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