EXHIBIT 10.3
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, 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.
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(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 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
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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.
(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.
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(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.
(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.
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(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.
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.
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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.
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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:
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Name:
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Title:
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INTERACTIVE NETWORK, INC.
By:
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Name:
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Title:
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EXHIBIT A
JOINT VENTURE LICENSE AGREEMENT
A-1
EXHIBIT B
STOCKHOLDERS AGREEMENT
B-1
EXHIBIT C
INVESTOR RIGHTS AGREEMENT
C-1
EXHIBIT D
TERMINATION AND LICENSE AGREEMENT
D-1
EXHIBIT E
CERTIFICATE OF INCORPORATION
E-1
EXHIBIT F
BYLAWS
F-1
EXHIBIT G
PURCHASER REPRESENTATIONS AND WARRANTIES
(a) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the "1933
ACT"). Purchaser has no present intention of selling or otherwise disposing of
all or any portion of the Shares and no one other than Purchaser has any
beneficial ownership of any of the Shares.
(b) ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
(c) UNDERSTANDING OF RISKS. Purchaser is a founder of the Company
and is fully aware of: (i) the highly speculative nature of the investment in
the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of
the Shares and the restrictions on transferability of the Shares (E.G., that
Purchaser may not be able to sell or dispose of the Shares or use them as
collateral for loans); (iv) the qualification and backgrounds of the management
of the Company; and (v) the tax consequences of investment in the Shares.
(d) PURCHASER'S QUALIFICATIONS. Purchaser has a preexisting
personal or business relationship with the Company and/or certain of its
officers and/or directors of a nature and duration sufficient to make Purchaser
aware of the character, business acumen and general business and financial
circumstances of the Company and/or such officers and directors. By reason of
Purchaser's business or financial experience, Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
(e) NO GENERAL SOLICITATION. At no time was Purchaser presented
with or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
(f) COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and
acknowledges that, in reliance upon the representations and warranties made by
Purchaser herein, the Shares are not being registered with the Securities and
Exchange Commission ("SEC") under the 1933 Act or being qualified under the
California Corporate Securities Law of 1968, as amended (the "LAW"), but instead
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the Law or other applicable state
securities laws which impose certain restrictions on Purchaser's ability to
transfer the Shares.
(g) RESTRICTIONS ON TRANSFER. Purchaser understands that, except
as set forth in the Investor Rights Agreement, Purchaser may not transfer any
Shares unless such Shares are registered under the 1933 Act or qualified under
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the Law or unless, in the opinion of counsel to the Company, exemptions from
such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
or the California Commissioner of Corporations and that, except as set forth in
the Investor Rights Agreement, the Company is under no obligation to do so with
respect to the Shares. Purchaser has also been advised that exemptions from
registration and qualification may not be available or may not permit Purchaser
to transfer all or any of the Shares in the amounts or at the time proposed by
Purchaser.
(h) RULE 144. In addition, Purchaser has been advised that SEC
Rule 144 promulgated under the 1933 Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the Shares
and, in any event, currently requires that the Shares be held for a minimum of
one year, and in certain cases two years, after they have been purchased and
paid for (within the meaning of Rule 144), before they may be resold under Rule
144. Purchaser understands that Rule 144 may indefinitely restrict transfer of
the Shares so long as Purchaser remains an "affiliate" of the Company and
"current public information" about the Company (as defined in Rule 144) is not
publicly available.
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