EXHBIIT 10.12
[Morrison & Foerster Letterhead]
June 25, 2001
Writer's Direct Contact
415/268-7161
msmall@mofo.com
Bruce W. Bauer
Chairman of the Board, President
and Chief Executive Officer
Interactive Network, Inc.
180 Second Street, Suite B
Los Altos CA 94022
Dear Bruce:
This letter is intended to confirm our mutual understanding concerning
the rescheduling of repayment of the indebtedness currently owed by Interactive
Network, Inc. ("INN") to our Firm, as required by Two Way TV ("TWTV") as a
condition precedent to TWIN Entertainment, Inc. ("TWIN") (TWTV's joint venture
with INN) entering into a merger agreement with INN. As a result of the merger,
TWIN will change its name to Two Way TV (US), Inc. ("TWTVUS"). On June 1, 2001,
INN announced that it had agreed to enter into such a merger with TWIN, and
accordingly the following provisions have become operative:
1. On June 30, 2001, INN will pay our Firm $500,000 in cash by wire
transfer to our account # 14992-01836, ABA routing # 121000358,
at Bank of America, NA's San Francisco office, Commercial
Banking (1499), 345 Montgomery Street, San Francisco CA 94104,
as partial payment of principal and interest, on the $957,774.55
(the "Pre-Confirmation Receivable"), which was to be paid on or
before September 30, 2001, with interest accrued at the rate of
1% per annum over Bank of America's prime rate, from October 15,
2000. The partial payment will be credited first against unpaid
accrued interest in the amount of $62,268.46 on the
Pre-Confirmation Receivable, from October 15, 2000, to June 30,
2001, and the balance against unpaid principal. In the event
that at the time such payment is made the U.S. Bankruptcy Court
has not approved payment of the Pre-Confirmation Receivable, we
will hold the funds so paid in our trustee account until such
approval is received, and then apply the payment as aforesaid,
subject to any adjustments that might be required by the U.S.
Bankruptcy Court order approving payment.
Morrison & Foerster LLP
Bruce W. Bauer, Chairman of the Board,
President and Chief Executive Officer
June 25, 2001
Page Two
2. The unpaid principal balance of $520,043.01 on the
Pre-Confirmation Receivable (the "Remaining Pre-Confirmation
Receivable") will be included in a new note (the "New Note"), in
the principal amount of $1,204,562.89, which includes the
Remaining Pre-Confirmation Receivable, plus the $684,519.88
principal amount of the current promissory note dated October
15, 2000, which it will replace), and will accrue interest at
the rate of 1% per annum over Bank of America's prime rate as
announced from time to time, (a) from October 15, 2000, on
$684,519.88, and (b) from July 1, 2001 on the Remaining
Pre-Confirmation Receivable. Payment of principal on this New
Note will commence on October 15, 2002, and be paid in
twenty-four equal monthly installments consisting of one
twenty-fourth of the aggregate of (1) the unpaid principal
amount of the New Note and (2) the unpaid interest accrued
through September 30, 2002, calculated as aforesaid, which will
be capitalized and added to the principal payments on the New
Note, with interest accruing on the new note after October 1,
2002, to be paid monthly with the aforesaid payments due on the
New Note. The New Note will be in the form of Exhibit 1 attached
hereto. The current $684,519.88 promissory note will be canceled
and returned to you following our receipt of the New Note, the
$500,000 payment on June 30, 2001, and the U.S. Bankruptcy
Court's approval of payment of the Pre-Confirmation Receivable.
3. The current INN Stock Purchase Warrant dated November 15, 2000,
held by our Firm will be amended to (1) reduce the Aggregate
Indebtedness referred to therein to reflect the principal and
interest paid on the Pre-Confirmation Receivable, and (2)
reflect a revised warrant exercise price of $.69, which is equal
to 101% of the average of the closing bid prices for INN's
common stock in the over-the-counter market for the twenty (20)
business days on which the stock traded preceding the public
announcement on June 1, 2001, of the agreement of INN and TWTV
to their merger. A copy of the amended Stock Purchase Warrant is
attached hereto as Exhibit 2. The current Stock Purchase Warrant
will be cancelled and returned to you upon delivery to us of the
Amended Stock Purchase Warrant, which should occur no later than
June 30, 2001.
4. Except to the extent that TWTVUS elects to include our warrants
and shares of stock issued on exercise of our warrants in its
Morrison & Foerster LLP
Bruce W. Bauer, Chairman of the Board,
President and Chief Executive Officer
June 25, 2001
Page Three
registration statement on Form S-4 to be filed in connection
with the INN-TWIN merger, the right of our Firm to participate
in a registered public offering under the Securities Act of
1933, as amended, of its warrants or the shares of common stock
issued to it on exercise of our warrants will be limited to the
most favorable registration rights held by other INN
shareholders who possess such registration rights, it being
intended that our Firm would be entitled to participate in any
such secondary public offering on the same terms as such other
INN investors (or if there are no other such investors, then on
usual terms for a registered secondary offering). You have
advised us that INN investors who currently hold such
registration rights are identified in Exhibit 3 attached hereto,
and copies of the agreements reflecting such registration rights
are to be supplied to us prior to June 30, 2001. You agree to
supply us from time to time with copies of agreements hereafter
entered into by INN extending such registration rights to other
INN investors, as soon as such agreements are executed.
5. The maximum amount of our fees payable by INN in connection with
the pending National Datacast appeal will be limited to
$100,000, unless INN elects to pursue a further appeal of the
case in the event of an unfavorable ruling. If our Firm wishes
to pursue such a further appeal (with INN's consent), the cost
of such an appeal would be borne by our Firm, with any recovery
of such cost to be contingent on a successful appeal, on the
same contingency terms as are currently in place.
6. In all other respects, the agreement between our Firm and INN,
as reflected in our November 3, 2000, engagement letter and
Memorandum dated November 3, 2000, attached thereto as Exhibit
1, will remain in effect.
This letter is also intended to memorialize our mutual understanding
that it is our Firm's objective to secure repayment of the indebtedness owed by
INN to our Firm as promptly as practicable through exercise of our stock
purchase warrant and sale of INN common stock (or TWTVUS Common Stock following
INN's merger with and into TWIN) acquired on such exercise in the public market
(either through a registered public offering or through brokers' transaction),
to the extent consistent with applicable securities laws and our ability to sell
our shares, giving consideration to demand for INN's (or TWTVUS's) stock in the
market, and other market conditions. It is understood that while we do not plan
to hold INN (or TWTVUS's) shares for long-term investment, our Firm will not be
obligated to exercise our stock purchase warrant, sell the shares received upon
such exercise, or otherwise act in a manner that would cause our Firm to sustain
a loss on any such sale or to dispose of our shares other than in the public
market in a manner consistent with our obligations under applicable securities
laws.
Morrison & Foerster LLP
Bruce W. Bauer, Chairman of the Board,
President and Chief Executive Officer
June 25, 2001
Page Four
It is understood that in the event we do not receive the $500,000
payment on June 30, 2001, contemplated by paragraph 1 above, then our agreement
to defer and reschedule payment of the indebtedness owed to our Firm by INN will
be terminated, and the original terms for repayment of our indebtedness, and of
our Stock Purchase Warrant, as set forth in our engagement letter and memorandum
dated November 3, 2000, will be operative.
Please confirm that you concur in the foregoing provisions of this
letter by signing in the place provided below and returning to me one copy of
this letter. Because TWIN (operating under the name Two Way TV (US), Inc.) will
become obligated as payor of the New Note and issuer of its Common Stock under
the amended Stock Purchase Warrant, as a result of the merger of INN with and
into TWIN, I also ask that TWIN confirm its agreement to the terms of this
letter agreement. By executing a counterpart of this letter, you also confirm
that INN's and TWIN's Boards of Directors have approved the terms of this letter
agreement.
Very truly yours,
Marshall L. Small
Confirmed and Agreed to
this _____ day of June, 2001.
-------------------------
Bruce W. Bauer
Chairman of the Board, President
and Chief Executive Officer of
Interactive Network, Inc.
-------------------------
Robert J. Regan
President of
TWIN Entertainment, Inc.