EXHIBIT 1.1
ADAM A. LEWIS (BAR NO. 88736)
J. ROBERT NELSON (BAR NO. 51235)
MORRISON & FOERSTER LLP
425 Market Street
San Francisco, California 94105-2482
Telephone: (415)268-7000
Attorneys for Debtor and Debtor in Possession
INTERACTIVE NETWORK, INC.
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re Case No. 98-34055-DM-11
INTERACTIVE NETWORK, INC., a Chapter 11
California corporation,
ORDER CONFIRMING CHAPTER 11
Debtor. PLAN OF DEBTOR AND DEBTOR IN
POSSESSION INTERACTIVE
Tax ID. No. 94-3025019 NETWORK, INC.
Date: March 25, 1999
Time: 12:00 p.m.
Place: Hon. Dennis Montali
235 Pine Street, 22/nd/ Floor
San Francisco, California 94105
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Having been duly noticed, the Chapter 11 Plan of Debtor and Debtor in
Possession Interactive Network, Inc. (filed December 22, 1998), as amended by
the First Amendment to Chapter 11 Plan of Debtor and Debtor in Possession
Interactive Network, Inc. (filed February 18, 1999) (together, the "Plan") came
on regularly for hearing on February 11, February 18, February 23, March 18,
March 19, March 22 and March 25, 1999. Appearances were noted on the record.
David B. Lockton and Calvin Wilson, Jr., filed objections to confirmation of the
Plan; there were no other objections. Trial on confirmation of the Plan and Mr.
Lockton's objections began on February 18, 1999. On or about March 18, 1999, Mr.
Lockton filed his Declaration of David B. Lockton re withdrawal of Objection to
Confirmation in which he stated, inter alia, that for the reasons stated therein
he had "elected to
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forgo [sic] the prosecution of my objections to confirmation ...." Having
considered the pleadings of the parties, the evidence presented and the
arguments of counsel, and having found for the reasons stated on the record on
February 11, March 18 and March 25, 1999 that the Plan (as modified herein) (the
"Modified Plan") does not impair any classes of claims or interests and
satisfies each and every requirement of 11 U.S.C. section 1129(a),
1. IT IS HEREBY ORDERED that the any objections to confirmation of the
Modified Plan are overruled.
2. IT IS FURTHER ORDERED that the Modified Plan is confirmed.
3. IT IS FURTHER ORDERED that the Plan is modified as follows:
A. Article IV.B of the Plan is modified as to provide that:
1) The reserve account provided for in Article IV.B of the Plan
(the "Account") shall be established at a federally-insured financial
institution or an SIPC-insured brokerage.
2) The Reorganized Debtor may invest the funds in the Account
in certificates of deposit, treasury bills, money market funds or other
investments of similar risk.
3) The Account shall be opened in the name of a disbursing
agent or trustee (the "Agent") for the benefit of the creditors to whose claims
the Debtor objects pursuant to Article V.C of the Plan. Signature authority
shall be jointly vested in the Debtor and the Agent. The Agent shall not be an
employee, officer, director or shareholder of the Debtor or an insider of an
employee, officer, director or shareholder of the Debtor as defined in 11 U.S.C.
section 101(31), and shall be "disinterested" as defined in 11 U.S.C. section
101(14). To the extent that a Disputed Claim is allowed, it shall be paid as
soon as practicable after an order therefor is entered (unless the order is
appealed and stayed pending appeal). Any undisputed portion of a Disputed Claim
shall be paid as soon after the Effective Date is practicable.
4) Until such time as the Account constitutes a 100% reserve
for remaining Disputed Claims plus accumulated interest, no funds shall be
disbursed from the Account except for the payment of allowed claims and the
undisputed portion of Disputed Claims. Once the Account constitutes a 100%
reserve for remaining Disputed Claims, any funds in excess of the 100% reserve
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amount plus accumulated interest shall be disbursed to the Debtor, which shall
be entitled to use them without further restriction.
5) The Agent shall have a senior and exclusive lien on all income generated
for and by the Debtor from its intellectual property, whether arising from sale,
license or other dispositions, to further secure the remaining Disputed Claims
of creditors until such time as the Account constitutes a 100% reserve for
remaining Disputed Claims. The lien shall be deemed perfected by this Order, but
the Debtor shall cooperate in providing such documentation as normally would be
required to perfect such a security interest to avoid public confusion (e.g.,
filing with the Secretary of State, the United States patent and Trademark
Office, the United States Copyright Office, etc.). Upon achievement of a 100%
reserve, the Agent shall release the lien.
6) Upon a default by the Debtor in the payment of a Disputed Claim once
(and to the extent that) such a claim is allowed, the Agent, with leave of the
Court shall undertake enforcement of the lien in accordance with otherwise
applicable law.
B. Article V.A.2 of the Plan is modified as followed:
1) By stipulation, the Debtor and Two Way TV (fka Interactive Network,
Ltd.) ("Two Way") agree that:
a. The deadline for the Debtor to assume or reject that certain
Know-How License Agreement (dated September 29, 1992) (the "Agreement") between
the Debtor and Two Way is extended indefinitely, provided, however, that the
deadline shall be extended only until the date that the Court rules upon any
motion brought pursuant to the next paragraph hereof.
b. Within fifteen days of the giving of notice in writing by either
party to counsel for the other party, the Debtor shall serve and file a motion
to assume or reject the Agreement, to be heard in accordance with Local
Bankruptcy Rule 9014(b)(1) and upon such schedule as shall accommodate the
Court's calendar and the parties' needs (including, without limitation, their
needs for any discovery). Such notice shall be given no sooner than April 30,
1999).
c. The Debtor agrees that should the Agreement be rejected, Two Way
may exercise the election to retain its rights under the Agreement as provided
in 11 U.S.C. section 365(n)(1). Thus, the Debtor agrees that the Agreement is
the type of executory contract subject to 11
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U.S.C. section 365(n), that Two Way, in the event of rejection, is eligible to
make the election provided in 11 U.S.C. section 365(n)(1) and that the debtor
will not oppose Two Way's election of treatment under either 11 U.S.C. section
365(n)(1)(A) or 11 U.S.C. section 365(n)(1)(B) of trade secrets, patents, patent
applications and any other "intellectual property" (as defined in 11 U.S.C.
section 101(35A)).
d. Two Way agrees that in the event of rejection of the
Agreement, any claim it may have against the Debtor as a result of such
rejection (whether Two Way elects to proceed under 11 U.S.C. section
365(n)(1)(A) OR 365(n)(1)(B) shall not exceed $100,000.
e. By entering into the stipulation, neither party admits any
fact or issue with respect to the assumability of the Agreement, which facts and
issues, if they must be adjudicated, shall be determined without reference to
the stipulation, except as provided herein as to the applicability of 11 U.S.C.
section 365(n) and the elections under subparagraphs 1(A) and 1(B), the
limitation on rejection damages and the extension of the deadline to assume or
reject.
4. IT IS FURTHER ORDERED that, pursuant to the voluntary agreement of
Morrison & Foerster, payment of Morrison & Foerster's expense of administration
claim as counsel to the Debtor, to the extent that it is allowed, shall be
deferred for one year without reserve.
5. IT IS FURTHER ORDERED that, as of the Effective Date of the Modified
Plan, the Modified Plan shall bind the Debtor and all those who hold Claims or
Interests.
6. IT IS FURTHER ORDERED that, as of the Effective Date of the Modified
Plan, all property of the Debtor's Estate shall be revested in the Debtor free
and clear of all liens, claims or encumbrances, which shall be deemed released
and extinguished, except such liens, claims or encumbrances as provided in the
Modified Plan or this Order.
7. IT IS FURTHER ORDERED that, as of the Effective Date of the Modified
Plan, the Debtor shall be discharged from any Claim that arose before the
Effective Date, and any Claim of a kind specified in 11 U.S.C. sections 502(g)(-
(i) in accordance with 11 U.S.C. section 1141(d)(1)(A). Thus, as of the
Effective Date, and in accordance with 11 U.S.C. section 524(e),
A. any judgement, whenever obtained, is voided; and
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B. the commencement or continuation of any action, the employment of
process, or an act, to collect, recover or offset any such debt as a personal
liability of the Debtor is enjoined.
8. IT IS FURTHER ORDERED that the Court will retain jurisdiction to the
extent provided by law, including, without limitation, jurisdiction to:
interpret and enforce the terms of the Modified Plan (including, without
limitation, jurisdiction to hear a motion to convert the case or to fashion
other remedies in the event that the Debtor does not pay a Disputed Claim when
and as allowed, and jurisdiction to interpret, enforce and otherwise conduct
proceedings in accordance with the stipulation between the Debtor and Two Way
incorporated in paragraph 3.B of this Order), the Settlement Agreement, and any
orders or judgments connected therewith; modify the Modified Plan in accordance
with 11 U.S.C section 1127; hear and determine objections to Disputed Claims,
and matters related thereto; hear and determine the Debtor's claims against
other persons; and hear an determine any matter necessary or appropriate under
11 U.S.C. section 505.
Dated: April 12, 1999
DENNIS MONTALI
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United States Bankruptcy Judge
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