7 PRESS RELEASE 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 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 EX-99.2 8 PRESS RELEASE 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, 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. --- 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. -----END PRIVACY-ENHANCED MESSAGE-----